BANK: MONEY SITUATION IS "TRAGIC"

Taupo Times, Volume 23, Issue 52, 2 July 1974, Page 1

BANK: MONEY SITUATION IS "TRAGIC"

The money situation in Taupo has been described "tragic" by the manager of the Bay of Plenty Savings Bank, Mr D. G. Mikaere. His comment follows a statement from the New Zealand Bankers' Association last week that the demand for credit had reached such a level that banks could no longer cope.

"Since November last year when the Government announced a credit squeeze everyone panicked and began directing money to - other sources outside the banks," said Mr Mikaere. "Consequently, depositors' funds became virtually non-existent." And since June 18 this year the bank's mortgage department has been closed. "We are not on the market for loans for housing and this situation will probably remain for three to six months," he said. "It all depends on the results of depositors' funds. If these improve we could open the department again hopefully in three months. "In the event of these funds not increasing the department may have to stay closed indefinitely." Mr G. R. Cambie, manager of the National Bank, said the money situation in Taupo was the same as in any other part of New Zealand. "Money is still tight here and mortgage loans have been hard to get for some time," he said. "We are restricted to tide-over finance for housing." The manager of the ANZ Bank, Mr N. R. Hinckesman, said although the money situation in Taupo was not good the savings bank was still allowing loans for housing. Other local bankers were tight lipped on the problem and refused to comment on the association's statement. The Northern Building Society's Taupo agent, Mr R. Fippard, said only people who had held shares "V

for two years or more could qualify for mortgage finance. "Otherwise money would have to be obtained by tender and that is very difficult these days," he said. Other building society agents were unavailable for comment yesterday. Banks throughout the country have been ' under pressure for some time to increase credit and by the end of May the limits had increased by $38 million to $2039 milion, said the bankers' association last week. During May actual lending increased by $31 million, but deposits rose by only $21 million. The banks' liquid assets were reduced by $42 million, leaving only a small margin above the reserve asset ratio tequirement set by the money authorities. "These trends of strong demand for lending together with only slow growth of deposits have continued into June, keeping the ratio of lending to deposits at a very high mark," said the association. "By mid-June the banking system had reached a position where new lending applications had to be declined and customers were asked to keep strictly within their arranged credit limits." The position was forecast last October and one basic cause was identified as the deficits on the balance of payments. The deficits have had the effect of reducing the holdings of liquid reserve assets by the banking system and as a result the banks' ability to lend.