DEFENCE OF THE BANKS. DUTY AND PRUDENCE.

Otago Witness, Issue 2895, 8 September 1909, Page 17

DEFENCE OF THE BANKS. DUTY AND PRUDENCE.

Mr R. Logan, chairman of directors of the National Bank of New Zealand, vigorously denied, at the general meeting on Tuesday, tho suggestion that the banks had not done their duty in the crisis. With regard to the statement that the banks had been over-cautious in restricting advances, he thought it was now admitted that they had advanced as much as could reasonably be expected, having . regard to their resources. As for the argument that an increase of capital would enable the bank.? to lend more freely, he might reply that for the most part what a bank lendii is the money received on loan from customers. Share capital formed, as a rule, a very small part of the money loanable by the bank. In the case of the National Bank of New Zealand, the share capital had been all withdrawn from the business and was now held as a reserve. — (Hear, hear.) The loans might increase when the deposits did, but it would be the reverse of prudent to increase the loans when the deposits wore decreasing. In spite of the higher late of interest the bank deposits had shown a tendency to decrease, and there was always strong competition for loans. In the case of the Government Savings Bank, which had the security of the State to offer and many facilities which banks could not give, the amount to the credit of depositors on March 31 was£12.159,000. or £2,175.000 more than the fixed interest bearing deposits in all the five trading ba.nks. Money-lending companies trading in New Zealand were also receiving deposits at rates in some cases higher than the banks could offer, but they did not maintain the large reserves of cash which sound banking demanded. He was glad to say the banks had impressed caution on their customers, and while meeting the demands of all legitimate trading had discouraged further advances. There was a great field m New Zealand for most of the forms of enterprise known to the people of Great Britain, and the resources of the Dominion had as yet only been partially exploited, but that was all the more reason why any form of extravagance should be avoided. Mr A. M. Myers (Auckland) referred to the recent speech of Sir Joseph Ward, in ?>k!:h he eeemed to infer that the

banks had not been doing their duty. The figures in the balance sheet showed that the National Bank had lent to the people of New Zealand practically as much as it had received on deposit. Personally, he -would disagree with anyone who thought they were justified in going farther. Individually and collectively the banks trading in New Zealand had done their duty. The people, moreover, were indebted to the banks for the prudent policy they bad pursued in the recent setback. They had been inclined during the last few years to go ahead a little too fast. Care and prudence were unnecessary. We could not expect the high prices to continue for ever, and this little setback would probably be a blessing in disguise.