The Dominion. MONDAY, DECEMBER 6, 1909. BANKERS' WORRIES.

Dominion, Volume 3, Issue 682, 6 December 1909, Page 6

The Dominion. MONDAY, DECEMBER 6, 1909. BANKERS' WORRIES.

,At, the half-yearly meeting of shareholders of the Bank of held on ;Friday last tho; Chairman, Mk. Hakold 'IiEAucHAiUP,. rightly claimed some action taken by ,the banks in .Zealand: to help -bring about the more promising monetary .conditions that how prevail in ■ the :I)bniini6ri. Towards the.close;bf. last.year--the/.bank's''were,.se-verely criticised lor' not advancing on a 'variety, of securities .mostly, of, a'real csr tate''.description,; and the head of the.Governmeht joined in the,chorus of criticism by expressing the opinion that the 'Dominion was "under-banked." ! Such an opinion cannot be ontertained now, and it was not .warranted when expressed, for events have since amply, demonstrated the fact that the conservative policy pursued by the bank's during the past twelve months' was the .right, ono.- The banks, forced: the .community—and- especially the/-trading section—to look closely jnto their affairs, and this enforced examination revealed extravagances of all, kinds, which were promptly eliminated.'■• Long 'years of prosperity had resulted in over- 1 trading, in the accumulation of; a masß of bad debts, of /inflated 'values' of land and of commodities, and of exaggerated views of the.-immediate prospects. In the prosperous times money was readily obtainable'arid at cheap rates, and Government and people' alike; rushed into debt. A corrective was needed, arid when the banks applied tho brake resentment and harsh criticism was natural. ■; . '

: As was mentioned] in the speech re-. ferred to, a good many people are under the:, impression that it is the duty of the banks to advance a'gainst all: and every kind of security. , There -was'a' , time'whcti some of' the , banks trading in Australasia •were:■ guilty of this .practice,' and, it: was this that helped to bring_ the :Bank of New 1 Zealand into difficulties some years ago, and ; which ' resulted in: the hasty legislation Of June 30,: 1894. Over £2,000,000, worth .of assets were: handed over to. the Assets Realisation Boar,d, and the liquidation took. a good many years ix) accomplish, notwithstanding that New Zealand was shortly afterwards favoured with;a.run of prosperous years. During •the- past two or three years banking experts have arisen in different parts of New .Zealand, and according to these' people we ,have but to, adopt their crudo ideas to secure a>perfect system:of bank-

ing. One party_ sees peculiar virtues in the State" resuming the monopoly of the noto issue, another expert wants an inconvertible note lßsue", and a third de; oiares that the deposits-held by the banks should be loaoaed in quite a new way. The theory of paper, money is the most fascinating and the most strongly urged by theorists. Bank deposits are another elusive matter, arid i few people realise that bank -advances make . bank- deposits. • A and B are customers, of the Bank of New'..Zealand. A wishes to purchase from B a motor-car wtirth £500, but. has not the money available. He pledges certain 1 acceptable securities, with the bank, and obtains an advance, or right,to draw a cheque for £500, which he does, and pays, over to B, who immediately places tho,amount to his credit, .possibly: at tho'same bank. B's current account balance, or free deposit ( arises ' from the advance to A. So that while the free and fixed deposits held by the banks appear, large, they arise mainly, through the. large ad-vnncos.-'V .;-;.;.-■■,- ; ;. ■■'■■■'':",'■■•/:''■: ; ' ''.' "Good banking is produced, not by good jlaws, .but by good bankers," is the dictum of one authority, and.it'is so obviously true and correct as to. require no explanation. G.ood banking consists in giving: as much assistance as 'possible to; trade.in the matter of and at the same time restricting credit as soon as the proportion between cash and liabilities is below the point at which prudence andcaution require that it should stand. Thie is tho happy mean that the banker has to find, and the exact point at which the mean stands i 3 a matter which' he is besl; able to judge. Banking in Australasia is a very difficulti matter, and this iact was given prominence by Me.'Leslie Sandeeson, the Chairman - of the Bank of Australasia, at the general meeting of-shareholders held in London on October 1. "He stated th'at droughts and' the fluctuations in the price of .commodities made .Australia an.d New' .Zealand difficnltcountriea, from a''bankor'B point of view, to operate on. The last twojears havo illustrated the .truth of thia. ■'.■- Banker&: arc not infallible any. more than anj,-

oneelse, and occasionally individual cases of injustice to customers of. banks occur; but this docs not warrant the sweeping assertions sometimes heard concerning banking methods. It is essential to our material progress, to the expansion of our-'commerce, and the settlement of the country that our banking .institutions should be financially strong, and; we think the sense and.sanity of the people of New Zealand will prevent any unwise laws of legislative interference or harassing conditions being put into operation; at the bidding of imaginative theorists anrj financial cranks.. .. ■,'■■•' .'■',.-'