BANK OF NEW ZEALAND.

Dominion, Volume 7, Issue 1905, 13 November 1913, Page 10

BANK OF NEW ZEALAND.

HON. J. ALLEN EXPLAINS THE BILL.

EFFECT OF STATE'S INTEREST. The Hon. J. ALLEN (Minister of Finance) moved that the Bank of New Zealand Amendment Bill he- committed. One reason for the introduction of the Bill was that the million guarantee becamo duo for payment early next year, and provision would either havo to be made for repayment by the bank or for tho renewal of it. A second reason was that an enormous increase iij the business of the bank rendered an increase in tho ordinary capital of the hank necessary. Thero had been some disagreement. between the proprietors of tho bank and the directorate, but these differences had been pot over, and now tho two parties were in agreement, and the Bill would give effect to their desires. Whatever had been the rights and wrongs of the State's connection with the bank, unquestionably tlks bank was in a highly prosperous position. Its business had increased, it had lieaped. up a considerable resolve, and he bei lieved tho connection of the State with it had added to its stability and made it more prosperous than it probably would have been otherwise, He thought the shareholders here and ill. Kngland could bo assured that the State's connection with tho bank would not be in/iodflus ia iha interests of the iliare*

holders. The Bill proposed, then, that i tiio State guarantee of one million be renewed. Ho was going to ask Parliament to allow tho bank to increase its capital by £3,000,000. It was better to give the bank power to issu? a fairly largo, maximum capital rather than to require t-lw bank to appeal to Parliament every few years tor authority to increase capital. It was not the intention of the directors or of the present Minister of Finance to allow all the new stock authorised' to be- issued at once. Probably, not -more than a third of the additional capital would be issued. Lu. tho issue- of new stock the Bill provided for the increase" in tho State's interest as against that of all tho other shareholders in the proportion of one to two. Th© shares to bo issued to tho State would bo "B" preference shares, to come in nftef the "A" preference shares, and before the ordinary shares, but the dividends to be paid 011 tlio "B" shares were not limited. The position of the bank partly controlled by the shareholders' and partly by tho State, with tho Stato exercising largo powers of control and audit, was entirely satisfactory, but ho thought'it was lmwiso to have the bank's affairs debated 011 ilte floor of the House, If tho people of New Zealand wanted a ■State Bank, it -should be establislaed by separate legislation, and not by legislation to deal with tho Bank of New Zealand-

