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ST C O N G R E S S )

QTTWATTT

2d Session

SENATE

)

/DOCUMENT

1 No. 332

NATIONAL MONETARY COMMISSION

The History of Banking
in Canada

BY

ROELIFF MORTON BRECKENRIDGE

LIBRARY
Presented by M R . B U R R O W S
JANUARY 28,1910.—-Ordered to be printed

Washington : Government Printing Office : 1910




TABLE OF CONTENTS.
I . The earliest banks:
Canada Banking Company
Montreal Bank
Bank projects
Efforts in Lower Canada
Upper Canadian legislation
Influence of American models on early charters
..
First charter of the Bank of Montreal
._
Quebec Bank and Bank of Canada
Bank of Upper Canada charter
Few safeguards in early charters
Conditions restrict expansion
Lack of uniform currency
Checks upon issue
I I . Bank expansion and regulation, 1825-1841:
Improvement in Upper Canada
.
Commercial Bank of the Midland District chartered
Imperial regulation of bank charters
Conditions imposed by Downing street
Upper Canadians resent interference
City Bank founded in Montreal
Obstacles to further incorporations in Lower Canada
Suspension of specie payments (1837)
Fraudulent private banks
Capital increases in Upper Canada
Introduction of shareholders' double liability
Upper Canadian agitation for more banks
Imperial intervention
Establishment of joint stock (private) banks
Bank of British North America founded
Cash credits
Suspension in Upper Canada authorized
Effect of t h e crisis of 1837
III. 1841-1866:
Union of the Canadas
Bank statistics at union
Bank of issue proposed by Lord Sydenham
Assembly rejects the plan
Tax imposed on circulation
A banking policy determined
Bank regulations prescribed by the colonial office

m

Page.
3
4
5
6
6
7
9
13
14
15
16
18
19
22
23
23
25
26
27
29
30
31
32
33
34
35
36
37
38
39
40
42
43
43
45
46
47
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I I I . 1841-1866—Continued.
page.
Renewal of bank charters and stock increases...
50-5l
Dollar notes retained
„
52
Economic expansion of the latter forties
54
Banque du Peuple chartered
54
Crisis of 1847
55
Blame cast upon the banks
_ _A _
56
The act t o establish freedom of banking
58
Amendments and concessions to chartered banks
60
Failure of the free banking plan
62
Stocks of chartered banks increased
64
Additional charter restrictions imposed
65
Speculative inflation
66
Collapse of 1857
67
Bank losses
68
New charters granted
.
69
Bank inquiry of 1859
70
International and Colonial Banks fail
71
Government issues proposed by A. T. Gait
72
The plan defeated
74
Treasury needs of 1866
75
Provincial note issue authorized
. . 75-76
Operation of the provincial note act
77-78
Bank of Upper Canada fails
79
Also the Commercial Bank of Canada
82
Growth of Canadian banks, 1841 -1867
_.. 84-85
Their development of function
86-88
IV, T le first bank act of the Dominion:
Changes wrought by the British North America act
89
Preliminary Dominion legislation
.
90
Legislative inquiries into the banking system
91-94
Proposal of John Rose and B. H. King to copy in Canada
the national-bank act of the United States
94-96
Opposition to the project through the country and in
Parliament
97-98
The plan abandoned
98
The policy of Sir Francis Hincks
99
The first Dominion bank act
100-103
Fixed reserve and note holders' priority rejected
104
Expansion of the government note circulation and new
regulation of its issue
105
Subsequent legislation concerning Dominion notes
106
Dominion takes over t h e postal and government savings
banks
—
107
The general banking measure of 1871
108

