PRESIDENTIAL ADDRKSS SKCTJUN K. 15«;l 



opening of a mint need not result in a rise in South African 

 exchange of the full amount of sending gold to London. Part, 

 at least, of the cost of exi>orting gold will be borne by the 

 importing country. At times exchange might even fall bek>w par. 



With the possible exception of the first cause, the rate of 

 exchange, it is clear that the import of gold is not a passive 

 affair. Gold, it might be said, will not so much flow out as be 

 taken out of South Africa. Those banks which take part in 

 international finance will either desire to enter into closer work- 

 ing arrangements with South African banks or will themselves 

 open branches here. That some will adopt the latter method is 

 almost certain, especially in view of the increase in trade be- 

 tween America and the Union. Another reason for the revision 

 of our present system is the danger of unsound banks being 

 established. That this is a real danger at the i>resent time is 

 shown by the methods of company promotion recently disclosed 

 in Parlament. 



So far no attempt has been made to consolidate the Banking 

 Laws of the Union. The Banks Act (Act 7, 1917) leaves the 

 former laws of the four provinces in force, and, in addition 

 to legalising the issue of los. notes, insists only on a uniform 

 method of stating the liabilities and assets of the Banks. In 

 this, as in the earlier acts, the only restriction on de])0sit bank- 

 ing lies in the requirement of publicity. 



As regards note issue, the only point on whicli there is 

 agreement in the various laws, is that the right of issue is not 

 limited to existing banks. A reserve in specie of one-third of 

 the notes in circulation is required except in the Cape, where 

 the amount of the specie reserve is left to the discretion of the 

 banks. A further restriction aopears in the limitation of the total 

 issue to the paid-ui) capital of the bank, or, as in the Cape, to 

 the paid-up capital and reserve. In place of a specie reserve 

 the Cape requires the banks to deposit with the Treasurer Govern- 

 ment securities to the amount of the intended issue; one-fifth 

 of this paper reserve may consist of Treasury Bills. Issue there is 

 further restricted by a tax of i per cent, per annum on the notes 

 in circulation. Notes issued under the Cape Act are les'al tender 

 in the Cape and Rhodesia. Other issues are not legal tender. 

 As the gold holdings of the banks against liabilities would in 

 any case result in a gold reserve exceeding one-third of their 

 issues, the Cape Act, requiring the deoosit of Government 

 securities, is reallv the most restrictive on banks which are well 

 managed. The total note issue of South African banks at 31st 

 December. 1918. was £6,451,107; coin and bullion held in the 

 Union amounted to £6,851,526. In addition, coin and bullion to 

 the amount of £2,485,401 was in hand or in transit outside the 

 Union. Legal tender issues, .subject to the deposit of securities, 

 have increased from £1.136,786 at December, 1913, to £2.437,042 

 at December. IQ18. Other issues increased from £1,166.969 to 

 £4,014,065. This, however, is not entirely due to the advantage 



