HISTORY OF BANKING

Wairarapa Times-Age, 1 March 1940, Page 6

HISTORY OF BANKING

CENTURY OF EVOLUTION IN NEW ZEALAND MR P. L. PORTER ADDRESSES ROTARY CLUB. FACTORS OF USEFULNESS & STABILITY. "Banking is a business like any other, but as bad banking can be disastrous to the community, it is usual for governments to provide certain safeguards," stated the assistant general manager of the Bank of New Zealand, Mr P. L. Porter, in the course of an interesting address on "One Hundred Years of Banking in New Zealand." at the Masterton'Rotary Club’s luncheon yesterday. "In practice," he went on to observe, “it is found that the soundest banking is where commercial morality is highest and legislative control least —in Great Britain. The United States has the tightest banking laws in the world, but banks there are very unstable. The fact seems to be that a banking sysusefulness to the community depends a'lmost entirely on the good sense and skill of the men in charge rather than on legislative controls or sanctions, and the same can be said of governments.” In the course of his very interesting survey of banking, Mr Porter referred to the fact that in the early days in New South Wales, rum was recognised as currency. In 1796 the admission to the first play presented in Australia was Is, paid in meal or rum. Mr Porter went on to give a description of the various types of coin current in Australia, namely, guineas, Johannes, halfjohannes. ducats, gold mohurs, rupees. Spanish dollars, holey dollars, dumps, shillings and coppers. In 1816 the Bank of New South Wales was established in Australia to overcome, the currency difficulties. Mr Porter gave a brief summary of New Zealand’s economic history over the past 100 years, tracing the periods, from the pioneer years and the boom following the discovery of gold, which

was kept up for a time by Government borrowing during 1870. He dealt with the depressions from 1880 to 1895, which was only in part checked by the introduction of refrigeration. New Zealand's economic point in 1888 was probably the lowest in the country's history.' From 1896 to 1921 there was an evolution in increasing wealth and rising prices, with consequent prosperity. The population reached 1 000.000 in 1910. The period 1921 to the present time showed a rise and fall. After touching on the establishment of the Reserve Bank. Mr Porter went on to deal with the work of the trading banks. He observed that in’ one year these banks cashed some 30 million cheques, to a total amount of about £ I,ooom. These, if placed end to end, would stretch for 3,077 miles or if placed, on top of each other would be a pile 10,000 feet high (2,000 feet higher than Mt Egmont). There were 394 branch banks and 3,577 employees. The total assets amounted to about £9om. The first bank in New Zealand was the New Zealand Banking Company, which was founded in 1839 at Korareka, Bay of Islands. The rate of interest varied from 10 to 121 per cent. The head office moved to Auckland in 1842, but crashed with liabilities of £8,500 in 1845. In March. 1840 the Union Bank of Australia opened at the! Petone beach. In 1844 Governor F|.tzroy, without Imperial authority, issued Government debentures for 10s, 5s and 2s. Governor Grey was sent out in 1845 to clear up the consequent trouble. In 1847 the Colonial Officer urged the formation of a State bank but the public did not welcome the idea. In 1857 the Orient Bank opened, but sold out to the Bank of New South Wales. The Bank of New Zealand owed its start to the fact that a Mr Thomas Russell had some difficulty in obtaining financial assistance from the existing house. In 1861 Gabriel's Gully was discovered and that kept the bank on its feet. In 1864 the Bank of Australasia commenced operations and in 1872 the National Bank was formed in London, later commencing here. In the meantime several minor banks opened up and then either sold out to more successful competitors or closed up. to the distress of clients.

Mr Porter then dealt with the period from 1887. when the Bank of New Zealand passed its first dividend until 1896, when New Zealand was out. of its financial troubles. That was a period of financial instability throughout the world. In 1894 the Government guaranteed £2m of debts for the Bank of New Zealand. In the following year, the Government tool-: up £500.000 shares in the bank. In 1914 the sovereign was withdrawn from circulation and bank notes made legal tender. IVIr Porter dealt with the ellccl of paper currency wisely controlled and discussed developments from 1929 onwards. . TT TT On the motion of Rotarian 11. H. Daniell. Mr Porter was accorded a hearty vote of thanks for his address.