MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LX, Issue 135, 8 May 1940, Page 4

MONEY AND BUSINESS AFFAIRS.

BIG BANKS. (By “H.J.Iv.”) The size and standing of a bank are not judged by the size of its capital, or by its directorate, or general manager, but by the volume ol its deposits. And deposits do not come to a bank unless it holds the confidence of the depositors. Without depositors a bank could not operate, and would not be a bank. An American institution has taken 150 banks, American and British, Dominion and colonial, and placed them in the order of their deposits. The largest bank is the Federal Reserve Bank of New York; then follow the Chase National Bank (New York), the National City Bank (New York) and the Guarantee Trust Company of New York. It is not surprising that these four American banks are in the lead, for during the past two years, owing to the tension in Europe, vast sums in gold and in credit have been transferred to the United States, and this money is deposited there temporarily. After these four American banks there follow'the Midland Bank (London), Barclay’s Bank (London) and Lloyd’s Bank (London). After these come two American banks, followed by the Westminster Bank, and the National Provincial Bank (both of London). The deposits of these institutions range from 0,700,000,000 dollars to 1,053,424,303 dollars. Ninetyeight of the 150 banks with deposits of 42,851.218.817 dollars are American. The 52 British banks, with deposits of 19,289,292,385 dollars are found in all parts oL the Empire. It is essential that a bank should retain the confidence of its depositors, but it has happened in the past that depositors take fright through something unconnected with a bank and there is a “run.” This happened during the great depression, when many American banks closed their doors because they could not meet the demands of their depositors, not having been able to realise on their assets. Sometimes a panic of this nature subsides through some spectacular incident. On one occasion there was a run on the Yorkshire Penny Bank, and the assurance of the authorities that all deposits would be paid did not prevent excited depositors from forming long queues. At last the authorities posted upon the bank’s notice board a letter from the Bank of England, announcing that £1,000,000 in gold had been sent, and more would follow if needed. The depositors realised that if the Bank of England had confidence in the Yorkshire Penny Bank then it merited their confidence. The run soon ended and the previously withdrawn deposits were redeposited. The chief duty of a bank is to safeguard its depositors and retain their confidence. If the deposits are withdrawn to any large extent a bank might just as well close its doors for all the good it could do. In thinking of banking one must think in terms of deposits and depositors, who are easily scared. Those misguided people who believe that the State should take over the Bank of New Zealand should consider how the depositors would react to such a proposal. Would ’they have confidence in bureaucratic management? If the depositors withdrew their funds there would be no bank to take over. The basis of banking is confidence, and confidence is a plant of slow growth. The confidence of the public and the liquidity of its assets are essential for successful banking. TRANSFER OF MONEY. The transfer of money from one country to another by private individuals or business firms is now almost impossible, for all activities in this respect are under control. Of course this is making it difficult not only for trade, but also for travel. It is reported that many fairly large sums of Australian bank notes brought by travellers to New Zealand for sale as unofficial exchange are held in Auckland. As permission to take these out of the country must first be obtained under the finance emergency regulations, some holders of these Australian notes express anxiety as to their position. This embargo is difficult to understand. If they have been brought here —that is, the bank notes—then the travellers spent the money in buying services in New Zealand; that is, the travellers received value for the money they spent here. It is possible that those who " accepted the Australian bank notes did so in good faith but at some risk. Yet Australian bank notes have a greater standing in the Dominion than New Zealand bank notes have in the Commonwealth. There is value in the Australian notes in New Zealand, but the reverse is the case with respect to New Zealand notes in Australia. It is also said that the Australian notes have been-brought to New Zealand for sale as unofficial exchange. If they were sold in New Zealand, what was given in exchange for the Australian notes? They were not dumped here by Australian travellers just to help some business people to import from Australia. They must have received value for the money either in goods or services, or both, and making use of the Australian notes for the'purchase of Australian goods reduces the whole thing to an exchange of goods and services. The Commonwealth Government has also taken steps to prevent The transfer of monev from Australia to New Zealand, and those with funds in Australia cannot use them for the purchase of goods in Australia. If goods are bought in Australia, New Zealand credit must be transferred in payment. It is now difficult for a person in Australia to make a monetary gift to a relative in New Zealand and vice versa. The times are very difficult for all, but particularly for. business men, but the people are willing to put up with difficulties. Tn fact they must, hut they would like to know’ if there will be a return to normal conditions when the war ends, or will regulations stringent and irksome be carried over into peace times. POST OFFICE SAVINGS BANK. The customers of tile Post Office Savings Bank continue the withdrawal of their funds. This trend was first noted in the closing quarter of 1938, and has been continued ever since. For the twelve months to the end of March, 1938, the deposits exceeded the withdrawals by £3,412,098, but in the Gear ended March 31, 1939, the withdrawals exceeded the deposits by £4,163.417. For the eleven months to the end of February last the withdrawals exceeded the deposits by £4,492,550, 1 or more than was withdrawn in the whole of the preceding year. It- is hard to account tor this movement, and yet it has been in existence for too long a period not to be noted. It is surely worth investigation by the authorities.

Importation of Weeds. It was alleged at the annual 'meeting of the Northland Pig Council that a wide variety of weeds was being found in imported undressed feed bailey. A sample of Australian undressed feed barley was shown -which contained a number of weed seeds. Y’he council 1 is to draw the attention of the Government to this position.