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The Cyclopedia of New Zealand [Wellington Provincial District]

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In view of the Banking troubles and difficulties with which some of the sister colonies have been afflicted, it may be said with precise truth that New Zealand is favourably situated in the matter of its great financial institutions. Of course it is impossible to forget that it has been necessary for the Government to step in to avert a crisis in one case; but the fact that it was averted, and that the institution so helped is now making satisfactory progress in the direction of showing that the aid thus rendered was not only timely, but very useful, is a fact of the highest importance. It is also impossible to forget that another institution is being more or less peacefully laid to rest, and that its labours are being undertaken by the assisted Bank. But it is further impossible to forget that all this has been accomplished without anything approaching a scare, and without a penny of loss to the creditors of these two institutions, as distinct from their proprietors. There are, of course, some who either believe or pretend to believe that the Colony will, sooner or later, make a loss by the Bank of New Zealand; but there are great men connected with the Bank who are determined that these fears shall be falsified. Whether it be a “party cry,” or whether there be any ground for this belief, it is impossible at this stage to say; but in justice to all concerned it must be recorded that when the Government first stepped in the action was endorsed by every section of the community whose opinion was in any way entitled to respect.

That the absorption of the late Colonial Bank must in the end be productive of good seems undoubted. Whether circumstances ever justified its existence is no present concern. From a national point of view, its continuance was unnecessary, though the sudden cessation—and consequent dismissal of a large number of deserving officials—was generally regretted.

It is not at all probable that any further Bank amalgamation will take place. From a commercial standpoint, Banking matters are settled and fixed, but politically few things can be considered particularly permanent; and it is quite possible that, as the years roll on, the agitators for a State Bank may prevail upon Government to make experiments in that direction. At present, however, there is no agreement between the agitators as to what shape any new departure should take. Some think that the existing banks might be assisted, rather than prejudicially affected, by the establishment of a State Bank. It is argued that if a State Bank were set up, in competition with existing Banks, it would then be quite safe to give all Banks a preferential claim over all other creditors. Not only a preferential claim, indeed, but the only legal claim for the recovery of debts. Mortgage deeds would be quite useless, for they would be illegal unless made in favour of a recognized bank; and in that case they would be surplus documents; for without any deed to that effect, all the property of a man would be subject to the claims of his banker. The effect of this would, of course, be a general resort to “Cash” as the basis of all transactions, except those between a man and his banker; and the banker, being the only legally-secured creditor, would have but one care: that of keeping a customer's debit balance safely within the realizable value of his entire estate. Capitalists would then be shut up to two courses: to use their money themselves, and to lend it to the Banks. This would, of course, wonderfully increase the business of the Banks; and trading generally would of necessity be conducted upon a much sounder basis than at present. The effect upon interest, it is contended, would be a lowering of the rates commensurate with the decreased risk; and as it is very plain that the risks of bankers would be greatly lessened, it is confidently asserted that under such a system the rates of interest would soon fall to the level of those ruling in the Old World. The expenses of banking would, page 496 of course, be smaller in proportion to the volume of loan transactions because of its simplification. This, however, is not the place for a discussion of the question. The present object is served in intimating that these topics are agitating the minds of several sections of the people, who are assuredly beginning to feel that the important matters of banking and insurance are being conducted too exclusively by one section of the community, and that, while the profits arising therefrom are very carefully kept within that section, when a calamity has to be averted the greater strength of the whole community is dexterously brought into play. It is, perhaps, only reasonable, therefore, that the people should come to the conclusion that if they are the best able to support a tottering bank, and pilot it through the shoals and quicksands of adversity, they are surely equal to the running of a flourishing institution. Be this as it may, however, it must be admitted that the Colony is at present well served by the five Banks described in the following articles:—