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When consulted on the subject of the proposed Share Guarantee Act of 1894, he advised the Government not to uphold the Bank of New Zealand, but to appoint the Colonial Bank as the bank for the colony, and through its agency liquidate the Bank of New Zealand. This proposal was not adopted. Shortly after the banking legislation of 1894, negotiations for the amalgamation of the Colonial Bank and the Bank of New Zealand began in earnest These culminated in an agreement, which was forwarded to the Colonial Treasurer on the 11th September, 1894, and subsequently laid on the table of the House. These proposals contemplated an amalgamation between the two banks, but not the purchase of one by the other. On receipt of this agreement the Treasurer wrote the following memorandum : — Colonial Treasurer's Office, Wellington, The Hon. the Premier. 12th September, 1894. I received last night the attached proposals for an amalgamation between the Bank of New Zealand and the Colonial Bank. Since the colony guaranteed £2,000,000 to the Bank of New Zealand the whole matter has given me the greatest concern and anxiety, not so much on account of the guarantee to the bank proper, but on account of the position of the Bank of New Zealand Estates Company. Attached to the bank as it now is, it will, in my opinion, render it impossible for the bank to extricate itself, even with the colony's guarantee, and must, if not now dealt with, call in the future for further substantial aid from the colony. If the Estates Company is left under tha same control as the bank itself, the duties of the President, Auditor, and Colonial Treasurer will be greatly interfered with, —and, indeed, I may add that, in my humble opinion, the Treasurer's life would not be worth living. To insure himself against the possibilities of disaster in the guarding of the £2,000,000, he would require to know almost every detail of the way in which the two concerns —namely, the Estates Company and the bank itself—were operated upon, otherwise the possibility of a loss in either of being transferred or even absorbed by the other would be not only easy to do, but exceedingly difficult over so huge a concern to detect. No President or Treasurer would feel safe (where two large businesses, conducted ostensibly as two establishments, but in reality one) in assenting to the investment of the funds guaranteed by the.State. I'reco'gnised at the time, and stated so in the House, that the Government would take steps this session to separate the Estates Company from the bank. How to effect this has been the difficulty to solve, and day by day since the House passed the bank legislation it has engaged my attention. The result of the considerations that have occupied the attention of the executive of the bank and myself are embodied in the attached proposals. They are, — 1. An amalgamation between the Bank of New Zealand and the Colonial Bank. 2. The clearing of both of all bad or doubtful accounts. 3. Each proprietary to be held responsible for and to provide for any losses made on any accounts now held by either. 4. The capital of the combined banks to be £3,600,000. 5. All profits after certain provisions named in the proposal hereto to be paid to liquidate the Assets Company. 6. The Estates Company to be separated from the bank, the colony undertaking, should any deficiency ultimately arise, to make good such. This is virtually the position now. 7. The collateral securities against the Assets Company to be held" by the Government to be £2,100,000. The profits from the bank to be paid into the Assets Company estimated to realise at least another £500,000. Total, £2,600,000. I am of opinion that, to guard the interests of the colony, the Agent-General should be appointed to the London board ; not if the Estates Company remains attached to the bank. The colony, with a clean and sound bank, would gain by having such a representative on the London board. There should also be a small advising board in Melbourne or Sydney to control and advise upon the Australian business. The policy in each of the Australian Colonies should be to reduce business gradually, and to confine the business of the bank there entirely to one of a liquid character. • Advances there on property or real estate should generally be avoided. The Government to control the Estates Company by the appointing of a president or chairman to it, and also two directors. The bank shareholders, who would be liable for £1,500,000, also to appoint two directors. The Government Bank of New Zealand Auditor also to be auditor of the Estates Company. The name of the Estates Company to be changed by the excision of the words " Bank " and " New Zealand." It would be well, in my opinion, to completely change its name. The past odium attaching to it would thus not continue to live daily in the history of the bank, and the colony could well afford not to have its name attached to it either. The position is both a difficult and a serious one. In the absence of the proposal now under consideration being adopted, the next best course, and one which could be adopted, would be to separate the Estates Company from the bank, and guarantee its outcome, holding the uncalled capital of the Bank of New Zealand against any loss that might arise. In the event of this course being adopted, the colony should control the Estates Company as suggested under the amalgamation scheme. If this course is thought to be preferable to an amalgamation, it will be essential to retire, the £1,500,000 of Estates Company debentures, and to do this an issue of 3-|-per-ceut. Government stock would be necessary. So far as my opinion is worth anything, the latter scheme has much less to recommend it than an amalgamation. The whole matter, however, requires the most careful consideration of all the Ministers. Wellington, 12th September, 1894. J. G. Ward. These proposals were considered by the Government, and the following letter was forwarded by the Hon. Mr. J. G. Ward to Mr. John Murray and the Hon. Mr. McLean:—