Budget Upsets Savings Banks

Press, Issue 31095, 25 June 1966, Page 16

Budget Upsets Savings Banks

(New Zealand Press Association)

WELLINGTON, June 24.

By accelerating a diversion of deposits from ordinary savings bank accounts to investment accounts, the Budget has caused discomfort to savings banks.

The secretary of the Associated Trustee Savings Banks (Mr F. Burns) said he knew from conversations with managers of the larger trustee savings banks that there had been a trend to transfer from savings to investment accounts.

The trend had become obvious even before the Budget and the Trustee Savings Banks’ Association had sought some relief from the stringent regulations governing investment account operations. Investment deposits are

those on which the maximum interest rate is paid only if a deposit is left in the bank intact for a year. The minimum deposit is £lOO. Before the Budget this rate was 4 per cent, compared with 3 per cent on the ordinary on-demand savings bank deposits. The Budget increased the rate to 41 per cent and left the ordinary savings bank rate at 3 per cent.

The switch from ordinary accounts to investment accounts is important to the savings banks because they are required to invest in Government stock all the money paid into investment accounts.

A proportion of the money paid into ordinary savings deposits may be lent on mortgages and on other approved securities which earn more than Government loans. In 1964 investment account funds were 8 per cent of the total money on deposit in trustee savings banks and in 1965 they were 12 per cent.