CREDIT CONTROL

Wairarapa Times-Age, 23 June 1938, Page 7

CREDIT CONTROL

COMAIONWEALTH & TRADING BANKS NEW CONDITION REGARDING DEPOSITS. SIR A. DAVIDSON’S CRITICISM. By Telegraph—Press Association. Copyright. SYDNEY, June 22. Addressing the Institute of Accountants today, Sir Alfred Davidson, general manager of the Bank of New South Wales, directed attention to the proposed Federal legislation which requires trading banks to keep a percentage of their total deposit liabilities as a cash deposit with the Commonwealth Bank. He emphasised that this was bound to lead to a drastic reduction in advances, resulting in a decline of business activity, incomes and employment. He indicated that the required deposit would be in the vicinity of 10 per cent of the banks’ total cash balances. Consequently, in order to protect their depositers, trading banks would be faced with the necessity of finding additional cash in order to meet the compulsory minimum deposit requirements. Existing liquid items could not provide the additional cash. Thus the only way was to reduce advances, which would probably lead to a serious depression. Sir Alfred added that the proposed legislation would disturb the development of the Australian banking system from lines of the well-tried and flexible English system, and produce a revolutionary change which would bring in the undesirable rigidities which had proved so unsatisfactory in other countries. No official intimation has yet been made concerning the legislation referred to by Sil’ Alfred Davidson.