The bank had dealt fairly with the State and ho hoped the House would complete the legislation as rapidly as nossible in order to relieve the uneasy feeling that was always created when such legislation was before the Bouse.; Leader of the Onsosition. SIR. JOSEPH WARD (Awarua) remarked upon the success that had followed the Government's action in coming to the aid of the Bank of New Zealand. All tho predictions of evil made when the Government did the only thing that could have saved tha bank from ruin had been negatived. He consul-; ered the constitution of the Board of Directors was a fair one, but he would not have objected to an increase in the number of directors, both as shareholders' representatives and. as Government representatives. One point about the Bill he did not like—it was tlio proposal that the bank should have a. nominal capital of £3,000,000 when it was not intended that it should all bo used. With the million guarantee the capital would be four millions, and this seemed to him a very large capital for an institution of the kind. Personally lie did not agreij that it was .advisable to give the bank a big maximum capital to avoid the necessity of the bank applying to Parliament for permission to increase it. This would mean that Parliament would not for at least ten years have an opportunity to review the relations of the State with the bank in tho interests both of the State and the bank. He woald have liked to see the caprtal of the bank fixed at a definite amount which eould be called up, and ho would have liked to see £1 la's. <]d.' et tlio £3 6s. Bd. still unpaid on tho ordinary shares called up. Now the pioposal was to allow the batik to keep clear ot Parliament for many years, because rt was not in the interests of the bank that its affairs should be discussed by the House. He took strong exception to this proposal. Ho hemed those ill control of tlio bank would iiot strive tor very large dividends. Ho cM not object to the payment of a full dividend, and h<f would make no observation as to what he consideri i a , dividend, but it Mould t Jiofc be in tlio interests of tho bank if tlio directorate made it their aim to pay very largo dividends! He commended the action of the Public Accounts Committee in striking outthe clause relating to the setting up . a sinking iund. Speaking of baking generally he urged thai- communication had been made so much easier in New Zealand in the last few years that tilings were totally different from the state they were m fifteen years ago. In view of this he would suggestto bankers that tho rates of exchange ought not any longer to be kept at their present high level, and also ho would urge that the rate of 10s. per year charged for the keeping of an account ought not any longer be charged. Phenomenal Success of Bank. 7l Tlio Hon. W. ERASER, (Minister 0 f 'Public complimented Sir Joseph Ward on having avoided party issues m dealing with tho Bill, Referring to the guarantee lie said that the object of the Government in coming to the jeseuo of the bank was not to save the bank,_ but to £»ve the very large number of people and institutions whom the bank would have brought down iu its ruin. There would have been some fivo million pounds tasked up for a number of years, if the bank had failed, and these moneys could not have,been released until the .assets were realised. Eventually it had taken some years to realise the- assets, and if tho money deposited with the bank had been withheld for all those years tho country would have been plunged in a financial disaster. Ho did not agree v.ith Sir Joseph Ward that it was not well to give the bank such power in the matter of increasing its capital that it would not have to apply to Parliament. The inference was that tkere was danger in giving the bank too free, a hand. But the honourable gentleman should remember that already the State had four directors to two representing the shareholders, and the issue of new stock would bo at the discretion of the Minister of Finance. The success of \ the bank was, ho believed, unique in the history of banking, a.ncl it proved liow wonderful were the resources cf this young country. But the success of this bank did not mean that a State Bank would be equally successful. His own opinion was that it would not, and ho did not think that a. State Bank would bo ablo to do all the banking work now undertaken by the Bank of New Zealand. Ho was glad to see the present strong position of the bank, and ho believed that if the Bill were passed it would put the bank in a still stronger position. And tho stronger the position of the bank the bettor it would be for the country. Compliment to Country's prosporlty, The Hon. D. BUDDO (Kaiapoi) regarded it as a very strong compliment to the prosperity of tho country that this bank, starting under the conditions it did in 1804, had been able to build op a reserve fund of £1,200,000 ill addition to transferring £50,000 annually to the Assets Board. The question of profits arose in connection with the Bill. It was a well-known fact that tho system of exchange was one of tho easiest methods by which banks could make a profit, and ho thought that some concessions- might bo extended to tho publie in this direction, and in the direction of interest on all deposits. Ho regretted that h 1894 he did not put r.p a greater fignt against the Colonial Bank being included, as he believed it would have been able to carry on its business, and carry it on very well, In the same way there would, he believed, be plenty of business at the present time for new banks. One thing be would like to see done in Committee was an alteration to make "B" preference shares rank the same as ordinary shores. The Minister assured them that tliev did. The Hon. Jas, Allen: As far as dividends are concerned, they do. The Hon. D. Buddo said they should be quite certain that they were on the s'rune level. The State might not to play second fiddle to ordinary sharelitildets. Speaking generally, he -thought they could look forward to the future with a great deal of equanimity. He would support the Bill, but- would move for wniio alterations in Committee. Asking for Too Much. 'Che Hon. .1. A. MILLAR <Dunertin "West) objected to the bunk's asking for capital, wlieu tlw. knew.

very well that it was not /all going to lie put 011 the market. Ho would move in Committee to reduce the amount to £2,000,000, a sua whieh lie considered would be ample. fie suggested, too, .1 proviso that when £3 6s. Bd. had been railed up on the new issue that any further eall should b<s pro rata on the whole, capital—this for the sake of uniformity.

Mr. 11. G. ELL (Christchureli South) also thought that the bank was asking for too much now capital, and he would support a reduction in Committee. He considered that charitable institutions should not be charged the soma hanking fees as the general run of clients. 'Hie fact that the bank made no concessions to_ these institutions was proof, to his mind,' that the bank was not shaping a policy in tho best interests of the public.

