8.—3.

Who suffers ? —I should say that the banks' shareholders suffer because the dividends payable to them are not so great as they otherwise would be. The figures show that the average return on the investment at market price is quite low now; for the six banks the last dividends were equivalent to: 1927 —£2 16s. 4d. per cent., £2 17s. Id. per cent., £3 2s. per cent., £2 9s. per cent., £-1 4s. 7d. per cent., and £2 lis. 3d. per cent. So in New Zealand in good years you are taxed in the same proportion as in bad years ?—Yes. So these poor rates are not necessarily due to taxation, they may be due to the depressed conditions of industry ? —lt would be partly due to taxation, because the fact that we are paying on a greater income than actually earned absorbs part of that income. If we were an ordinary trading company we would pay a graduated scale of tax according to our business. We would get relief in a bad year. How much tax is paid on Treasury bills borrowed by the Government to purchase sterling funds held overseas ? —The tax paid on that would be, roughly speaking, Bs. 9d. per £100 on the average assets. Not liabilities ?—Yes. So 17s. 6d. per £100 is what is paid in taxation. Are the Treasury bills referred to classed as overdrafts ?—They are not classed as overdrafts ; they are classed as advances, but they are not included in the total advances ; they are incorporated in Government securities. And there are not corresponding deposits for these Treasury bills held against sterling funds ? — I would not say there are not corresponding deposits for these Treasury bills. And yet the ratio between advances —including Treasury bills—and deposits has not been so greatly disturbed as one would imagine. Can you give us those figures ? Mr. Fussell: Total overdrafts and advances, including Treasury bills, £59,000,000 ; and the deposits, £62,000,000. Dr. Sutch.] What rates have the Government paid for Treasury bills over the last few years ? — I could not say, but that has been published recently—£s Bs. 9d., and later at £5 per cent. Was there nothing higher than that previously ?—Not to my knowledge, I do not think there was anything higher than £5 Bs. 9d. The Treasury could give it to you ; I would have to look into it. Is Bs. 9d. the tax on these Treasury bills ? —Yes. Was that 5 per cent, apart from administration costs as clear profit ? —-I would not say it was clear profit, because, as mentioned before, we are paying interest on deposits to the extent of 4-| per cent. What is the objection to issuing Treasury bills against revenue with no interest charges at all ? — The paying of interest charges is caused by the stringent conditions operating at the present time. Assuming the stringent conditions, is the issue of the Treasury bills holding up advances to industry I—No, they are not. Any person who can provide security and show the bank that he will not lose the money —if he can prove that to the bank the money is available for him. Dr. Sutch.] You use the expression " to preserve what the banks consider a proper volume of deposits." How is this " proper volume " determined ? Mr. Fussell: There is no rule about the matter. If a bank had let its deposits fall very low it is obvious the difference between deposits and advances would have resulted from cheques being drawn and claims being made on the bank, and these claims have to be settled somehow. Dr. Sutch.] At the moment, would a concerted move to reduce deposit-rates have any effect on the volume of deposits ? — I do not think so, because at the present time there are no avenues for investments. If the deposit rates were put up would it reduce lending ? —To a certain extent, because then the banks would be unable to quote such low overdraft rates as they would otherwise. You quote the Chairman of the associated banks, "Were overdraft - rates to be reduced without adequate adjustments in the method of taxing bank incomes, the inevitable and inescapable result would be to curtail the banks' means of assisting their customers and the community " ?—Unless we get adjustments in taxation the community are going to suffer because they cannot borrow on such attractive terms. But you yourself said there was plenty of credit available ? —Yes. The credit is available if it were only usable by the people who might use it. But it is not the rate of interest that worries them ?—That goes into the account because during unprofitable times if the person could hardly trade profitably with no interest at all or if it would just pay him to operate and trade with the money at no interest at all, obviously the charge of 5 per cent, interest would be just that deterrent which should prevent him from operating. Would your extra taxation put .up the overdraft-rate and discourage borrowers I—l should say that it keeps up the overdraft-rate. That means if we were put on the same basis as other trading companies—and I speak to you entirely without prejudice, because I cannot say what the bank would do —I should say that it would be possible to reduce the interest-rate by J per cent. I say that entirely on my own responsibility, but it seems to me that that would enable the banks to reduce the rate by £ per cent. In the answer to question 2 you say that all accounts have benefited by the reduction in overdraft-rates. I took that to. mean the best accounts. What about the accounts that are charged more than the minimum rate of 5 per cent.? —When that last reduction from 6 per cent, to 5 per cent, was made I understand that it was an all-round reduction. That means advances which were getting a less favourable rate than the best rate for various reasons also were reduced by that amount, 1 per cent, all round. I notice here that the banks seem to reduce deposit-rates some months before reducing the overdraft-rates. Why is that ? —That has not always happened. It has happened sometimes, and the reason for that is this : When overdraft-rates are reduced the banks immediately stop collecting

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