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V. Legislation and development, 1867-1890:
Page.
Bank expansion, 1867-1890
no
Prosperity of the early seventies
111
Multiplication of new banks
112
Increase of banking capital
113
Depression following t h e crisis of 1873 _ _
114
Bank losses
115
Mechanics' Bank fails- _ _
116
Bank of Liverpool
117
First decennial revision of the bank act (1880)
118
Concession to the national-currency advocates
119
Criticism of issue regulations
119
Bond security and government inspection advocated
120
Minister proposes to make notes a prior Hen
121
Parliament approves
121
Privilege of issue under $5 withdrawn from the b a n k s . _
122
Fuller returns to the government required
122
Money penalties provided for certain infractions of the
bank act
123
Newr charters granted, 1882-1886
124
Banks' business increases
125
Exchange Bank fails
126
Maritime Bank fails
„
127
Bank of London and Central Bank
128
Liquidation of Federal Bank
129
VI. Bank act revision of 1890:
Defects in the immediate convertibility of Canadian bank
notes
131
Discount upon notes of distant banks
132
Increase of small banks
132
Banks establish redemption agencies
133
Bankers and minister of finance meet
133-134
Arguments against a fixed reserve
134-135
Compulsory audit and appropriation of unpaid balances
defeated
136
Establishment of a safety fund to secure note circulation
*37~139
Note redemption at provincial commercial centers made
mandatory
__
140
Dilatory creditors of liquidated banks protected
140-141
Minimum capital requirement increased
141
Loans upon warehouse receipts and the like
141-144
Further amendments
144-146
Emergency circulation privileges accorded
147

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VII. Amendments of 1900:
Page.
Effort to complete joint guaranty of the issue by joint
control
148
Incorporation of the Canadian Bankers' Association
148
Powers conferred by the charter
149
Jurisdiction over suspended banks
150
Supervision of the note circulation
151
Provisions respecting bank mergers
152
Minor amendments of the bank act
153-154
Bankers' Association requires returns of circulation
154
Duties of curators of failed banks prescribed
155
Range of the association's further activities
156-157
Growth of Canadian banks' business, 1888-1908
158-159
Effect of competition on banking profits and the increase
of branches
159-161
Branches by Provinces at five-year intervals
162
Clearing houses organized
162
New charters, 1901-1908
163
New capital called up
164
Bank mergers
165
Bank failures
166
Commercial Bank of Manitoba
166
Banque du Peuple
167
Banque Ville Marie and Banque de St. Jean
168
Bank of Yarmouth, Banque de St. Hyacinthe
169
Liquidation of the Ontario Bank
170
Liquidation of the Sovereign Bank
17 2-174
APPENDICES.

I.
II.
III.
IV.

V.
VI.
VII.
VIII.
IX.

The first Dominion bank act
175
The consolidated Canadian bank act
210
Amending legislation of 1908
283
Table showing the grand totals of the assets and liabilities of
die chartered banks of Canada, as reported to the Government on December 31, 1867-1908
287-288
Canadian bank statistics, 1889-1908, as of December 31,18891908
289
Table showing the total circulation, by months, 1868-1908,
inclusive, of the chartered banks of the Dominion of Canada.
290
By-laws of the Canadian Bankers' Association
291
Table showing, by years, the clearings in the clearing houses
of divers Canadian cities, 1890-1908
309
Number of branches of Canadian banks on December 31,
1889-1908
310

VI




THE HISTORY OF BANKING IN
CANADA.0
I . — T H E E A R U E S T BANKS.

