THE BANKS' PART

Evening Post, Volume CXIII, Issue 3, 5 January 1932, Page 5

THE BANKS' PART

VALUE TO CO3DIUNITX

ANSWER TO CRITICS

Many misconceptions regarding tha functions performed by our financial institutions are. due either to failure to distinguish the part each plays ia our national economy, or to over-em-phasis on the contribution, rendered by a single unit, writes C. B. James in the "Sydney Mornhig Herald." Tha term "banks," for instance, frequently is employed in a very narrow sense as meaning only those organisations advertising the fact that they are banks. A complete list of enterprises engaged in banking could not be obtained from a telephone directory under the heading "Banks." Eeference also would be necessary to "pastoral and land finance companies," "life insurance companies," "building and investment societies," "co-operative credit societies,?* ■ and "trustees, executor, and agency companies.'' these are banks, because they receive deposits and make . advances. Money lent to .them, and (loans granted by them, may not in all cases be described as "deposits" md "advances," but "what's in a name.?** Criticisms of our financial institutions most frequently are directed against those units which are cabled, trading banks; as if these were "the only villains in the piece.'' Logically t much of the .criticism must be applied also to institutions other than trading banks. The same arguments advanced in condemnation of these latter also condemn, many other financial organisations. Some critics of our trading banks apparently do not realise that their shelling hits a larger target than that sighted. Savings Banks, for instance, can scarcely escape some of tha . shrapnel. If it is intended to reduce the whole of our financial structure to ruins, the persistent bombardment of the trading banks may accomplish this objective. Therein lies a real danger. VARIETY OF FUNCTIONS. Some financial concerns more particularly minister to the needs, of .producers, others are mainly concerned with, satisfying the wants of consumers. Among the former aae trading banks and pastoral companies, and among, the latter life insurance companies and building societies. But it is not possible to draw a line between them. Each in its special performance of a banking function undertakes other banking I business. Trading banks do not limit 'their attention to the provision of projducers' credit, nor do life insuranca companies confine their activities to consumers' credit. The former supply, money to home builders, and the latter finance the erection of commercial structures. Well-reasoned criticism of the policy, pursued by the trading banks may be desirable, but it should be consistent and constructive. Moreover, it should, take into account those features with, which no fault can be found, and pay, due regard to the general structure of society under which the trading banks operate; Does the following recent comment of a church dignitary, measure up to those requirements?— "They (i.e., 'bankers and .financial magnates') are obsessed with the ecb« nornie fallacy that, as long as the producers get enough money consumers automatically do ... they think primarily in. ' terms of goods and profits. '\ In this criticism the production of consumer credit ' by, some of our financial institutions ij overlooked. This ecclesiastical statement ignores the many incidental services rendered the community by banks and other financial concerns. It may be asked whether the assistance given during "the period of falling prices by trading banks and pastoral companies, against farm securities of doubtful value, is prompted by an outlook coloured by "thinking in terms of goods and profits." . AID TO GOVERNMENTS. Although the trading banks are pri« vately owned, their policy on occasions is not directly in the interest: of their shareholders. A narrow vision, may result in bigger dividends for a short period, but a broad outlook—a national outlook —ultimately means more profits. The classical example of decision* made by a management mainly in the interests of the nation, is afforded by the policy pursued by the directors <rf the Bank of England, which is privately) owned. Private banks in Australia also-serve the community first. Thera are not wanting evidences of this. Taka for example, the agreement into which, the banks voluntarily entered in August, 1930, to sell remittances on London to Australian Governments at a price 2s 6d per cent, less than that paid by, other purchasers. It was-not as though tie banks had more money in. London than they-could sell. They could readY iiy have disposed of all they possessed at the higher rate. Their decision waa prompted by the nation's need, and noti by the immediate interests of theif shareholders. Those who criticise the banks should endeavour to appreciate , the difficult problems confronting bankers. If pro-duction-proceeded at-a steady rate," and if consumption were not subject to such! violent changes, safeguarding the funds entrusted to them would not occasioQj so much anxiety. Bankers are custoV ians'of the community's savings, Thejl would fail in their trust if they hastily} departed from banking practices, Trhiclj have been evolved through many year# of specialised -training and. practical~ej* perience. It is no time to change horse* while crossing a stream, and it itj simply courting disaster to makeTadicai alterations in approved banking methods when the country, is passing through a depression. There is always room for improvement in the best managed concern*. Banks are no exception. But who ara best fitted to institute reforms? Surely those who know the inner -workings. Suggestions by outsiders may be helpful, since it is good to see ourselves as others see us. Advice, however, is not dictation. Can a farm be run satis* factorily by a city theorist? ~ .