WELLINGTON NEWS

Hokitika Guardian, 3 August 1928, Page 4

WELLINGTON NEWS

POST OFFICE SAVINGS BANK. (Special to “ Guardian.”) WELLINGTON, August 1. The functions of the Post Office Savings Bank differ from those of trading banks, land banks and mortgage banks, but this does not appear to be realised by many people and particularly by the ! Labour members of Parliament who the other day heckled the Minister of Finance ancl accused him of sub-ordinat-ing the interests of the Post Office Savings Bank by reducing the maximum amount of money out of the Post Office Savings Bank into the private banks. This statement when closely examined will be found to be somewhat stupid. The Post Office Savings Bank was established to help the small wage earners to save, and tor this purpose the Savings Bank will accept deposits of Is and upwards, allowing a small rate of interest, the money being withdrawn without notice except under special circumstances. It must be obvious that it is particularly convenient to those who save a few shillings or a few pounds. At one time the Post Office Savings Bank paid no interest on deposits above £SOO, and rightly so for anyone with such a deposit cannot be regarded as the small man the savings bank was designed to help. Latterly, or since the close of the war, the whole scope of the bank was changed, for it was decided to accept deposits up to £5,000 and to allow interest thereon, the deposit being at call. ' This gesture was not for the purpose of helping the small man but to provide cheap funds for the squander policy of the Government- But the scheme went astray for instead of adding materially to the deposits, the statistics of the Post Office Savings Bank show that for each of the past five years the withdrawals have exceeded the deposits. The bank was being used by men with large means who deposited money for a month 01 two only to withdraw it for their business purposes. It was convenient for them for the money could be withdrawn at any moment, and if it remained in the Post Office Savings Bank for a month there was a month’s interest which on a deposit of £4OOO or .£SOOO was appreciable. While this was convenient for the depositors it was very inconvenient for the Savings Bank because very-

large amounts had to be held to meet these sudden demands. The small savings are not messed about like that. There is some real pleasure in adding week by week or month by month to the small deposits which are not withdrawn except to meet urgent necessities. In providing facilities and conveniences for people with limited means t,o save and to learn to be thrifty, the department is doing good work, but by accepting deposits up to £SOOO it was going outside of its true functions. A land bank or mortgage bank has quite different functions. It deals in long term credits and cannot-accept deposits for limited periods. The Mortgage Bank sponsored by the British Government is to make loans on land and other farm assets for periods extending up to GO years. The whole of the capital is found by the private banks and the dividend is limited to 5 per cent. Furthermore the British Government is to lend the bank lice of all interest for 60 years £750,000, and also donates £IO,OOO a year for ten years to provide for administration. The loan funds of this bank are to be derived by the sale of debentures to the investing public. The Mortgage Bank is being established to help the farmers of Great Britain. The private pr cqnimercial banks cannot lend money on land, be-

cause long term loans lire not within the scope of a private bank. The great bulk of banking resources are represented by deposits repayable on demand or at short notice. It is not in accordance with sound principles that the banks should provide permanent capital for industry and, within reasonable limits, they should confine themselves to loans of a more or less short term character.

If tiie various functions of these banks are understood and appreciated there would be less 'criticism of our trading banks which are observing sound principles ol banking. II the trading banks are to render lull service to the community there must be a full and regular flow of deposits to their coffers. If any check is placed on this flow and there is q scarcity of deposits then it becomes the duty of tlio banks to q'ffer higher rates pf interest to attract deposits, at the same time they are bound to raise their rates for advances. When the banks have a sufficiency of deposits it is the proper tiling to reduce the interest rates for small deposits. It is just merely observing the inexorable laws of supply and demand. The great gain of £5,5;80,p0Q shown by the last banking returns was not due to the higher interest rate entirely but to quite other Causes, and politics is at the base of them. The competition of Government with the trading banks for deposits is much to be deprecated, for if the banks are forced by competition to again raise their rates for deposits then the business community will have to reckon with dear money. -