N.Z. BANKS DENY PROFITEERING ON NEW EXCHANGE

Grey River Argus, 3 September 1948, Page 4

N.Z. BANKS DENY PROFITEERING ON NEW EXCHANGE

Explanation of Position P.A. WELLINGTON, Sept. 2 . A denial of the suggestion that the banks are making a proiit out of change in tne exchange rate was made to-day by the Associated Banks of New Zealand, which in an official statement, clarified the position relating to the current drafts negotiated overseas before the alteration of the rate on August 19. The statement pointed out that, when a bank asked an importer to pay (approximately) £125 New Zealand after August 19, 1949, for a draft discounted in London before that date, that bank concerned had already paid £125 New Zealand for the one hundred pounds sterling it had sold (i.e. paid out to an exporter in London). "Some misunderstanding exists m the minds of importers and others regarding drafts or bills negotiated, say, in London, up to August 19, 1948, covering shipments of goods to New Zealand, which drafts are now being presented to the drawees for acceptance, or are due for payment,” the statement says. , , “For example, it has been asked why a draft for £lOO sterling, negotiated by a bank in London on, say, August 10 last, and presented to the drawee on September 1 converted —at the on-demand buying rate in London on New Zealand—to approvimately £125 (New Zealand), must be paid as drawn. Other importers have thought that, when their bank asks them to pay (approximately) £125 (N.Z.) after August 19, 1948, for a draft discounted in London before August 19, 1948, that the bank is making a profit out. of a change m the rate of exchange. This is not so, and the reason it is not so is that the bank concerned has already paid (N.Z.) for .the £lOO sterling it has sold (i.e. paid out to the exporter in London. , . , “A transaction, as . above, is for practical purposes, similar to a sale of an article by a shopkeeper on August 10, to a customer for £lOO. He renders his account on August 31, for £lOO. and the customer must pay £lOO. The fact that the sale price of the article may have dropped to £BO on August 19, has no effect on the amount the customer must pay.