BREAK UP OF THE BANK MONOPOLY.

Dunstan Times, Issue 780, 30 March 1877, Page 4

BREAK UP OF THE BANK MONOPOLY.

(From the Age.) At length there appears to be a fair probability of trade lieing released from the financial handcuffs by which it has been bound for years past, through a combination on the part of our local banking institutions to keep up the price of money. The Bank of New South Wales, in pursuance of notice given to the other associated banks, retires to-day from the old arrangement ; and for the future the trader may hope to be treated on a more equitable basis as regards accommodation. It must be clear to the most ordinary observer of commercial matters that the effect of the late huge monopoly of the money market could not but act prejudicially on the extension of business operations. Whilst in every part of the world where trade was sound cheap money was to be had sufficient to supplyall its requirements, in Australia enormously high rates were maintained to cripple and impede it. Legitimate ventures had to be abandoned, or were frustrated in their inception simply because a tax of nine to ten pounds out of every hundred pounds was required—no matter how good the security in return—for any •assistance granted by the banks. How disproportionate are the rates charged in Victoria, may be gathered, in some measure, by comparing the same with those ruling in England. Taking the following years, we have:— Bank of England. Year. Average rates per cent. 1869 3p 1874 3J 1875 -31 1876 3 Victorian Banks. Year. Average rates per cent. 1869 '6 to 7 1874 7 to 8 1875 8 to 9 1876 8 to 9 ■ Circumstances can hardly be said to have altered unfavorably in regard to the trade of Victoria since 1869, yet the business man has to pay two per cent, additional for his accommodation. We must therefore look elsewhere for a solution of the enigma. Turning to the deposit account, we find that in 1869 54.37 per cent, of the same bore interest; in 1874, 53.29 ; in 1875, 68.14 per cent., and during 1876 there ■was, wo know, a still further increase. The Victorian banks commenced that practice, and were pushing it in all quarters, of inviting small capitalists by offering high rates of interests to use their institutions as a channel for investment. By so doing, as has been already pointed out by several leading English financial and commercial journals bankers departed from their legitimate course of business, and introduced a new feature, the pernicious effects of which were certain to be felt sooner or later. For not only does this system starve the ordinary and legitimate channels of trade, but it also necessitates the banks themselves accepting risks which, under ordinary circumstances, would have been de- ■ clined, solely to meet the increased charges incurred. Examples of the result ot this course of procedure wo trace in the losses incurred by the London Banks in connection with Sanderson and Co. and others, and by the Victorian Banks in mining bills to which scrip was attached. Good ■and bad risks were averaged, and the advances to the legitimate trader, the small farmer and settler, were “loaded” 'to compensate the banks. But -despite all these expedients there has been a steady increase in the uninvested capital of the various Victorian banking institutions. A recent agologist for “ the policy of the banks” has made a feeble attempt to prove that this increase does not arise from failure, but rather from prudential motive*. Against this expl anal ion we have Mr Palgraves estimate of the English banks, whose coin and bullion he returns at about 4 per cent, of their liabilities; while in 1874 the Australian banks held no less than 27 per cent, of theirs, and this during the last two years has sensibly increased. Now, a difference of 23 per cent, is ■quite unnecessary, and certainly would never have continued unless the system of monopoly by combination had been introduced. The Bank of Now South Wales, an institution representing the largest amount of uninvested capital, is naturally the first to move in the matter, because its managers see very clearly that the present system must result in a reduction of their profits. They have plenty of money to lend, but no good borrowers. Firstclass paper is scarce, because the existing high rates have driven merchants into reducing their discount account to the lowest possible figure. New ventures, which means increased demand for money, are checked, and the paper offering is either risky or accommodation is absorbed by land speculators, who may or may not eventually land the bank in a loss, as in the case of the late Hugh Glass. The movement, however, is not popmlar ; some institutions have pet customers which bring in a large annual revenue (o the bank, and their pleasant arrangements may be disturbed The break up of the banking combination means encouragement and assistance to certain classes which representatives of the monetary magnates detest. “All or none,” is the motto of this class ; the money must be theirs ; the right of supplying the wants of the country theirs; their Fiends must monopolise «very subsidy, and the common folk

must accept the quality and description of work thov choose to offer, and the wages they deem sufficient.