The flow of capital from abroad seeking investment in Jerusalem exceeds the demand, the chairman of the board of directors of the Palestine Mortgage Bank said at a press conference held at Tel Aviv, in announcing the conversion of Â£333,000 worth of seven per cent debentures of the bank.
The rate of interest has fallen, he asserted, and the number of persons desirous of buying the shares of the bank has increased.
During the year just ended shares were sold to the amount of Â£700,000, the total value of shares reached Â£850,000, and the capital of the bank is Â£200,000.
The bank is preserving a fixed proportion of one to five between its own money and the value of the shares which it issues. The Anglo-Palestine Bank holds 51,000 of the 88,000 votes of shareholders.
The capital situation in the world market does not justify the bank in raising the rate of interest, the chairman of the board declared, adding that those who believe that Palestine is blessed with a high rate of interest forever are making a mistake.
The bank has decided to convert not only the new shares but also the old shares from seven per cent to five per cent. The value of the seven per cent shares is Â£333,000.
Every shareholder who wishes to change them must apply to the bank not later than the end of January. Those who do not want to accept the transfer will receive the value of their shares in cash on July 1 next.
FINANCED IN LONDON
The previous high rate of interest is opposed to economic sanity, the bank official contended. In order to insure the success of this operation, the bank has made arrangements with the bank of Benson and Company of London, which will supply whatever funds are needed for the redemption of the old shares and will receive the rest of the series of new shares (about 350,000) which fail of sale in Palestine.
The bank has decided to reduce the interest on mortgages to an appreciable extentâ€”by more than one per cent and possibly by two per cent. It is intended to make it possible for the owners of old mortgages to benefit from the reduction of interest, but the details are not yet fixed.
The speaker said it was necessary to stress that in Palestine the proportion of obligations to capital is as five to six, while in other countries it is as seventeen to twenty-five.
As a consequence, the relative wealth of the bank has increased, while the value of the shares and mortgages is less, which has caused the great difference between the rate of interest on shares and that of mortgages.