It is probable that the special Parliamentary Committee on Banking in 1896 would have had no more interest for posterity than most of its kind had it not been for the connection of the then Colonial Treasurer in the Seddon Government, J. G. Ward, later Sir Joseph Ward, with the sale of the Colonial Bank to the Bank of New Zealand and the subsequent liquidation of a number of its accounts. What, in the first view of the matter, was a routine official commission, developed into an inquiry that was publicly commented on in the strongest terms all over the colony. The Bank of New Zealand, shortly after its purchase of the Colonial Bank (with Government approval), found itself in need of State aid, and a Committee was set up by the Premier to find out why, and also to investigate the sale of the Colonial Bank. The hearing took three months, and the evidence, together with the charges and inferences sought to be drawn from it, fanned political and religious differences to an intensity that survived for many years.

The Colonial Bank, itself a child of discord, came into existence in 1874 because Dunedin and the South Island generally resented Auckland and London domination over the only genuinely colonial banking institution in the country – the Bank of New Zealand. By 1894 it was in deep water. Its reserves were small and its advances included some very large troublesome accounts. Unfortunately, among the more difficult accounts were those of the Ward Farmers' Association (of which the Colonial Treasurer was managing director and chief shareholder) and Ward himself, both being heavily indebted to the bank. Personal animus and opposition to Ward's financial policies were brought to a head by the explosive political atmosphere of the day, and when the Bank of New Zealand bought out the Colonial Bank, in 1895, Ward's enemies said that he had persuaded the Government to approve the deal to avoid the embarrassment to his company and himself if, as seemed most likely, the Colonial Bank were to go into liquidation. Here was the source of most of the acrimony and bad feeling. The Bank of New Zealand rejected certain categories of accounts in the Colonial Bank and these were handed to liquidators to wind up. The Ward accounts were included, and when shareholders found that all they could expect from the final wind up was 11s. 1 ¾d. in the pound, they began to demand the investigation of the Ward accounts and also those of the directors. The story of the liquidation is shrouded in a good deal of mystery, but it was 10 years (1905) before the Official Assignee at Dunedin achieved the final dissolution. In the meantime the Ward Farmers' Association had been forced into liquidation and the Colonial Treasurer adjudged bankrupt.

The Committee of Inquiry sat long and earnestly, and the general view was that it was designed mainly to exonerate the Colonial Treasurer from the charges of his political enemies. It could all have been a great deal worse, but for the firm stand taken from the outset by William Watson, then president of the Bank of New Zealand, and former chief inspector of the Colonial Bank. He pleaded the deeds of secrecy associated with his appointments and point-blank refused to discuss individual accounts. He was hailed before the Speaker of the House, told that his attitude was “indefensible”, and fined £500. The Bank of New Zealand paid the fine and Watson stood his ground. He was examined day after day from 15 August to 9 September, but he successfully short-circuited the efforts of certain members of the Committee and the Opposition to have the accounts of Ward and his company and those of certain directors of the two banks investigated. Other bank directors and executives were questioned interminably from July to September, when the Committee returned to the House with recommendations that brought about the reconstitution of the Bank of New Zealand under the Bank of New Zealand and Banking Act Amendment Act of 1898.