WELLINGTON NEWS

Hokitika Guardian, 6 September 1928, Page 4

WELLINGTON NEWS

NEW BANK FOR THE DOMINION. (Special to ' Guardian.”) WELLINGTON, September 3, As was anticipated no opposition lias been offered to the formation of a new bank for the Dominion and the promoters will now bo able to go abend with their scheme. There is no doubt that at tho second rending some of the speakers voiced 1 some stupid opinions, but the main complaint appears to have been that tho banks are associated, thus tho Lender of the Opposition (Mr H. Holland) who appears to be particularly incompetent to deal with financial matters. Ho sought an assurance that the now bank would not join up with the Associated Banks, and declared that there was a strong banking combine which not only dictated the financial policy of the country but entered also tho political arena, and the Minister for Finance rightly declared the statement to be nonsenso. That the banks are associated seems to be tho chief cause of resentment, and it is difficult to understand this. Surely tho banks lmvo as much right to have an association of their own ns other business interests, indeed the modern trend is for international cooperation. Almost every section iii industry has its society, association or union, and that this seems to be essential. The idea that the new bank can work apart form the associated banks and go on its own is futile. “If the establishment of the bank meant that more money would be made available at a cheaper rate there would lie some justification for the Bill passing,” but he doubted whether that could be achieved. This idea that money can bo made arbitrarily cheap without relation to supply and demand is entertained by a lot cl people, but it is an erroneous idea.

The laws of supply and demand open, ate in respect to money or credit as they do with other things, and the new bank will be powerless, to break the law. In his evidence before the Banking Committee, the Chairman of the Associated Banks considered that any attempt made by a new bank to cut rate's and to operate outside the Associated Banks would lead to war, and the six banks at present associated would undoubtedly undercut the new bank and put it out of business. There is nothing startling in the statement for it is the common every-day practice in business. Unionists have) been known to refuse to work with nonunionists or Tree labour, and many employers have bad to dismiss competent men to avoid trouble. At the present time there is a fierce rate war with shipping lilies trading between Canada and New Zealand. If the new bank cut the overdraft rate, that is offered credit at bargain prices, the object would be to cut into the business of the Associated Banks, and it is not to bo expected that they will quietly submit to such an attack.

Adequate banking facilities exist in the Dominion, and a new bank is not really wanted. Every one of the six banks trading in New Zealand has substantially increased its capital since tbe close of the war, and only once or twice since then has there been an appearance of shortage of banking credit As a matter of fact there was no shortage but tbe banks recognising that there was over-importation made r difficult for intending borrowers to oh tain credit, and in doing so the banks did a great service to the country. Mr ,T. G. Elliott (Orona) who is the sponsor for the Bill, referred to the profits of the banks and from his icmnrks one would imagine that the apparently large profits was entirely earned capital. He omitted to mention that the reserve funds of the hanks are in many cases quite ns large as the capital and it is resefvc funds that help to swell the dividends. If the reserves arc taken into consideration tho average of the dividends is small, or at any rate not more than reasonable. And the banks are required by law to build up reserve funds, and such funds repiesent past profits withheld from distribution to shareholders. The Union Bank was the first hank to start in business in New Zealand, opening up about 1840, then came the Bank of New South Wales and tho Bank ol New Zealand. The Colonial Bank, which started in 1871 went out in 1895, l)cing sold to the Bank of New Zealand. The Oriental Bank was doing business in New Zealand in 1800, and there was also a Bank of Otago which 'was acquired bv tbe National Bank, which was formed in London in 1872. There was another institution known as the New Zealand Banking Corporation which has long ceased existence. There has never been any lack of bank accommodation in New Zealand and there is no scarcity now. Still it is quite within the limit of capitalists to establish another hank if they wish to do so.