A State Bank framed upon the attached principles would only effect the present banking companies in a very gradual manner, and would not therefore meet with that opposition from them, and those interested in their welfare, as a "State Hank" modelled upon the present banking principles.

First.—The "Government Saving Bank" converted into a "State Bank." This bank would retain all its functions and character as heretofore; at the same time it would be the receptacle of all the revenue of the State and through it would be disbursed all claims payable by the Government.

Second.—The Government, with the sanction of the Legislature, would make and issue "State Bank Notes" which notes would be a legal tender, the holders having the State as a guarantee, their not being subject to Foreign influence.

Third.—Post offices could be so classified as to meet all requirements of the public, those situated in sparsely populated districts page 10 suiffering only a day or two's delay in waiting for warrants to pay, instead of two or three weeks as at present. All Post Offices through the country to be made Post Office "Saving Banks." There being about twelve hundred Post Offices, every working person or others desirous of putting by their savings would have a bank of deposit close to their doors, and those deposits guaranteed by the Government, and bearing interest. Under the present system, at the end of December, 1892, there was to the credit, of Savings Bank depositors £2,863,670. How much more may he looked forward to when such facilities are opened up through the country,

Fourth.—This merely has reference to the departmental arrangements in respect to the paying out, on the authority, and at the various paying offices created.

Fifth.—The issue of "State Bank Note" would provide a large amount of cash, which could be utilized by the Government in Public Works, Loans, Loans to Public Bodies at a small rate of interest. Thus the money spent on these purposes would come out of the thrift of the people themselves, and they would be in reality lending their money for the purpose of making opening up, and improving the roads in their own districts, and placing Road Boards, Boroughs, County Councils, etc., in a much better financial position by relieving them of the exorbitant interest now charged by private banks for overdraft

Sixth.—A system of deposit account extending over a period of one to five years would guarantee a large amount of money being placed at the disposal of the Govern munt for those periods. The current account, operated upon as at present, Would be greatly augmented by increased facilities given through withdrawals being paid on demand. The present system of waiting days and weeks before a withdrawal can be paid is a serious barrier to hundreds of persons in each district The advisability of permitting withdrawals to be made by cheque could be considered after the scheme has been brought into operation and tried. At present there is much against it, the system now in vogue of personal application preventing fraud, and suiting the class of depositors likely to use the bank,

Seventh.—The keeping of all Government imprest and deposit accounts of Government officers, and Local Bodies' accounts, would not only give a greater security against fraud, but be a great saving in exchange new paid to other institutions. These accounts could be operated upon by cheque, and paid in "State Bank Notes."

Eighth,—The payment of all salaries, accounts, subsidies, contracts, etc., by the local agency of the "Stale Bank' would be an enormous saving in bank exchange, besides saving the large amount of clerical labour necessary to issue cheques at the Treasury, The officers so employed could be utilized in the "State Bank" as the increase of business would demand more clerks. Thus no extra cost would be incurred by the enormous increase, and no hardship inflicted on those employed in the Treasury.

Ninth.—All remittances would in reality he stopped, as the payment of monies into the agency of the "State Bank" would be sufficient, A great saving in the cost of remittance would be effected.

Tenth.—This has reference to the exchange of the circulating notes of other banks received by the several Postmasters as the "State Bank." The custody and distribution of the note and metallic currency would, as a matter of detail, devolve upon the officers appointed by the Government.

Copy of Correspondence with the Honble. J. G Ward, Colonial Treasurer.

Sir—At various Limps surggestions have been made as to the advisability of establishing a "Staff Bank" The late erisis in banking institutions on the Continent of Australia, and the consequent effect upon great commercial concerns, not only paralyzed trade and business, but have been the means of undermining and actually destroying public confidence. The Government in one instance has interfered (whether wisely or not) by special legislation to avert disaster. Three Premiers Verniers in conference (Victoria, New South Wales, and South Australia) have come to the conclusion that the "banking larges of the Colonies must be inform under specific conditions.

How these would ultimately affect New Zealand can at present be hut conjecture. Sufficient already are exemplified how their business transactions affect this Colony by the suspension ot the I Loan and Mercantile Company. This is a simple issue. What may be, under a more complex system, must be left for further consideration.

In partial mitigation of their inability to meet their engagements, Goldsborough, Mort, and Co, there, and the Loan and Mercantile Company here, state the cash depositors demand their deposits. The inducements held out by these and similar institutions invite "cash deposit," upon which they are partially worked. The risk is not foreseen or contemplated by such depositors, as the management is so completely concealed by its business operations. These facts, with their attendant evils, comprise partial ruin to some, and total ruin to other, I venture to submit a proposition for your consideration:

"Propositions."

The "Post office Saving Bank," to be converted into a "State Bank" or rather could he utilized as such to the advantage of both depositors and State without any expense or radical change. The Chief Post Qffices and First. and Second Class Office could be made receiving and paying branches: all payments to be made in "State Notes"; the notes issued not to exceed the amount of deposits. All Third and Fourth Class Offices to be receiving offices only, and to pay out on the warrant of the nearest paying branch. All Government monies could be transferred, and payment made, without the aid of any other branch. This would save the Treasury a considerable amount of work, as all vouchers could be paid on authority, thereby saving the issue of cheques. Even if the duties of such a bank were restricted to cash transactions, the amount of business would he enormous, as a small interest on current accounts would be sufficient to secure all desirable accounts, and the amount of "State Notes" in circulation would give the Goverment a large amount of suplus cash. If the deposits were limited to say £500 as at "present, there would be no fear of page 12 a "run" at any time, and thus allow the Government to sink monies in a payable manner. I have not entered into minute particulars, but all I he neeessary apparatus is now in vogue.

I have laken the I thirty, sir, to direct this proposition to you privately, as on other questions 1 have dono myself the honour to suggest to the Government of the day I have had some reason to infer they have been delayed to a convenient season before reaching the principal for whom they were specially intended.

Copy of Reply.

Sir,—I am in receipt of your letter of the 29th nltimo, in which you suggest that the "Posi office Saving Bank" should he converted into a "State Bank," and I thank you for the same.

The matter is a very large one and requires to be most carefully thought out.