"UNDER-BANKED."

Taranaki Daily News, Volume LII, Issue 85, 6 May 1909, Page 4

"UNDER-BANKED."

A QUESTION FUR FINANCIERS. I 1 SOME REPLIES. I THE PRIME MINISTER'S SCGGES- ' TIONS DISCUSSED. 1 The conclusion 1 have come to is ' that. . . the banking resources at j present in New Zealand are nut sufficient for the amount of business that requires to be carried on: In other words, we arc " underbanked," and either those institutions carry- ' ing on this important branch of the work of the country should largely increase their capital and available funds or else facilities should be given for an increase in the number of banking institutions, so as to keep pace with the expansion of business that has gone on, and will continue to go on throughout the Domiiion.

The important suggestion above quoted, which were made by the Prime J' Minister, Sir Joseph Ward, in his speech at Invereargill on Saturday night were - brought under the notice of three gentle- 5 men who occupy promhent position in e the New Zealand banking world by a J New Zealand Times reporter. The first financier consulted was Mr Harold Beau. f champ, chairman of directors of Uie j Bank of New Zealand. "Sir Joseph Ward's references to 1 finance and banking in the course of ! his most statesmanlike speech," declared - Mr Beauchainp, "are deeply interesting at the present moment. 1 am glad to see by the reports that he admits that the banks at present trading in NewZealand have done their duty to the public, while at the same time, to use his own words, he savs we are " underbanked." LEGITIMATE BUSINESS. Apropos of that, Mr. Beauchamp proceeded, " 1 had something to say on the question of increasing capital at the half yearly meeting of the Bank of New Zealand "in December last, when I made the following remarks:—' Having regard to the steady growth of all branches of trade and commerce in New Zealand, and the amount of money that is required for the legitimate development of its resources, 1 believe that the time is not far distant when it will be desirable to take into consideration tne question of increasing the 'capital of the bank and thus bringing it more into line with other banks represented in the Dominion. " When I said that I had in view the necessity of providing more capital for legitimate banking business, but not the introduction of capital for loan on mortgages. 1 am firmly of opinion that the .latter does not come within the function of a bank. It is a course which was undoubtedly followed largely by tne Bank of New Zealand many years ago, and it is the course to which we may attribute the bank's financial difficulties, difficulties from which it was only extricated by Parliament on two occasions. Tile lending of money to farmers and others for the acquisition of laud and its development should be done by mortgage and investment companies, or by means of the Advances to Settlers Department. No bank, to my mind, has the right to lock up its funds—widen i very largely are lent by the public either at call or at short-date—in advance on ■ land. MONEY FOR MORTGAGE. " Personally, 1 am hopeful that during i the ensuing session of Parliament our , members will see the wisdom of authori isiug the raising of a large sum of money ■ by the Government, to be lent out, by i the Advances to Settlers Department. ; Having obtained that authority, it does , not follow, of that the money ! would be raised at once in London, but = the issue of Joans from time to time t could be made in accordance with tile ' demand existing for money on mortgage. •' As to the Bank „i flew Zealand,' 1 I may point out that under the present ■ Acts relating to its constitution I be- ' lieve its capital can only be increased ' by authority from Parliament, ilowi ever, it has not yet been determined by > the board whether steps will be taken i to attain that end during the coming . session, though 1 believe that sooner or <■ later something will have to be done - in Unit direction. But, as I have indi- ( cated already, such additional capital , would not be available for loans on I mortgages, but only for the assistance - of the growing trade of the Dominion. I J do not think we can look for any rc- '■ lief from tiie mortgage and investment ! companies so long as they have to face the competition which arises from the ■ operations of the Advances to Settlers •■ Department. It is, therefore, just as ! well to face the position at once aid • look to the department for the bulk of 1 the money that is required for mortI gages. SHOULD BANKS INCREASE » I " No, Ido not think you are going to I meet the present difficulty by adopting Sir Joseph Ward's suggestion to in- ■ create the number of the banks trading - in New Zealand. Generally speaking, ■ the banks are able to supply money for I legitimate banking purpo,cs. Jt is only • their failure to provide money ill respect I to fixed loans that has brought about I the present position, added, of course, ' to tne fact that during the past few 1 years there has been a steady withdraw- ' ill from the Dominion of money that ' was lent here prior to the establishment ■ of the Advances to Settlers Department. "That is just the point. It is the ■ withdrawal of the mortgage and hvest- ■ nieiil companies which has thrown the ' demand for money upon the banks and ' upon the department. Their reserves '■ have naturally been restricted, and th L limit, so to speak, has now been reached • A remedy is wanted to restore the situa- ; lion, but 1 do not believe that thai ■ remedy is going to lie obtained by cn- • couraging the establishment of a larger , number of banks than are now trading • in the Dominion. This for the reason ' 1 have already stated, that it does not ! come within the province of banks to f advance money on what is practically ■ fixed mortgage." ROOM FOR ANOTHER. ■ BUT WHERE IS IT TO CO.ME FROM '; DISCOURAGING SPECULATION. i "There is no doubt that in a progros- : sive country such as this, there will always be room for another bank, and per- ; sonally 1 think that Sir Joseph Ward's i suggestions may be looked upon with i favour," was the opinion of another high , financial authority, to whom the matter was referred. "It is beyond question, lie proceeded, "that during the past year the banks operating in the Dominion ■ could have increased their advances eve : i more than they did, had they been soi . disposed. ' j "But," he asked, "where is the new bank to come from '! All the banks in Australia which are not now represented in New Zealand have an ample field for the investment of their funds throughout the Commonwealth, and are hardly likely to seek new pastures here. Are Now Zealamlers willing ami wealthy enough to subscribe the capital to esti-jiish another bank ? 1 scarcely think so, especially after the bitter experiences of the pn»l to shareholders in the Bank of New Zealand and National Bank, ami it lias to be borne in mind that a bank dues not trade wholly on its capital. The new bank would at'once be faced with the difficulty of getting deposits. Where are they to come from'; The present banks and co-operative trading companies and many mercantile houses hay.' absorbed all the deposits-which have not been attracted to the Savings Hank. THE TIME NOT KIPE. "No doubt a new bank with a local share-list would secure some deposits, but this could only be at the expense of existing institutions in the first instance. Therefore, I do not consider that the Dominion is yet ripe for the establish-' ■incut of another'bank. The Government i are adopting, therefore, a wise policy in extending the scope and the facilities of the Advances to Settlers Department which will in effect meet the suggested necessity for another bank. "As to the cry against the ha'iks for not meeting the necessities of borrowers ill the Dominion, it is absurd. They have rendered the Dominion wholesome service by deliberately discouraging the speculative tendencies which have ilevcopeil throughout New Zealand as the result of the prosperity of the past years. It is well known'that the banks have always been ready to grant accommodation for legitimate business operations. DO WE WANT OUTSIDE CAPITAL '< NO REASON' WWY IT SHOULDN'T COME. "The Ufc Mr. Seddou used to say, 'We don't want outside capital.' We seem to have changed our niiiuls," said a third financial authority, and added: "Of course there is plenty of room for mo.icy in New Zealand, anil for thai reason an additional bank 'would be welcomed. The more money we have for .develop 1. the belter. ' lii the meantime the Advances to Settlers Office is doing gnocl service. Of course it inav be possible that tile existing banks will increase their capital, which also would ; be a very good tiling." I