Efforts to introduce the practice of banking into the
British North American provinces were put forth as early
as 1792. The " Canada Banking Company/' then organized by certain English firms and Montreal merchants,
was not destined long to survive its origin, although one
at least of its 5-shilling notes which has been preserved
(No. 6803) is proof that it exercised the function of issue.
It seems to have left little trace, either in men's memories or in the records of the time.
Twenty-five years had passed before the next considerable project of a bank of issue, discount, and deposit was
a AUTHORITIES AND SOURCES: By far the most accurate, painstaking, and
thorough discussion of the development here to be reviewed is in the series
of chapters contributed by PROFESSOR ADAM SHORTT, sometime of Queen's
University, Kingston, Ontario, to the Journal of the Canadian Bankers*
Association, Toronto (later Montreal), 1896-1905. Cited more particularly, these are:
" T h e Early History of Canadian Banking," Vol. IV, 1896-1897, Nos.
1, 2, 3, and 4; Vol. V, 1897, No. 1.
"Canadian Currency and Exchange under French Rule," Vol. V, 1898,
Nos. 3 and 4; Vol. VI, 1898-1899, Nos. 1, 2, and 3.
" T h e History of Canadian Currency, Banking, and Exchange," Vol. VII,
1900, Nos. 3 and 4; Vol. VIII, 1900-1901, Nos. 1, 2, 3, and 4; Vol. IX,
1901-1902, Nos. 1, 2, 3, and 4; Vol. X, 1902-1903, Nos. 1, 2, 3, and 4;
Vol. X I , 1903-1904, Nos. 1, 2, 3, and 4; Vol. X I I , 1904-1905, Nos. 1, 3,
and 4; Vol. X I I I , 1905-1906, Nos. 1, 2, 3, and 4; Vol. XIV, 1906, No. 1.
A preliminary survey of the more accessible material was undertaken
by the present writer in " T h e Canadian Banking System, 1817-1890,"
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brought to the point of opening for business. This was
in the province of Lower Canada and in the city of Montreal. For lack of legislation giving them corporate
powers, the promoters of the bank began their work under
articles of association, and so worked until a provincial
charter was obtained in 1822. The initial paid-in capital
of the first bank was £25,000 currency, or about $100,000.
Like action to that of the Montreal Bank—the name of
the new organization—was taken in Quebec by those who
formed the Quebec Bank the following year, and by another group of Montreal proprietors, a number of them
Americans or persons interested in the American trade,
under the style of the Bank of Canada.
published in the Journal of the Canadian Bankers' Association, Vol. I I ,
Toronto, 1894-1895, and in the Publications of the American Economic Association Vol. X, Nos. 1, 2, and 3, New York, 1895. A detailed bibliography
was printed as an appendix to that dissertation.
Illuminating discussion of the recent history of the Canadian system is
available in the pages of the Journal of the Canadian Bankers' Association
published quarterly since 1893. A good part of the work by GEORGE
HAGUE, "Banking and Commerce," New York, 1908, is concerned with
episodes of the Canadian history or illustrates the organization and operation
of the Canadian banks. The administrative technique—the internal regulation—of these corporations is well described by H. M. P. Eckhardt in
his "Manual of Canadian Banking," Toronto, 1909. For the Canadian
bank act in the light of judicial interpretation there is nothing better t h a n
the copious and learned annotation of Justice J. J. MACLAREN, " B a n k s
and Banking," Toronto, 1908. As introduction to this work there has
been printed one of the admirable addresses of Dr. Byron E. Walker, who,
with George Hague and James B. Forgan, has done much toward acquainting Ataerican bankers of the peculiarities and advantages of the Canadian
system.
The present paper is based upon the session laws and legislative documents of the several provinces, and of the Dominion, the parliamentary
debates, where reports were accessible, contemporary newspapers, memoirs,
and pamphlets, and in respect of recent history, upon the oral accounts of
many who had knowledge of the events detailed. Grateful acknowledgment
is owing, as well for this last assistance, as to the researches of Professor
Short! into difficult phases of the earlier history.
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The successful operation of the Bank of the United
States in the country to the south, the scant supply of
currency in the colonies and the variety, in point both of
origin and of condition, of such coin as was in circulation,
the nuisance of promissory notes and merchants* bons,
issued or used without lawful authority in substitution
for coin, and a lack of adequate capital to handle the
colonies' trade, to develop their farms, fisheries, and forests,
or to expand their exports, had all prompted much discussion of banks some years before any was actually
begun. It is of record that even in 1767 the authorities
of Lower Canada were asked to grant a monopoly of the
issue of bons or due-bills. Fifty thousand pounds were
subscribed in 1801 toward a projected bank in Halifax,
the plan failing because those interested sought monopoly
privileges from the legislature. In 1807, Montreal and
Quebec merchants joined in petitioning their legislature
for a bank charter, and in the session of the assembly the
following year a bill to incorporate divers persons as the
Bank of Canada reached the stage of printing. At Kingston, Upper Canada, a similar movement was begun in
1810, but the effort failed. So also one of like nature
started in Halifax in 1811.
The first bank of the upper province did not begin
business until 1819; the first bank of Nova Scotia in 1825.
In Kingston (Upper Canada) as in Montreal, the promoters, failing of incorporation, organized under articles
of association, the articles being substantially the same
as those adopted by the lower province banks. The Halifax institution was a private partnership. Bills to incor-

