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Browse the 1966 Encyclopaedia of New Zealand
Graphic: An Encyclopaedia of New Zealand 1966.


This information was published in 1966 in An Encyclopaedia of New Zealand, edited by A. H. McLintock. It has not been corrected and will not be updated.

Up-to-date information can be found elsewhere in Te Ara.



Early Difficulties

Banking in New Zealand has not been without its crises and spectacular developments. Tales both tragic and amusing are told about its early days when a main consideration was the purchase of newly mined gold, and when efforts were made to found banks which could not secure a firm footing and which, in consequence, were short lived. The Colonial Bank of New Zealand, for example, was established in 1874 with its head office in Dunedin. Authorised capital was £2 million, of which £400,000 was paid up on the 200,000 shares issued from the total of 400,000. Up to 1895 the Colonial Bank paid an average dividend of 7 per cent, but in that year it became clear that, largely as a result of reduced earnings, a fall in the value of its securities, and a large increase in bad debts, a crisis was imminent. Earlier proposals for an amalgamation with the Bank of New Zealand were renewed, and in November 1895 the Colonial Bank, having been purchased by the Bank of New Zealand closed its doors–not a very happy way of celebrating 21 years of banking. Shareholders received 11s. 1¾d. for each 2 share .

The Bank of New Zealand had also been in difficulties in the nineties, and June 1894 saw urgent legislation introduced and passed in one night. The plain purpose of the legislation in the words of the bank's historian “was to save the bank”. In 1945 this bank was nationalised when the Government, which previously held preference and certain long-term mortgage shares, acquired all the bank's shares.

Next Part: The Reserve Bank