B—lo.

The balance required to complete the repayment of the 4-per-cent. 1937-40 loan was provided mainly by the issue to the trading banks of three months' Treasury bills at the rate of 1J per cent, per annum, and the securities which had been issued to various Government Departments and to the Reserve Bank to provide for the repayment of the Southland Electric-power Board's sterling loans have been renewed. The Board considers it a cause for satisfaction that advantage was taken of the opportunity of dealing with a 4-per-cent. Government loan at the earliest optional maturity date, thereby effecting a considerable saving to the State in the annual charge for interest and at the same time splitting up into convenient new maturities a large loan which was due to mature finally within a few years. State Advances Corporation. On the 16th February a prospectus was issued by the Bank inviting subscriptions for stock or debentures of the State Advances Corporation bearing interest at the rate of 3£ per cent, per annum and repayable on the Ist June, 1944. In terms of section 25 of the State Advances Corporation Act, 1936, these securities are guaranteed by the State. No date was announced for the closing of the list of applications, and these securities were still on offer on the 31st March. The Reserve Bank will undertake the registration and management of the above-mentioned stock and debentures when issued. Discount Rate. The Bank has not yet been called upon to discount any bills for the public ; but, in accordance with the requirements of subsection (2) of section 13 of the Reserve Bank of New Zealand Act, 1933, the minimum rate at which the Bank is prepared to discount or rediscount bills has been made public at all times. The rate at present is 2 per cent., having been reduced from 2| per cent, on the 29th June, 1936. Exchange Rate. The rates at which the Bank has been prepared to pay its notes in sterling and to issue notes in exchange for gold or sterling have remained unchanged at £125 (N.Z.) and £124 (N.Z.) respectively for £100 sterling. When the Reserve Bank originally fixed its buying and selling rates a margin of £1 between the two was decided upon in order to allow a certain amount of latitude for the trading banks to operate between those limits. It was assumed that the trading banks might wish to accelerate or to discourage purchases of sterling from their customers from time to time according to the state of their London funds and that in certain circumstances they might be prepared to pay a slightly higher price for sterling than at other times. A similar movement upwards and downwards within outside limits takes place, of course, in the market rates of exchange of countries on the gold standard ; and it appears to the Board to be desirable that the banks trading in the Dominion should be able to alter their buying and selling rates for sterling within the outside limits set by the Reserve Bank without affecting the basic rate and, moreover, without undue significance attaching to any such restricted movements. New Zealand Trading Banks. The position of the trading banks as disclosed by the monthly returns made by them to the Reserve Bank in accordance with statutory requirements was as follows :—

4

(000 (N.Z.) omitted.) Bankers' Cash. T , Liabilities in New „ _ Totfll d ° n Combined Govern- « •, Zealand. Ratio of « C. Cash rpxnrpsspd Totals ment Date. Balances HoMings of in < ex P£ 8aed , Securities To at Ne w New 111 in New T . _ (Demand Demand Reserve Reserve sil Zealand. Zealand ( f5 ,, r/ , , Zealand. em and. lime. , Demand and Bank. Bank ™ver Currency). B - Zealand. ™ Liabilities. Time Notes. Com ' e) ' Liabilities. "A." "B." "C." " ID." "E." "F." "C." "C." 1936. £ £ £ £ £ £ £ £ £ £ £ "E." "F" Mar. 30 8,938 3,593 754 13,285 14,143 27,428 5,082 44,919 31,946 36,530 68 476 85-9 40-1 April 27 8,571 3,627 738 12,936 15,980 28,916 5,157 45,091 32,049 37,311 69 360 90-2 41-7 May 25 8,075 3,520 735 12,330 16,701 29,031 5,202 44,971 31,584 36,675 68 259 91-9 40. k June 29 6,686 3,337 733 10,755 17,317 28,072 5,326 45,077 30,806 36,067 66 872 911 42-0 July 27 6,366 3,518 717 10,601 16,729 27,330 5,229 45,185 30,268 35,614 6ō'882 90-3 41-5 Aug. 31 5,693 3,357 683 9,733 14,438 24,170 5,184 45,826 29,907 34,893 64 800 80-8 37-3 Sept. 28 6,865 3,403 652 10,919 12,891 23,810 5,171 46,000 28,935 34,486 63 420 82-3 37-5 Oct. 26 7,661 3,428 632 11,720 10,763 22,484 5,215 47,780 28,889 34,048 62 937 77-8 35-7 Nov. 30 9,546 3,169 659 13,375 8,414 21,789 5,699 49,512 29,189 33,384 62'ō72 74-6 34-8 Dec. 28 11,040 3,198 524 14,763 7,908 22,671 5,710 48,282 31,080 33,124 64,204 72-9 35-3 1937. Jan. 25 11,870 4,713 736 17,319 7,362 24,681 7,593 47,417 35,021 32,949 67 970 70-5 36-3 Feb. 22 11,735 4,292 725 16,753 8,308 25,061 7,618 45,759 36,738 32,600 69 337 68-2 36-1 Mar. 29 8,864 3,335 608 12,808 11,048 23,856 7,617 46,954 36,898 31,975 68 873 64-7 34-6