THE Evening Star. PUBLISHED DAILY AT FOUR O'CLOCK P.M. Resurrexi. SATURDAY, MARCH 26, 1881.

Thames Star, Volume XII, Issue 3820, 26 March 1881, Page 2

THE Evening Star. PUBLISHED DAILY AT FOUR O'CLOCK P.M. Resurrexi. SATURDAY, MARCH 26, 1881.

In a late article upon the position of banking matters in the colony, the evils of the present system were referred to, and the risk to the colony should a time arrive when a general demand was made for specie payments. An ample reserve, so invested as to be readily convertible into coin, in cases where by their charter such institutions are not required to have in their cellars coined gold and bullion, is, of course, the best and simplest provision that can be made to avert the consequences of panics or sudden demands for specie payments. Bat how many of our colonial institutions have , made such a provision? From a late article in the Observer we make the following extract, which will answer our question. The writer, speaking of the quarterly returns of the banks, says that the total liabilities of the banks in New Zealand at the end of the year were £10,042,507. To meet these obligations to pay, the banks have the following means for a sndden call for money - — Coined gold and other coin .. .. £1,964,324 Gtild and silver in bullion and bars .. £182,549 Union Bank of Australiaßeserve Fund invested in Government securities £500,000 Bank of Australasia Reserve Fund invested in Consols and Three-per-cents £215,710 The Bank of New South Wales, having 'lately accumulated large stores of coins, has placed itself in an exceptional position. The reserve funds of the other ianJcs are absorbed in their business—forming, as it were, a portion of the cash they keep in their tills to open shops with. Bullion is the only legal tender in New Zealand, and should a period a great stringency in the money market arise, it is evident, in the event of a run being made on tha banks, that the securities forming a portion of the reserve fund of our reputable banking corporations could not be hypothecated in this Colony, because there is no cash in New Zealand to advance on the securities which would be sought to be hypothecated, other than the cash above mentioned. The securities, therefore, held by such banks as the Union, and another, would afford only a fictitious source of confidence in the time of a commercial crisis. The actual cash the banks have in New Zealand is thus found: — Coin and bullion .. .. .. £2,146,873 Less notes and bills in circulation .. £998,907 Cash held by banks .. £1,150,966 The matter is thus placed in a very simple form before us, and the force of our remarks must be apparent to all. Let us turn from the position of our Colonial corporations and see how the great banking institutions of England and France provide for times of distress or periods when commercial panics convulse the Home countries. A contemporary, the Wairarapa Standard, speaks as follows: —" In the Banks of England and France the reserve fund is kept in bullion and coin—in Joint Stock Banks, such as London and Westminster, and the Union, in securities, which, in times of a run for money, can be converted into coin. In England and in France, as we have already pointed out, the national reserve is kept in the banks of France and England ; the Joint Stock and private Banks depending on this reserve for the conversion of their securities, which constitute their reserve funds. In this colony it will be seen that no such a parallel can be found —each bank having its own reserve fund, on which ifc must, or should, rely in times of stringency or of unusual calls for money.

Let us see hovv the maintenance of this ' cash reserve' in England in two cases have saved the community in times of panic. In 1825 Mr Harman said on behalf of the Bank of England when speaking of this Cash Reserve: —•' We lent it by every possible means and in modes we had never adopted before; we took in stock on security, we purchased Exchequer bills, we made advances on Exchequer bills, we not only discounted outright, but we made advances on the deposit of bills of exchange to an immense amount, in short, by every possible means consistent with the safety of the bank, and we were not on some occasions over nice. Seeing the dreadful state in which the public were, we rendered every assistance in our power.' When the Bank of England adopted this treatment of the panic at the time spoken of, in day or two. the ' City was quite calm.' Let us^come nearer to our own times, to 1866, when 'Overend and Gurney' failed. Mr Lancelot Holland, the Governor of the Bank and who presided at the Court of the Bank of England, in the September following, spoke as follows: —' When the storm came npon us, on the morning on which it became known that the house of Overend and Co,, had failed, we were in as sound and healthy a position as any banking establishment could hold; and on that day and throughout the following week we made advances which would hardly be credited.' Ho then narrates how those

who wanted advances went to the Chancellor of the Exchequer requesting authority for the Bank to issue notes beyond the statutory amount, and continues ; —' But we had to act before we could receive any such power, and before the Chance, 1 lor of the Exchequer was perhaps out of his bed, we had advanced one half of our reserves. lam not aware that any legitimate application for assistance made to this house was refused. Every gentleman who came Jiere with adequate security was liberally dealt with, and if accommodation could not be afforded to the full extent which was demanded, no one who offered proper security failed to obtain relief from this house,' "