Colonial Bank of Issue. [From the "Wellington Spectator," May 18.]

New Zealander, Volume 5, Issue 431, 1 June 1850, Page 3

Colonial Bank of Issue. [From the "Wellington Spectator," May 18.]

Our readers are aware that, as has been notified in the Government Gazette, Colonial Banki oflssue have recently been established by the Governor-in- Chief in Auckland and Wellington, under (he provisions of the Paper Currency Ordinance, paned in Oct. 1847, which has received the royal confirmation, and that the Branch Bank in Wellington will be opened for business on the 3rd June. This Ordinance, it will be remembered, was passed in conformity With Lord Grey's despatch, Feb. 27, 1847, in which hit Lordship explains his object to be to secure for New Zealand a uniform paper currency of the best description, and regulated upon the most correct principles. With this view it is intended to place the colonial currency entirely under the control of the Government, by the establishment of Banks of Issue, the notes of which shall only be issued in exchange for specie, and shall be payable in specie on demand. These notes are to be a legal tender in payment of all sums above for y shillings, and their ultimate payment is charged on the general revenue of the Colony. Commissioners are appointed to ascertain the average amouut of notes of the Union Bank ia circulation during the period of two years

preceding Jit July, 1847, when tha Union Bank will be allowed to issue its own bank notes to the extent of the amount 10 ascertained, until a day to be fixed by the Governor in Council, of which twelve months notice shall be given, after which period the notes issued by the Government will be the only lejal paper money in the colony. By a Treasury Minute, May 20, 1848, one third of the money received in exchange for the notes ii to be retained in the bank, and the remainder is to be invested in the British funds, and authority is given to the Commiuariat to render any assistance which may be required in the event of any extraordinary demand on the bank, the Home Government having the power of selling an adequate portion of the Government securities of the iuvestmenti made by the Bank, to repay the assistance so rendered. By the Ordinance, the Manager is obliged to make a weekly statement to the Treasurer of the amount of notes in circulation, and the amount of gold and silver coin in the Bank, a copy of which ii to be posted in the Bank for the inspection of the public, who will thus receive every information as to the actual state and management of the Bank. From the above sketch it will be seen that theie notes will be iisued by the Government under all the conditions of a currency " regulated upon the most correct principles.'' It is a currency established on the faith and credit of the Government, which is, or ought to be, a higher guarantee than that of any private company, however wealthy ; it is regulated by the public through the action of exchange, since the notes are only issued in exchange for ipelcie ; it is uniform throughout the colony, «nd payabe immediately on demand in specie. The chief objection! raised to this currency are, that in a Memorial dated Sept. 7, 1847, several merchants and storekeepers of Wellington declared themselves opposed to the measure; that a paper currency, (the notes of the Union Bank of Australia,) already exists in this settlement, with which the public are satisfied ; and that the expense of working the measure will be more than the profit to be derived from it. In considering the first objection, after allowing all the weight due to the memorial alluded to, which was signed by forty persons, six of whom have since left the colony, it must be borne in mind that two of the persons engaged in getting up the memorial (Mr. M'Donald, the late Manager of the Wellington branch of the Uuion Bank of Australia, and Dr. Featherston) were chiefly remarkable for their inveterate hostility to Sir George Grey'i government, and that the memorial only represents the opinion! jof a portion of one class in one settlement, while the Government it bound to legislate for the interests and convenience of all classes in all the settlements of the colony, and it oan be shewn that to a considerable extent the class protesting against the measure will be directly benefited by it. Since the passing of the Ordinance a Branch of the Union Bank has been established at Auckland, and it might be supposed that the notes of the Auckland branch would be readily exchanged at par by Hie., branch at Wellington. In effect a charge is made of two per cent, by the Wellington branch on exchanging Auckland notes and an additional premium of one per cent, for gold, while no facilities exist for remitting from any other settlement to Wellington. But by meant or the Government notes remittances may be made between the different settlements free