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porate banks failed in the Nova Scotia legislature in
1822, as well as in 1825.
So far as the records show, the first of any British North
American charter granting incorporation to a banking
company which not only was passed and approved, but
was also actually used by the beneficiaries, was the New
Brunswick act of 1820 incorporating the president, directors, and company of the Bank of New Brunswick, with its
principal office at St. John. For one reason or another,
mostly reasons of domestic or colonial politics, action in
this direction proposed to the legislature of Lower Canada
in 1815, 1816, 1817, 1818, and 1819, either failed of passing
or, passing, failed of the royal assent, without which no
legislation of these colonies had force. The bills which
finally incorporated the first three banks of Lower Canada were passed by the legislature in 1821 and came
into force by proclamation the following year. In the
upper province a bill to incorporate a "Bank of Upper
Canada" was passed in the session of 1817, but the royal
assent was first proclaimed in 1819 after the time limit
within which the bank was to begin business had expired.
The legislature proceeded then to pass two charters, the
one for the Bank of Kingston, and the other for the Bank
of Upper Canada. The second measure, being in the
interest of the historical family compact, the dominant
political faction, contained a provision for a stock subscription on behalf of the provincial government and was
reserved, though the royal assent was eventually proclaimed in 1821. The Kingston charter was forthwith
approved by the lieutenant-governor, acting for the
Crown, but those interested in it, many of them being
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also shareholders in the private bank already established
failed to raise the capital of £20,000 required before beginning business, and thus forfeited their rights by nonuser until January 1, 1821.
If ever they were published, the precise terms of the
earliest Nova Scotian organization are not now accessible. But the articles of the Quebec Bank, of the Bank
of Canada, and of the private (afterwards called the
"pretended") Bank of Upper Canada, at Kingston, appeared in the newspapers of the day, as did also the
document from which they were apparently copied, the
articles of the Bank of Montreal. Through the ingenuity and research of the leading authority upon the
early history of Canadian banking there has been found,
moreover, a copy of the master document of this phase
of Canadian banking history—the bill, that is, introduced into the legislature of Lower Canada in 1808.
The first charters, of course, are all available in the
session laws of the various provinces.
A comparison of the bill of 1808 to the charter of the
first bank of the United States has shown beyond all
doubt that the essential features of their proposed bank
charter were framed by the Canadians quite in the
spirit, and for long and significant passages, exactly in
the letter of Alexander Hamilton's provisions for a
national bank. In the Canadian project, for example,
there was an arrangement for a government subscription,
the appointment of government directors, and the payment of the government subscription by government
debt; for shareholders voting by a scale designed to
minimize the influence of large holdings; for excluding
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aliens from the directorate; for limiting the holdings of
real property; for restriction of the total debts of the
corporation to a prescribed proportion of its capital; for
the payment of half yearly dividends, if earned, and for
the establishment of offices of discount and deposit at
places other than the domicile of the bank. While there
are abundant changes and additions in the Montreal bill,
the language of the American act is followed so literally,
even through whole sections, as to preclude any other
explanation than that the southern measure, proven
successful and advantageous in operation, served as
model for the draftsmen of the north. The principal
interests concerned in the project of 1808 were much the
same as those which finally brought about the organization of the Montreal Bank.
When the legislature was induced to pass charters,
some ten or twelve years after the plan of 1808 failed,
the feature of government participation was omitted
from the Lower Canada charters. But in the upper
province, as has been seen, the earlier suggestion was
adopted by the members of the family compact. It was
provided that in the bank at York (Toronto) for which
they got a charter the provincial government should
take one-eighth of the whole capital stock. Through a
subsequent reduction of the authorized capital the government share became a fourth. In other essentials the
articles of 1817 and 1818 and the acts of 1819 to 1822
all show marked similarity to the bill of 1808. The
changes from this model are to be found, for the most
part, merely in the phraseology or in the stipulations
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concerning the capital stock and the par value of the
shares into which it was to be divided.
The charter of the Bank of Montreal, for example,
recited the formation of an association some years earlier
and the desire of the shareholders for incorporation under
provisions corresponding as nearly as might be with the
terms of their original association. The legislature therefore formed the 144 shareholders into a body corporate
and politic, with corporate powers continuing to June i,
1831. The capital was fixed at £250,000 currency, 0 all
to be paid up in annual installments of not more than
10 per cent within nine years from the passing of the
act. There were to be 13 directors, only natural-born
or naturalized British subjects or residents of Montreal
for three, or of the province for seven, years, and holders
of at least 10 shares being eligible to the office. Directors were forbidden to act as private bankers during
their term of office or to receive any salary except such
as might be voted by the shareholders in general meeting.
They were authorized to appoint the officers of the bank
and to require proper bonds. They were required to
declare half yearly dividends out of the funds of the
bank, but never so as to lessen or to impair their capital;
to keep a register of stock transfers and to present to
the annual meetings of shareholders statements of the
debts due to and from the bank, amount of bank notes
« Halifax currency, 12d. = 1 s.; 20s. = £ 1; £1 (approximately) = $ 4 .
Through long periods the British pound sterling was conventionally
equal to £ 1 4s. 4d. Halifax currency. There were no coins exactly corresponding to this arbitrary money of account, which was used in Canada
down to 1858, but the Spanish and American dollars generally passed for
ss, or a trifle more.

