The Dominion WEDNESDAY, SEPTEMBER 3, 1913. STATE AND BANK.

Dominion, Volume 6, Issue 1845, 3 September 1913, Page 6

The Dominion WEDNESDAY, SEPTEMBER 3, 1913. STATE AND BANK.

The anxiously-awaited legislation of the Government _ concerning the Bank of New Zealand was introduced in the House of Representatives last evening, and is likely to j give occasion for hoated argument both in and out of Parliament. Tho legislation is necessitatedby the fact that next year tho million pounds worth of State-guaranteed stock will become redeemable. The Bank shareholders wish to redeem this stock out of the funds of the Bank, and by so doing relieve themselves of further obligation to the State under this head. They also desire authority to issue new capital which will enable the Bank to extend its business. Furthermore, they claim that the control of the institution should, on the redeeming of the guaranteed stock, revert to' the shareholders. These, broadly speaking, are the claims which have been put forward on behalf of the shareholders. If these demands had been acceded to it would mean that the only interest which the State would continue to hold> in the Bank would be its £500,000 worth of preference shares and its right to appoint a Government auditor, and possibly the right also to appoint one or perhaps two directors. The Bill introduced last evening falls a good deal short of the shareholders' wishes, although some members in discussing it appeared to_ labour under the idea that it was giving the shareholders too much. Briefly put, it provides for the redeeming of the guaranteed stock next year, not by its imme'diate extinguishment, but by the issue of new stock, having a currency not exceeding 20 years; and as security for the redemption of the new stock a sum of £50,000 is to be set aside annually by the Bank. Then as to new share capital: authority is given the directors of tho Bank to raise new capital to an amount not exceeding three million pounds. This is to ne provided by the creation of 150,000 preference shares of £6 13s. 4d. each (a total valuo of £1,000,000) and 300,000 ordinary shares, of £6 13s. 4d. each (a total value of £2,000,000). The State is to have the right to take up the whole of these new preference shares, which arc to be known as the "B Preference Shares," while the shareholders ean take up the ordinary shares in proportion to their present holdings. It is provided that in issuing the new share capital one preference share shall be issued for every two ordinary shares issued, so that the State, if it chooses, will in the eve'nt of the Bill becoming law have the right to take up one-third of the Bank's new capital, with the advantage that its holding will be of preference shares. Thus if the full three millions of new capital were issued the State's share interest in the Bank would be £500,000 of A preference shares and £1,000,000 of B preference shares. It is apparently anticipated that the new capital will be issued at a premium, and it is specially stipulated that should • it exercise its option and purchase shares the State shall not pay more . than one hundred per cent, above their nomindl value. The miuor details of the measure, such as the manner of issue and payment for the shares, etc., need not bo discussed at the present stage of matters, the interest for the moment centring on the main lines of policy embodied in the proposals. The outstanding feature in this respect is the determination of the Government to secure for the State as a shareholder in the institution the right to participate with the ordinary shareholders in the taking up of any new share capital; but still more important it has evidently determined that the State shall maintain the dominant control of the affairs of the Bank. A member of the • House of Representatives last evening protested that the preference

shares held by the State did not give the Government the right to participate in shareholders' meetings in the same manner as ordinary shareholders. . That is true enough, but what does it matter when the Government has the right to nominate four out of the six members of the Board of Directors, who have powers quite independent of the shareholders? As a matter of fact, the position created under the Bill will simply amount to this: that the Bank will.go on as it has been doing, cxeept that in place of the million of State-guaran-teed stock, there will be issued a a million of new stock; and thero will also be a substantial increase in the share capital of the Bank. The control.. however, will remain exactly as it was—in the bauds of the Government of the day. There is one weakness in the Bill which immediately presents itself, and which will no doubt receive attention at the proper time. The State is not compelled to take up the B preference shares, and let us suppose that it dccides that it would bo inadvisable to do so. In that case, would it be justified—even if it is so justified now—in claiming the right to nominate four of the six members of the Board of Directors? The merits of the details of the measure, however, must stand over for discussion. Tho general principles of the Bill," we believe, will find favour with the majority of the public, not so much because people are in favour of tho State mixing itself up in banking business as because of the disinclination to relinquish the safeguard which State control is considered to provide in the management of an institution, tho success or failure of which means so much to tho commercial and farming life of the country, and which under private control threatened, not so many years ago, the welfare and happiness of so many thousands of men and women. We are quite prepared to admit that today this fear does not seem a very real one, and that thero were special circumstances leading up to the Bank's desperate plight in tho nineties; but the public, we>. believe, arc desirous that the Stato should not relinquish its share in the control of the institution.