BANKING POLICY.

Hokitika Guardian, 5 July 1921, Page 3

BANKING POLICY.

Some criticisms of the banking policy were referred recently to Mr Harold Beauchamp, chairman of directors oi the Bank of New Zealand, who. in Lis comments, gave some interesting information as to the present difficult financial position. Speaking of deposits placed with public companies and trading concerns, he said it was atone time a common practice for customers of hanks to arrange for overdraft limits, and as soon as that was done to commence to accept deposit at rates of interest substantially lower than any bank could a Hun! to charge. It Wit- good business on the part of the borrowers, but bad business for the bankers; who .were practically underwiling the obligations of their customers without making any charge whatever. With the commencement of the present- period of financial stringency the banks could do little more than to iissist in the earring on of the industries of the country, and had no funds available for the payment ol deposits. In the circumstances, he could scarcely see why customers should complain of their inability to get from the banks the money they required for the discharge of tlteir liabilities in respect to deposits. They took this money with their eyes open and they had no one (o blame except themselves for tiie consequences that had attended such tt policy. “I know there lias been a good deal of criticism.” continued Mr Beauchamp, “in respect to the rate now charged bv the banks lor overdraft accommodation. In that connection, I would point out that during the whole period of the war and for several years afterwards, money was cheaper in this country than ie any other country in the world, and to-day the rate is no higher than that ruling in London, America and other parts of the world. Decently the Bank of New Zealand paid 71 per cent for temporary accommodation in New York to other hankers while the Bank of England rate was

7 per cent, reduced recently to til and later to 5 per cent. At the same time soiik' of the largest, and most powerful companies in Great Britain have been i-siting gilt-edged debentures tit rates varying from 71 to It) per cent. In this Dominion tip to tlm present the Highest rate offered by any company tor debentures or bonds, has been 8 per cent. All tilings considered, I have no hesitation in affirming that the people ol this country have no grounds whatever tor complaining about the rates ruling for money. It is only necessary tn look at the Inst banking returns to see the

enormous increase there has been in advances, and this has been brought about by transferring Irom London vast sums which were earning a better rate of interest in the majority ot cases than was obtainable in New Zealand.

In reply to further questions, he said hat a very large portion of the pro-

fits oi the Bank of New Zealand had, of recent years, been made in London. This was on account ol tile policy ol the hank to keep exceedingly strong in the world’s centre, where special opportunities were offered ol lending nirimv at remunerative rates oil terms which would allow it to be called up at any moment for ttansler to New Zealand to meet such a position as bad arisen during the last lew months. “It is not difficult.” lu* said, “to picture the position in which New Zealand would have found itself if money had not been kept in that liquid form in London and available as it has Ileeii during the past few months tm transfer to New Zealand. Supposing, I, nr instance, these million- which have been invested temporarily in London ]ad been lent in New Zealand, how would it have been possible to have ended in any considerable portion of ii to meet present demands? “It was the same policy.” Mr Beauchamp continued, “as that followed b> tbe Government, which had kept emisiderahie sums invested in London as a

i-,,against saving bank deposits. Il was believed that on one occasion the Government bad as much as 15 million pounds in London. As lar as the Bank of v •■■■ Zealand was concerned it bad transferred from London within the last twelve months the sum of L‘15,090,000.”