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in circulation, amount of probably bad or doubtful debts,
and the surplus or profits, if any, remaining after deduction of losses and provision for dividends. Should the
debts of the corporation, whether by bond, bill, or note,
exceed thrice the amount of its capital stock, over and
above a sum equal to such money as might be deposited
with the bank for safe-keeping, the directors were to be
liable in their natural capacities—severally and jointly,
that is—for the excess, not only to the creditors, but to
the shareholders as well. As escape from this liability,
directors in opposition might publish their protest within
eight days of the time the illegal enhancement of indebtedness occurred. The Bank of Montreal and the Bank
of Canada shares were rather larger than others of the
time, being fixed at £50 each. The Quebec Bank's
shares were for £25 each and those of the Bank of Upper
Canada were for £12 10s. each.
Shareholders were accorded votes in the meetings of
the company in such a proportion that, while the holder
of 1 to 2 shares had 1 vote, the holder of 100 shares
could have but 20 votes, no matter how many shares he
held. a After the first election of directors no share was to
carry a right to vote unless held for three months prior to
a meeting. Transfers of stock were effective only when
a Precisely, the scale was this:
Vote.
For holders of 1 to 2 shares1
For each 2 over 2 shares.
1
For each 4 over 10 shares^
1
For each 6 over 30 shares-.
1
For each 8 over 60 shares
_ —.
1
The holder of 10 shares would thus have 5 votes; of 30, 10 votes; of 60,
15 votes; and of 100, 20 votes, as in the first Bank of the United States.
In the Montreal charter, however, no holder was permitted more than 20
votes,
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registered at the bank, and even then not until the transferor should have discharged any debts then due from
him to the bank in excess of the value of his remaining
shares.
Shares were made personal property and liable to
seizure in behalf of bona fide creditors other than the bank
for debt, it being provided that attachments should be
served on the cashier of the bank. Shareholders failing
to pay calls were penalized 5 per cent upon the amount of
their stock. On the other hand, they acquired the privilege of a liability limited to the amount of their subscriptions in the provision, "no shareholder shall be answerable in his private or natural capacity for the debts of the
said corporation." Fifty shareholders, owning 150 shares,
might call an extraordinary meeting of the proprietary.
The bank thus created was empowered to sue and to be
sued in the corporate name of the company; to issue
promissory notes intended for circulation and payable
on demand in specie current by the laws of the province;
to deal in bills of exchange and in coin and bullion; to
discount notes of hand and promissory notes and to receive
the discount at the time of negotiating; to sell stock (goods)
pledged for money lent and not redeemed, and, finally, by
implication, at all events, to receive deposits. Practically
all other forms of activity were forbidden. Even the
power to take and to hold mortgages, hypotheques, or
real property by way of additional security for debt contracted to the bank in the course of its dealings was
coupled, wisely enough, to be sure, to a prohibition against
lending upon any account, upon mortgage, hypotheque
or upon land or other fixed property. The corporation
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was forbidden, on pain of forfeiture of its charter, to lend
money to a foreign state. It might not raise loans of
money or increase its capital; neither was it permitted
"upon any pretext whatsoever" to demand or to receive
upon its loans or discounts any interest exceeding 6 per
cent per annum.
For forging the common seal of the bank or its bonds,
bills, and obligations, or for passing them, knowing them
to be forgeries, the penalty was imprisonment for not less
than six months nor more than six years at hard labor,
with the picturesque options, in the discretion of the court,
of a public whipping or of standing in the pillory. But
for making or engraving plates or tools for counterfeiting
the bills of exchange, promissory notes, undertakings, or
orders of the bank, the punishment provided was death
as a felon without benefit of clergy.
Two other provisions need be cited to make this outline of a characteristic early charter complete. Both
saved the rights of the province. The thirteenth section
of the act made it plain that the person administering
the government of the province for the time being, or
either house of the legislature, might require from time to
time statements under oath of the bank's capital stock,
debts due, notes in circulation, and cash on hand—this
"for the better security of the public." The twenty-first
section continued the life of the bank to June i, 1831,
with the proviso " t h a t if before the expiration of that
period it shall at any time be found expedient to establish
a Provincial Bank in this Province, and that this same be
so established by an act of Legislature thereof, then and
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and Company of the Bank of Montreal shall from and after
the expiration of seven years from the passing of such Act,
be dissolved, and all and every the powers, rights, privileges, and benefits hereby given and granted to the said
corporation shall from thenceforth wholly cease and
determine, everything in the present Act contained to the
contrary in anywise notwithstanding/'
Under charters of similar purport the capital of the
Quebec Bank was fixed at £75,000, that of the Bank of
Canada at £200,000. But it was not until 1831 that the
Quebec Bank had called up the full amount, or that the
Bank of Montreal, which had had £87,500 paid up in
1818, could report its joint stock at the £250,000 authorized by the act. In 1824 the stock of the Quebec Bank
was reported at £51,377, of the Montreal at £187,500,
and of the Bank of Canada at £93,825. The latter, finding the trade in American exchange less lucrative than
expected and meeting heavy losses besides, gradually
wound up its business, though without loss to its creditors, and some time prior to 1831 ceased banking
altogether.
Modest as were these capitals of Lower Canada, the
bankers of the upper province were unable to report
anything like them. The copartnership or association at
Kingston probably never had more than £11,500 of capital paid in. That was about the sum at which it stood
when, partly because of internal dissensions, partly by
reason of unskilled or ill-advised operations, the partnership became bankrupt late in September, 1822. Against
a note issue and other debts to the public of some
£19,000, the bank had due to it on bond and note a sum
S. Doc. 332, 61-2

