THE BANKS AND THE GENERAL DEPRESSION.

Dunstan Times, Issue 893, 30 May 1879, Page 3

THE BANKS AND THE GENERAL DEPRESSION.

The following article on the relation of the banka to the preaent depression of trade in the Colony appeared in the Lyttelton Times of a recent date : A perusal ot the bank returns for the quarter ending Maroh HI last discloses results for which we had not been quite prepared. We have heard much of the tightness of money and the consequent public inconvenience, caused by the restriction of bank accommodation—a policy ascribed to all the banks, but in which, for some reason, the Bank of New Zealand has been supposed to be foremost. We do not ourselves believe that this bank had so entirely departed from its traditional policy, but concluded that even a prudent and necessary check to its advances was severely felt by reason of the large business of the institution and its usual liberal policy. The opinion is more than borne out by the bank returns, which show that in the March quarter three foreign banks, as they have been called, have reduced their advances by 1.130,000, while the Bank of New Zealand has increased its accommodation to the public by 1.170,000, the National Bank having also increased its advances by 1.120,000. This we think a circumstance of much significance, as tending to confirm a prevailing impression that in a time of difficulty and pressure the interests and wants ot the Colony are likely to receive greater consideration from institutions locally controlled than from those which must carry out a policy dictated from abroad. As we expected, we fail to discover from these returns that existing monetary pressure is in any degree caused by the action of the banks as a whole ; restriction by the foreign banks being more than compensated by increased facilities allowed by local institutions. The causes of the tightness are easily to be found in the reduced value of colonial products—a deficient harvest—and last, but not least, in the rashness of many people who have incurred obligations which they have not the means, nor the credit, to meet, and who naturally seek to fix the blame anywhere but on themselves. To these causes we might add the check to the flow of money for investment in the Colony caused by the late financial crisis in England ; and the failure to organise new lending companies to be the channels for such investment in proportion to the rapidly-increasing wants of the Colony. While looking into this subject we have endeavored to find out how far the banks themselves sutler from the scarcity of money which’affects so many of their constituents. The quarterly returns do not adequately supply this information, as they only deal", with cash resources actually held in New Zealand': nor have we been ablo to lay bands on balance-sheets of late date of all the banks. We find, however, that at their balance on March Hist last the Bank of New Zealand showed : Coin and cash balances ... £1,725,000 Bullion ... ... ... 197,000 Government securities ... 629,000 £2,551,000 The Union Bank shows as at DecomberHlst last : - Specie on hand & cash balances.. £1,240,000 Bullion ... ... ... 141,000 Government securities ... 387,000 £1,708,000 The Bank of New South Wales shows as at March Hist lost Coin and cnahAbjUances ... £2,658,000 Bullion .*•*■" ... ... 272,000 Government securities ... Nil. £2,930,000 Each bank having special liabilities for Government deposits. These, in the case of the Bank of New Zealand, would appear by the quarterly returns to be L 869,000 ; but as this figure represents the average of the quarter, the amount at March Hist is no doubt ranch less. As regards the liability of this hank to make advances to the Government, it is significant that the bank is already holder of Government securities to the extent of L 629,000, which, for anything that appears, may in fact cover all the advances it can be called upon to make. The liability of the Union Bank to the Queensland Government was, at the time, probably nil, but they are holders of E156.000 New South Wales Government deposits. The Bank of New South Wales appears at the date of its last balance to have had L 1,200,000 of Government deposits. Estimating the liability of the Bank of New Zealand on Government account of the date of its balance at, say L5U0,000, the resources of the three banks in cosh, bullion, and Government securities, less Government deposits, would stand thus Bank of New Zealand ... £2,050.000 Union Bank ... ... 1,610,000 Bank of New South Wales ... 1,730,000 We do not pretend to go exhaustively into the finance of any one of these banks ; the figures available to the public do uot alibrd the means of doing so conclusively ; while an attempt of the sort might be an injustice to one or other of them, and create interminable controversy. It is enough that we can see nothing in the position of three of the leading banks trading in this Colony which is otherwise than re-assuring ami calculated to inspire confidence. In this connection, and as an instance of Government financial policy, the action of the New South Wales Government is noteworthy. Having some L 3,000,000 on deposits with the Sydney banks, they nevertheless have just raised a loan of over 1.3,000,000. The reason given, as we believe, for this rather s ngular procedure is that, it would be highly inconvenient for the banks, and therefore dangerous to the Colony, were they at present called upon to repay this money