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The Pamphlet Collection of Sir Robert Stout: Volume 44

Chapter X. Banks and Financial Companies

Chapter X. Banks and Financial Companies.

This sketch of the trade of the colony would be incomplete without a slight glance at its monetary institutions, and other joint-stock companies of a financial nature. The banks are partly local, with resident shareholders, and partly foreign. The two purely local banks, namely, the Bank of New Zealand and the Colonial Bank of New Zealand, transact more than one half of all the business; the former, established nearly twenty years ago, having numerous branches, and the largest proportion of business. The National Bank of New Zealand is a London establishment; with a proportion of shareholders in the colony. The other banks, which are branches of Australian banks, are the Union Bank of Australia, the Bank of New South Wales, and the Bank of Australasia. The whole banks have amongst them a circulation of notes amounting to a million sterling. The total deposits amount to nearly eight millions. The notes and bills discounted amount to six and a quarter millions, and other debts due to the banks to seven and a half millions. The total capital of the banks is about five and a half millions, besides two millions of reserve. Several of the banks have English deposits, which are probably not included in the colonial returns. They all pay page 79 dividends to their shareholders, varying from six per cent, to seventeen and a half per cent., the oldest bank paying the highest dividend. They are well managed, and possess the confidence of the community.

There being no colonial clearing-house, the banks require to keep a large amount of coin and bullion on hand, usually not less than one and three-quarters of a million. The want of a system of clearing is a defect in colonial banking. There is continually seen the anomaly of one bank importing sovereigns from Melbourne, and another exporting them. In 1878 there were three hundred thousand sovereigns imported, and one hundred and five thousand exported. It is also attended with the evil of considerable parcels of gold being scattered about in the small seaport towns, offering a tempting bait to an enemy's cruiser in the event of England being involved in war.

These institutions occupy the most central sites in the various towns. Their buildings are elegant and commodious, rivalling each other in architectural display. We annex an illustration of the Colonial Bank's premises in Dunedin, formerly occupied by the Otago University; but the site being in the central thoroughfare, it was found to be unsuitable, and was sold to the bank by the Council, that they might enjoy academic quiet in a new Gothic structure in the valley of the Water of Leith.

At one time the colony was dependent on English companies for its insurance, but the traders have now taken this branch of business very much into their own hands. There are six local companies, having a subscribed capital of seven millions, a paid-up capital of half a million, and a reserve of £350,000. They have on the whole been successful, although some seasons sufferers from marine risks. The fire premiums are high, varying from 10s. to 15s. per cent, on common risks. Both banks and insurance companies are excepted from the operation of the Colonial Joint-stock Companies Act. Each bank has its own special act, under which the liability of the shareholders is limited to twice the amount of the subscribed capital. The liability of the shareholders in the insurance companies is unlimited. The insurance companies usually invest their capital and reserve in mortgages, retaining a sufficient balance with their banker to meet demands.

In the colonial share list are to be found shipping companies, coal companies, and quartz-mining companies; but the class of associations of next importance to the banks and insurance page break
The Colonial Bank, Dunedin

The Colonial Bank, Dunedin

page 81 companies is that of the investment companies. They have been formed chiefly for the purpose of granting loans on real estate, and thus relieving the business of the banks from deadweight. There are five British investment companies, with an aggregate subscribed capital of four and a half millions, and a paid-up capital of half a million. There is one local, the Equitable Investment Company of New Zealand, having a subscribed capital of £75,000. They have been uniformly successful and dividend-paying, the older companies paying twelve and a half and fifteen per cent. The greater part of the funds is invested on the mortgage of real estate, and is composed chiefly of deposits obtained in Scotland, where the rate of interest and the security offered appear to be more appreciated than in other parts of Britain. The ordinary rate of interest paid on deposits is five per cent., but in some cases the deposits are obtained for less. The rate of colonial interest, varying from seven to ten per cent., affords a profitable margin in favour of the shareholders of the companies.