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rising £22,000. The liquidation, however, was sadly
mismanaged from the outset and after sixteen years and
more there was still a sum of £5,000 due divers creditors
of Upper Canada's first bank. The shareholders appear
to have lost all they put in.
Notwithstanding the backers of the chartered Bank of
Upper Canada had proposed the ambitious capital of
£200,000, at the time their bill was presented to the legislature, they soon had sufficient experience of the scarcity
of coin in the province to obtain a reduction of 50 per cent
in the sum of specie required to be paid in before the
beginning of business. By an act of 1822, the bank was
allowed to start with £10,000 paid in. In 1823 the
authorized capital was also reduced by half to £100,000,
at the same time as the provincial government was empowered to appoint four of the fifteen directors., Two
years from the foundation of the bank in 1822, the capital
paid up was only £28,181; in 1826 it stood at £54,037; in
1828 at £72,410, and not until 1830 did it reach £100,000.
Half the £10,640 or less, with which the bank had begun
operations, was found by the provincial government. As
early as 1817, and again in 1819, the legislature of Upper
Canada had made a certain improvement upon Lower
Canada acts in so far as the acts passed here forbade the
bank to issue notes for less than 5s., and provided that
upon refusing payment of its bills in specie a bank should
suspend proceedings until payment had been resumed.
The Bank of Upper Canada was expressly authorized to
establish branches. The lower province establishments,
on the other hand, were nowhere enjoined to confine their
operations to one place.
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No one can pretend, after scrutiny of the earliest
Canadian charters, that the laws governing banking were
strict or their conditions severe. Provisions now reckoned
indispensable for protecting the public were either lacking
altogether, or, if embodied in the legislation, were deficient in form and devoid of statutory sanction. The
liability of shareholders, for example, was limited to the
amount of their subscriptions to the stock. This formed
some protection to public creditors so long as the stock
was not all paid up, but once the authorized capital had
been reached, the safeguard of a contingent liability
ceased. The issue of notes could proceed to any length,
so long as the total debts of a bank, over and above its
deposits, did not exceed thrice its capital stock. No
apparatus was provided to insure the specie payment of
the shares or of calls upon the shares, before the bank
began to exercise its rights. No specific penalty, except
in Upper Canada, and then it was a mild one, was imposed
for suspension of specie payment. Neither were there
safeguards against a bank's lending on its own shares, or
against directors unduly exploiting in their own behalf
their institution's control of funds. The one offense
deserving forfeiture of charter, in the opinion of the
Lower Canada legislature, seems to have been the loan of
money to a foreign state.
As it happened, however, those who owned and managed the first banks were animated by another purpose
than to take advantage of the law's defects. What they
wanted, apparently, was to make as large a legitimate
profit as they might in relying upon legitimate means.
The original proprietaries of the Bank of Montreal and
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Quebec Bank included a goodly proportion of the wealth
and respectability in those cities, and that of the Bank of
Upper Canada, though politics rather than commerce
predominated, was made up of those who had won standing, esteem, and power in the province. Both the Bank of
Montreal and the Bank of Upper Canada had the advantage of alliance with the dominant political party; the Bank
of Montreal was favored also with the government account.
Until 1832 no other bank was chartered in either province.
In the lower province, the prejudice of the French
Canadians against paper currency and their reluctance to
accord their English neighbors legislative favors in the
shape of charters; in the upper province, the determination of an efficient and well intrenched political faction to
keep the valuable franchise of banking in its own hands
along with any other available opportunity for power or
profit—these were the factors that, for the time at any
rate, prevented the multiplication of banks. The influence in the legislative council of the partners of a private
