The Daily News. FRIDAY, NOVEMBER 5, 1920. BANK OF NEW ZEALAND.

Taranaki Daily News, 5 November 1920, Page 4

The Daily News. FRIDAY, NOVEMBER 5, 1920. BANK OF NEW ZEALAND.

The passing of the Bank of New Zealand Bill by both branches of the Legislature marks a new step in the history of the bank. It is reasonable to assume that the majority of the public have not troubled themselves over the details of the measure. A Banking Bill is not as a rule easy to follow, and even the' Premier found it impossible when introducing the measure in question to convey a clear impression of its objects and effect, nor did he improve matters by his remarks on moving the second reading, when he introduced comments of a controversial and illusory nature. In the first place it should be noted that this legislation was promoted by the directors of the bank for certain definite reasons among which were the following: (1) To divide nearly a moiety of the reserve fund (£1,125,000 out of £2,500,000) among the shareholders (including the Government) by increasing their fully paid-up shares to that, extent in the proportion of one-third to the Government and two-thirds to the ordinary shareholders. (2) To authorise the raising (with the consent of the Finance Minister) of new capital not exceeding 2j millions by means of the issue of a further £750,000 preference B shares of £1 each to be held by the Government, and H million ordinary £1 shares, the principle adopted being that in the ease of all new issues of shares the Government 1 takes one-third and the ordinary shareholders two-thirds. (.;') Reducing the nominal value of all shares to £1 as against £6 13s 4d as at present. (.'!) Fixing the preferential rate of interest on the Government's A shares at ten per cent, these shares not participating in the capitalising of the reserve profits. The interest, on these A shares heretofore increased in certain proportions when dividends on ordinat'v shares exceeded five Jjet l

cent., but Ihe maximum interest was ten per cent., so that in future they will receive this maximum. (4) Authority for the Government to purchase B preference shares from Lime to time offered, at a price not exceeding 100 per cent, of the nominal value. (6) A shares held by the Government, while the residue, up to £306,250, is to be divided between the Government and the ordinary | shareholders in the proportion of one-seventh to the Government and six-sevenths to the shareholders, but in the case of profits above that amount the proportion is to be one-third to the Government and two-thirds to the other shareholders. Other provisions are that directors must hold 1000 shares, the maximum of shares to be held by one proprietor is increased from six to sixty thousand, and the maximum votes from 200 to 2000,. while the total remuneration of directors is increased to £SOOO a year. The generality of the public may well be excused if they fail to clearly comprehend the real reasons responsible for this shuffling and inflation of capital by means of utilising the reserve fund and reducing the nominal value of the shares from £6 13s 4d to £l, or why the Government should be offered what has all the appearance of a bribe to pass this legislation. In the reconstruction, process after 1914 not only was tiie value of the shares written down, but an additional £3 6s 8d per share was .called up. The bank was saved and, phoenixlike, arose from its ashes under the fostering care and help of the Government, with the result that its last dividend was per cent - r yet this salvation meajit the ruin of many shareholders who lost their all through reckless management by the directors, and there is much moral force in Mr. Wilford's plea for some provision for tnesp unfortunates. The reserve fund has been built up out of profits, so that, although it is a provision against, bad times, the shareholders, while gaining an immediate advantage by means of additional shares, will have to take the risk of losses if and when they arise. This readjustment can either be regarded as increasing the value of the share to £lO each, or as a return of the £3 (is 8d called up on the shares to help, to_ set the bank on its feet. The' Government naturally benefits under the new legislation, and rightly so, for the present position of the bank was made possible by Government action, nor I can it be conceived that the passing of the Bill would have been likely unless the consideration was sufficiently tempting. The weak point in the Bill was that the four per cent guaranteed stock representing the Government's loan to the bank should not have been converted into B shares, a course that might well have been insisted upon. The bank's capital will now total £3,375.000, of which the Government holds £1,125,000. The quest'on as to whether this holding could not be better utilised for developing the country's resources must form the subject of separate comment.