781

ACCUMULATION.

THE

BANKING.

HE laws relating to banks and banking at present in force are susceptible of great improvement, and in 1893 the failure of many monetary institutions which posed as banks directed attention to the urgent necessity for entirely revising the conditions under which deposits. might be taken from the general public, but so far no new legislation has been enacted. All institutions transacting the business of banking are required by law to furnish, in a specified form, quarterly statements of their assets and liabilities, and from these statements and the periodic balance-sheets the tables in this chapter have been compiled. The returns furnished by the banks, though in compliance with the laws of the states, are by no means satisfactory, being quite unsuited to the modern methods of transacting banking business, and they cannot be accepted without question as indicating the stability or instability of the institutions by which they are issued. As a rule, nothing can be elicited beyond what is shown in the half-yearly or yearly balance

No uniformity is observed as regards the dates of closing the accounts, and the modes of presentation are equally diverse. Important items which should be specifically stated are included with others of minor import, and, in some cases, current accounts are blended with other accounts instead of being separately shown. The value of the information vouchsafed to the public is illustrated by the fact that it was impossible to obtain from the publications of several institutions suspending payment in 1893 the amount of their liabilities either to the public or the state, and these particulars were never disclosed.

CAPITAL RESOURCES OF BANKS,

According to the latest information published, the paid-up capital of the twenty-two banks operating in Australasia is £18,490,015, of which £5,818,629, inclusive of £2,500,000 guaranteed to the Bank of New Zealand by the Government of that colony, has a preferential claim on the profits of the companies. Below will be found a statement of the ordinary and preferential capital of each bank at the date shown, with the amount of the reserve fund of the institution. In the case of several companies which were reconstructed, there are reserves which

are held in suspense pending realisation of assets, and of these no account has been taken in the table :

During the half-year ended 30th June, 1904, a reduction in the capital of the Australian Joint Stock Bank, Limited, took place, resulting in the writing off of £6 10s. per share in respect of 154,348 shares, portion of the shares which have been issued and are now outstanding; £5 per share on 936 shares, the remainder of the shares which have been issued and are now outstanding; and £5 5s. per share on 506 shares which were issued, but have been forfeited, and are not now outstanding; while the nominal value of all unissued shares in the company's capital was reduced from £10 per share to £3 10s. per share.

The preceding table shows the position of the capital account at date of balancing; but a number of the banks had made calls on their

shareholders which will increase their paid-up capital. The amount of these calls and the total working capital that will be available when they are met are appended :

* Includes £8,190 prepaid on account of Reserve Liability.

The paid up capital of the banking companies now operating in Australasia has increased from £14,724,587 to £18,490,015, or by £3,765,428 since 1893, the year of the great banking crisis. In 1893, however, there were in existence two banks, with a combined capital of £900,000, which are now defunct; and it should also be mentioned that capital to the amount of £9,324,803 has been written off during the last eleven years, including £1,000,000 guaranteed stock repaid to the New Zealand Government in July, 1904, and £1,010,598 of the capital of the Australian Joint Stock Bank, Limited.

LIABILITIES AND ASSETS OF BANKS.

The liabilities of the banks enumerated, at the dates which have been previously given, totalled £141,537,509, against which amount assets aggregating £167,415,341 were shown. The following table

gives the liabilities of each institution to the public, notes in circulation and deposits being distinguished from other liabilities. In some

cases small items which should be classed with "other liabilities" are included with deposits, as they cannot be distinguished in the balancesheets; and in the case of the Commercial Bank of Australia (Limited), the accounts of the assets trust have been excluded:

The difference between the assets and liabilities shown in these tables amounts to £25,877,832, and practically corresponds with the paid up capital and reserves (£24,946,890) shown on a previous page, the difference in the two amounts representing for the most part undivided profits. It will be noted that both the assets and liabilities represent the total of the various banks wherever situated, and not merely the Australasian assets and liabilities which are shown in a succeeding paragraph. The business of the banks outside Australasia appears to be represented by liabilities amounting to £24,852,487, and by assets £32,910,868.

METALLIC RESERVES OF BANKS.

The following table shows the metallic reserves held by the banks as against their total Australasian liabilities, and also against their liabilities at call, viz., deposits at call and note circulation. The table, however, cannot be taken as complete, as some banks receiving deposits in England and elsewhere do not include such liabilities in their returns:

It will be seen that Queensland, apparently, holds the weakest position in the proportion of cash reserves to total liabilities, and New Zealand in proportion to liabilities at call. This, however, means very little, seeing that in some of the states many banks profess to hold gold largely in excess of their wishes or requirements.

The explanation of the excess of liabilities over assets in some of the foregoing instances lies in the fact that several of the banks find it more convenient to keep their reserves at headquarters, rather than distributed amongst all their branches, but in some instances it is not possible to use to advantage deposits at the place where they are obtained. The Bank of New Zealand shows an excess of liabilities