THE RESERVE AND OTHER BANKS.

Hawke's Bay Herald-Tribune, Volume 81, Issue 9, 4 October 1937, Page 4

THE RESERVE AND OTHER BANKS.

The annual report of the Reserve Bank of New Zealand, signed by the Governor, Deputy-Governor and Chief Accountant, tliough only a comparatively brief document, yet contains . some items of information that are of distinct interest. By no means the Jeast notable feature about it is the comment which is made on the activities of the trading banks, which differs very materially from what our Prime Minister has to say about them. Only last week Mr Savage was reported as saying that "the private banking intsitutions were not providing the full degree of service which they might be expected to provide." JL'his was followed by a vague tbreat that, "if they failed to render tbe proper measure of service, then the State, that is the Government, would step in to fulfil the duty of giving the requisite degree of service to the community." This is the comment of Mr M. J. Savage, who probably knows as much about banking as he does about astronomy, with "the sky as the limit," and stars for wagon-hitchiug. Turning to the Reserve Bank Report submitted by three highly experieneed bankers, we find them presenting in schedule form a summary of the operations during last financial year, of all the trading banks doing business in the Dominion and saying: The ratios in the last tvvtxcolumns of this summary skovv that the trading banks as a whole maintained a liquid position throughout the year, while their willingness to lend to suitable borrowers is indicated by the fact that the total unexercised overdrai't facilities provided for their customers did not fall below £20-million." This latter statement, we take it, meant that there was made specifically available to the customers of the banks an aggregate of credit for which to the extent of /,20-million they could find no reasonably safe and profitable outlet. Ihis position can bear only the one construction : that it was not the banks that were reluctant to lend, but the customers who were afraid, under the existing conditions created by the Government, to take the risks of committing the funds thus put ready to their hands to any industrial or commenrcial undertaking. This, of course, means that this big volume of banking credit which might otherwise have been invested in wage-paying ventures had been lying practically idle. Then, so far as concerns lendmg financial support to the' Government itself, these Reserve Bank officials tell us that when the Finance Minister, the Hon. W. Nash, found himself short of some ^2^-million in carrying through the London conversion operation for which he claims so much credit, a very considerable proportion of that amount was provided for him on Treasury bills taken up by the trading banks, and this, too, it is to be specially noted, at a rate of interest no more than 1 J per cent. per annum — a rate to which even Mr Savage could scarcely take exception. 9 As has been said, the Reserve Bank report is for the financial year ended 31st. March last and may thus be regarded as somewhat stale. It is, however, to be observed that, in the interval, the actual advances made by the trading banks to their customers have been increased by very nearly £3million. According to the latest available returns at the end of August last they stood at ^4g|-million, or something more than ;£8-million in excess of the figure for the corresponding month of 1934. It will thus be seen th(it so far as concerns affording banking facilities for the "community" the trading banks have done none so badly under the disadvantageous circumstances. Then, if Mr Savage had only the most elementary grasp of the position, he could scarcely but see that the last result to be expected from shaking the "big stick" in the face of the banks would be encouragement to further expand the resources available to wage-paying industrial and commercial businesses and services. Thus he is doing but a very poor service to the wage-earners. It is, indeed, very difhcult to discover the basis— if there really is one — for Mr Savage' s so persistent grouch against the trading banks. The only thing that suggests itself at the moment is that they may not be very ready to commit their depositors' funds to the long-term loans his Minister of Finance seeks for the purpose of carrying out the extravagant and prodigal expenditure his Budget contemplates. Should this be the case, then it may be said only that the thanks of the community are due to the trading banks for not pandering to the squander-lust of the Government. Incidentally it may be noted that the report under review draws attention to the fact that, under last year's legislation, the Reserve Bank is authorised "without limit as to amount", to hold such long-dated State securities, which of course, is no pRrt of the prpper functions of any such institution.