The Guardian And Evening Star, with which is incorporated the West Coast Times. WEDNESDAY, NOVEMBER 27, 1929. BANK FOR INTERNATIONAL SETTLEMENTS.

Hokitika Guardian, 27 November 1929, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times. WEDNESDAY, NOVEMBER 27, 1929. BANK FOR INTERNATIONAL SETTLEMENTS.

An integral portion of the Young plan lor effecting a permanent settlement of the German reparations question is a scheme for an international bank, primarily designed to supersede the various organs of political control over German finance that were set up under the Dawes plan, such as the AgentGeneral for Reparations ? aymenlrs. and the committees appointed to control and supervise the Reich,shank, the railway company, and certain ol the revenues. The intention is to create an institution that will remove the mechanisyn iof reparation payments from the sphere of inter-governmental relations and to assimilate the handling of the annuities to the ordinary operations of international finance and commerce. In other words, the bank would he an agent, for the creditor Governments. Tt is apparent that this part of tlie Young plan was drawn up

rather hurriedly, and in certain respects, says tine London Commerce Journal, it has been adversely criticised. A Committee is now sitting at Baden-Baden for the .purpose of organizing the bank, but it will be very

remarkable if the business of creating and putting into working order an entirely new kind of financial institution dees not prove to lie exceedingly difficult, white it seems evident that some institution of the kind must be established in order to ensure the smooth 'working of the new reparations plan. One of the proposed dut.es of the bank is to superintend the commercialisation of the unconditional portion of the German annuities and to arrange for Ijoiid issues in, any market, provided that the central hank of that market raises no, objection. Tjic bank will also have special powers to act in the event of a transfer difficulty. In regard to one of the important operations of the proposed hank, there would seem fo he a danger of the institution exceeding its p: imary functions. It is proposed that the conditional portion of the annuities shall be paid into the account of the bank in reichsmarks, instead of in foreign curren.ies. The bank will he authorised to invest the reichsmarks in German securities, against which it will he able to issue its own corresponding obligations in the other gold standard markets of the; world- and credit the creditor powers with the proceeds. This seems to open the door to the possibility of the institution becoming involved in a somewhat risky form of speculation. Among the inon-obliga-tory functions of the bank as laid down' in the Young report are the establishment of a gold clearing house for the central hanks on lines somewhat similar to the gold settlement fund of the American Federal Reserve system, and the power to receive deposits from central hanks, as well as to transact various other financial operations with those institutions subject to the veto of the central bank in whose market they are undertaken. This question of an international gold clearing house is a. very important one, and increased attention has been given to the matter as a result of the heavy movements in gold during this year. Unless the various central banks show more disposition to agree upon a gold policy, it is doubtful if this part of the scheme will operate satisfactorily. In theory it would be very satisfactory if a great international bank, directed by representatives of the various central hanks of the world, could exercise such control over international movements in gold as to prevent heavy transfers of the metal from one country to another in settlement of a balance of payments. For that purpose it would he necessary for the new hank to accumulate a large quantity of gold, hut the process might mean the appearance of yet another strong competitor for the metal, thus leading to a disturbance of the principal Money Markets of Eurone. If the central hanks agreed to deposit a given quantity of gold with the international hank, and considered such gold as part of their own reserves (which procedure would be perfectly correct), this part of the scheme would stand a better chance of acceptance. tSd far, such central hanks as those of

Franco and Germ any have shown no disposition to agree upon a gold policy, either with Great Britain or the Ini ted States; hence the heavy drain of gold from England ibis year which lias resulted in a 61 per cent. Bank Hate.