Sir W« G. Buchanan Protests. SIR, WALTER BUCHANAN (Waiiarapa) desired—as one of tho few survivors of the members who had ill 1894 , conic to the assistance of the banfcMo give his views of the present position. He felt reluctantly eompeltcd at the present timo to enter his protest against the Government taking so largo a share in the batik's affairs. Not onTy'was he against a State Bank, but. he could not too strongly protest against tho country's increased interest in the Bank of New Zealand as proposed by tho Bill. One of tho features of this debate had been tho manner in which members had ignored. tho statements that had been made in rogardito political interference in tho' bank's affairs in the past. There had been political interference of a very pugnacious character, but 'he would not go into details of what must bo in the knowledge of many members ef the .House. In touching upon the monopoly whieh the Bank o{ New Zealand had had in the past and some of tho results of monopoly, Sir Walter gave it as his opinion that a better method (than that proposed in the Bill) of providing the increased capital, which was unquestionably required at the present time, would bo to*encourago the establishment of other' banks. Ho then went on to refer to tho attitude adopted by tho hank in opposing what the Freight Reduction Cominitteo had been doing in tho interests of tiio producers of this country. Quo of the foreign banks had left the committee free to fight the shipping monopoly, but tfie Bank of New ' Zealand fought the committee iu all that it was doing, He protested, or behalf of the settlers of this country, in giving more power to such an institution, although lie had supported all that the Government did in regard to the bank in 1894. Reference had already been mado to the charge of 10s., which tlio banks exact' ed for keeping the most trivial accounts, and ho would just mention, in passing, that the Bank of New Zealand reaped a very handsome income from this charge, which in many cases was a very serious overcharge. There could be no mistake that tlxo success of tli<?. hank had been very marked, but it had to l>o remembered that in tho past 19 years—the poriod since the Government had como to tha rescue of tho bank—the record had "fceen one of success for every branch of the population. Tlie hank ecnild not help being succcssful during that period. increased Holdings. Sir. 11. M'CALLUSI (Wairau) congratulated tho Minister on the very excellent speech he had mado that afternoon. Turning to tho Bill, ho submitted that it was not in tho best interests to increase the holding of any one shareholder from £20,000 to £40,000 as Clause 12 pro* posed to do. In his opinion, it was desirable to mako the bank as far as possible' a people's bank, and to spread the shares aver a large number of. shareholders rather than permit all the capital to bo held by a few.

Dr. A. Iv. NEWMAN (Wellington East) stated that members of tho committee had been anxious to carry out the idea expressed by tho member for Wairau as to spreading tho capital over a larger number of shareholders, but after 'considering the rights ol' share' holders it could not see its way to do other than had been done. At thfl spine time ho would like to' point out tiiot it was not probable that any uno shareholder would take up £40,000 worth of shares, and even if' ho did his relative share would not- be greater than was provided for at the present time, because tho capital was being doubled. Tljo committee -had, he mentioned,, the benefit of evidence from representatives of all tho parties concerned, and the Bill would, he felt sure, meet with the m>-i<-vorsal approval of shareholders, _ He favoured making the shares uniform, and lie hoped that this phase of the question wo'.dd be considered when the Bill was in Committee. Talk ni State sank. Mr. W. A. VEITCH (Wangantii) wss prepared to [uimit that, up to the present, the shareholders had not made a great deal out of the- .bank; but the future prospect made the shares- valuable, and, as the State had received nothing for the tise of its guarantees it was only right that th& State retain as large an interest as it previously had. This notwithstanding ]the fact tlat the shareholders were anxious to gain entire control soon as tto State's guarantee was paid. Ho regretted that in 1894 tho Government had not gone farther than it did ana token over the whole control.

Mr. G. W. RUSSELL (Ayon) spolie oi tlie foresight of tliose .at the head of ilio Government- in 1894, who had induced Parliament to go to the rescue of tte Bank of New Zealand. By tb'.» action- a step had been taken towards the establishment of a State Bank, and ho believed that the final step would yet be taken. He congratulated the Government on having roado successful and satisfactory negotiations with tlie bank. The idea of a State Rank had Hot been lost sight of, and the State's interest was recognised in the Bill.

Mr. E. P. LEE (Oamaru) said he wished to correct an impression that some members scorned to this State's interest in the bank was onehalf. In actual fact it- was one-third, and ho did not tliink it would bo fair for the Government to encroach upo" the interest which the shareholders bad an the bank.

Tits House wait into Committee on the Bill at 11.33 p.in. The short title was passed, and progress was reported.

ACCOUNTANTS BILL. The Hon. F. M. B. FISHER moved the second reading of the iSew Zealand Society' of Accountants' Amendment Bill.

The Bill was read a second time on the voices. Uio House rose at 11.50 p.m.