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Hokitika Guardian, 4 August 1931, Page 4

Tn'u report of Sir Otto Niemeyer on a revised banking system for New Zealand, was made public last week. It follows in general the trend of similar reports for other countries, in relation to the central bank system of control, which is a feature of the recommendations now being made in the banking world. The function of a central bank is to control credit and currency, and so avoid any undue inflation or deflation of the value of a currency, and to maintain prices suitable in relation to gold. Sir Ernest Harvey, another financial authority, and an advocate of the central bank system, stated the cardinal rule of central banking was to keep its assets very liquid so that they could be turned over rapidly, and on that account the trading banks would need to carry a minimum reserve for immediate needs only. New Zealand proposes to take time to consider the matter. Here, there is a distinction in that, one of the trading banks is partly a State owned institution, and enjoys already the benefits of the State hanking which is usually earmarked for the central bank if that system is adopted. To that extent the conditions here are somewhat different and the matter requires careful consideration. All the trading banks require to hold adequate reserves, and for exchange purposes these are deposited overseas. Necessarily there is a large, reserve in London, and the effect of this on local credit requires to be considered. The regulation of the money market as it- affects New Zealand should have some economic advantages, and it is believed that under that heading dt is possible to avoid violent fluctuations of prices,' and no doubt exchange rates could be stabilised. Probably it would be necessary to secure all possible benefits, to have a uniform banking system within the Empire, and if that be so the subject will be one for consideration at the next Empire Conference. The Government does not propose to move hurriedlv jn this matter. As was indicated in the Budget, Mr Forbes places the particulars before Parliament, and the matter will not be approached seriously till next session at the earliest. Tt is, of course, not a party matter, and any Government which may he in power after the next general election would he justified, in taking up the report for the definite consideration of Parliament. Meantime .Sir Otto’s recommendations will he receiving serious consideration particularly bv those most interested.