STATE BANKING.

Dominion, Volume 4, Issue 983, 25 November 1910, Page 3

STATE BANKING.

REPORT OF A SELECT COMMITTEE. AGAINST STA.TE NOTE ISSUE. The report of the State Bank and Slate Paper Currency Committee, which has been considering the question of the advantage or otherwise or (1) a State Bank ot Issuo aiul Deposit, and (2) a State laper Currency, was submitted to the ■Legislative Council yesterday afternoon. The witnesses called, a*: the request of V* r * were Mr. J". 13. Hobart, Mr. H. G. Eli, M.P., Mr. I<\ T. Moore, Mr. John l r oung, and Mr. Benjamin Dawson, -the associated banks and the Bank of New Zealand were also invited to tend representatives to give evidence, and Mr. A. P. Webster, representing the associated banks, viz., the Bank of New Zealand, the Bank of Australasia, the Bank New. South Wales,, the Union Bank, the National Bank of New Zealand, and Mr. A. E. Mills, representing tlie Bank of New Zealand, solely, gave evidence. The committee proceeds to define a State Br.nk as "a, bank of issue and deposit and carrying on • similar business to that undertaken by the present asso-. ciatedton&s, but owned'entirely by the State," and gives a summary of evidence. It does not appear • (the report runs). that there is at the pres?nt time any bank in the world that corresponds to the aboro definition, though it is stated m evidence that the banks of Venice and Hamburg were once State banks of this description. The evidence, says the committee, will show that none of the wit- j ncsses establishment of a separate and new State bank. l Several witnesses strongly demanded ! Bank of New Zealand should I or partially be taken over by the I otate and converted into a State bank, and some of those witnesses suggested that the interests cf the private share 1 holders should be preserved as in the case of the so-called State banks of JL-ranco and Germany. The representa.*vo the Bank of New Zealand gavo it as his individual opinion that a partnership between, the Government and. the shareholders' would be desirable if the capital representation and profits W m? Wally apportioned. r, , e proposals for, the conversion of the iiank of New Zealand into a State Bank varied considerably. The most-generous proposal was that of Mr. Hobart by which the shareholders should be bought out oa a liberal valuation as a going concern. Under other proposals the shareholders would receive smaller dividends or be compelled to accept less than the market price for their shares. The most • definite proposal was that of Mr. Ell, M.P., who proposed (a) that the 4 per cent guaranteed stock should be converted into State capital unlimited, as to dividends, and (b) that the shareholders' ordinary capital cf ,£500,000. should bo converted into a stock (whether preferred or deferred not stated), and,-limited in dividend to 7 per cent., or at most S per cent. He-was of the opinion that private shareholders would serve a useful purpose for a time as "watch-dogs" in order to see that the .management was being conducted on sound lines, but he looked forward to the time when tho interests of private shareholders would be acquired by the btato. Messrs. Hobart, Moore, and Dawsoi complained of the policy of the Associ atcd Banks in referenco to the manr.oj m.wnich they made or refused advance; to clients, while Mr. Webster dofeiutcc the policy of the banks and approved o tiro present banking system as/ beinj entirely satisfactory. Mr. Mills supporter Mr. U cbstcr's views generally, but he wa: m favour of the notes of tho banks bcinj made a legal .tender by the Governmen • during.periods-of financial stringency. l\.- col , nm ittee, ,tifter consideration o the questions submitted to jt, and of th evidence, expresses' the opinion: • : 1- As regards a State! Bank: (a) Tha the establishment of' an entirely nov State .Bank of .Issue and Deposit*is no advisable; . (b) that a permanent an< effective partnership between tho Stat and the shareholders of the Ban! . of New Zealand, or' the acquisition o [ the present shareholders' interests o equitable terms by the State, ;s <Kvu ' able. 2. As . regards . a 'State .note issue*":—-(a [ That the present provision for tho issu | of notes by tho banks is sufficient' fo [ ordinary requirements;. and, (b) tha . since, the existing note-tax, as appeal » from the- evidence, absorbs nearly al . if not quite all,, of tho profit "wad© b ! the banks on. their note issue, little o ho advantage would be gained by th issue of State notes for ordinary rcQuin ' raents;' but that to' meet exceptional d< • mands, a$ in times of panic or of al " normal withdrawal of deposits, some pre ? vision is needed for temporary issues ( non-redeemable State notes "or Stati » guaranteed notes. It- was decided that the report an evidence be printed and. forwarded to tt Government for consideration.