of any chargd lince these notei are immediately payable on demand in specie at the branch bunks of issue. In addition to the facilities for remitting, the advantage of a good paper curiency uniform throughout the colony, in the place of the preseut imperfect substitutes for it, will be sensibly felt in the more distant settlements. In answer to the sscond objection it ii to be observed that Lord Giey's object is to establish, while the field is comparatively clear, a uniform currency on icund principles which shall grow with the growth and strengthen with the strength of the colony, that however unexceptionable the character and credit of the Union Bank may be, other banks will be in time be established in this and other settlements of different degrees of credit and stability, when the value of this currency will be more obvious in preventing the inconvenience arising from circulation of different private notes, and the mischief cauied by the failure of any one of the banks issuing them. While many of the asiumptions of the Independent of the expense of t he New Bank are probably exaggerated and false, one •ource of profit, and that not an inconsiderable one, the profit arising from the accidental loss or destruction of notes in a circulation of £15,000 has been overlooked. And it muit be borne in mind that while the expenses will remain the same for some years to come the profit derived from the circulation will be every year increasing, but this consideration ought to be subordinate to that of the other advantages sought to be obtained. An opposition is intimated by this writer on the part of the Union Bank of Australia. In explaining tlie operations of the new bank we are told that " The Colonial Treasurer receives from the Collector of Customs £4,0 UO in specie, every quarter— he exchanges this lum for the Colonial Notes, and then isiues these notes in payment of salaries and other demands upon the Government. What follows ? The whole of these notes within a day or two find their way into the Union Bank, which at once returns them to the Bank of Isiue, and takes the £4,000 specie in exchange. The Manager of the Colonial Bank is therefore just where he started from — he has got back his £4,000 of notes— but cash he has none and h 8 notes he ciinnot re-issue except in exchange for cash. Where thea are the funds for investment ?" The aniwer to this is sufficiently obvious. Since these notes are the only paper currency allowed bv law, on the withdrawal of the notes of the Union Bank that establishment muit either make use of the Government notes in their transactions, or gold and silver, aud it will in effect be found that the new notes will circulate to the amount to which a paper currency is required by the wants and convenience of the public, in other words to the amount of the present chculatiou of the notes of the Union Bank. But lastly an objection of another character is advanced, and an attempt made to insinuate doubts and •uspicions as to the character of the Bank. We will give the objection of this writer in his own words— 41 But at any rate the Bank of Issue will be safe ? Being bound only to issue notes in exchange for cash on demand, it cannot fail ? We doubt it. Suppose a party bring! to the Wellington Bank ifl,ooo of notes issued at Auckland, and demandi, as he is entitled to do, specie in exchange— what follows ? Suspension of payment. — Notei at h discount — and a second Debenture fraud upon the public !" That a factious opposition will be offered to the new Bauk of Issue by those who are opposed to Sir George Grey's government we can readily believe, and the only effect of this oppoiition will be by its failure to Strengthen the lustitution^and confirm iti credit in the estimation of the public. *But supposing, for the sake of argument, that in the operations of business £ 1, 000 of notei issued at Auckland are presented for payment in ipecie at the Wellington Bank. Since the notes are iisued only in exchange for cash, it would show the introduction, to that amount, of paper iuto this settlement beyond the ordinary circulation, the specie representing its value lemaining at Auckland. It dues

not follow that this sum, suddenly demanded, would be productive of injurious consequences ; nevertheless the Government have the power to obviate the poisibility of any inconvenience by instructing the Commieiariat to advance ipecie to the Bank in exchange for such notes, if required, and to remit them to Auckland, where specie would in return be received for them, and vice versa, if limilar circumstances occured at the North. Such an arrangement would only be in accordance with the spirit of the Treasury minute previously adverted to ; we do not apprehend that any further inconvenience would arise in such n contingency beyond the occasional transmission of a few parceli of notes between the two Settlements.