banking company formed in 1825 hindered the issue of a
legislative charter to any bank in Nova Scotia before
1832, while with one small exception, no bank was authorized in New Brunswick between 1820 and 1835. The
difficult period of youth, accordingly, was passed by all
the early banks in communities where lenders of money
were able more or less to pick their risks.
It must not be forgotten, however, that these were also
communities to which the practice of banking was so far
familiar only by hearsay, by experience with like institutions in the United States, or by use, outside of banks, of
the contracts, securities, money, bullion, and pledges in
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which banks dealt. All the colonies were accustomed to
the trade in bills of exchange, for the great bulk of manufactures and a large proportion of the supplies used in
any of them had to be imported from the south, the West
Indies, or Great Britain. Furthermore, it was the custom
of the British military establishment, as of the French
commissariat before the conquest, to find funds for local
expenditures in part at least by the sale of bills instead of
by the import of specie. New France had learned the
disadvantages of a legal-tender paper currency through
a grievous experience with "card money" issued during
the closing decades of French rule in enormously excessive
quantities, quite beyond the power or inclination of the
home treasury to redeem. Hence a deep-seated distrust
of paper among the French population of Lower Canada
and a disposition to hoard coin. In Nova Scotia, a first
issue of treasury notes had been made in 1812, and other
issues, all reissuable but not all of them redeemable on
demand, followed in 1813, 1817, and 1819. In the two
Canadas, finally, apart from divers private promises, there
had circulated during the war of 1812 and for some time
thereafter, the so-called army bills—legal-tender paper
paid out by the commissary-general of the forces in exchange
for supplies for the troops, and redeemable in bills of
exchange upon the British treasury. With these last the
experience had been satisfactory to a degree. Why it had
been satisfactory the Canadians of the time seem not
always to have understood. Some of them, at all events,
overlooked the fact that they were selling their produce at
high prices and getting cheap bills of exchange wherewith
to pay for imports. Some failed to see that the wealth and
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prosperity of the colony were increasing swiftly under the
stimulus of a copious inflow of capital from without.
Such persons were inclined to explain the good times that
lasted through the war and for several years beyond the
peace merely by the abundance of a circulating medium,
convenient, easily recognized, and of a uniform value.
Inasmuch as the colonies had no coins of their own
minting and most of the British specie was promptly
exported across the Atlantic, a uniform currency had to be
a paper currency. Legal tender, consisting of French,
American, South American, Spanish, Portuguese, and
Mexican coins, such as these colonies had, each coin given
its special rating by the act which made it current, could
scarcely furnish a uniform circulating medium in any circumstances. Thus the money changer found his opening
and the shrewd peddler or trader took every chance to
pay out overrated coin and to retire the gold or silver
pieces worth more elsewhere than in Montreal or Quebec.
Later on, even the banks, when called upon to redeem
notes in specie, did not always scorn to furnish coin of a
bullion value so far below the nominal rating that the
applicant stood to lose less by paying a stiff rate of
exchange for the means of remittance he desired. While
the Imperial Government expenditure on the one side and
on the other the British North American export of timber,
furs, grain, and, later on, pork and flour, generally gave
the colonies a favorable balance as against Britain, and
the exports to the south or sales of exchange thither a
favorable balance in the United States as well, about the
only practicable way to realize this balance was by import
of specie over the difficult and costly routes from Boston
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and New York. Once the equilibrium was restored, the
Canadian colonies were subject to a pretty regular drain
of the smaller coin through the traffic with the American
settlements along their southern borders. Not infrequently it was necessary to make considerable payments
for produce shipped from the United States by the St.
Lawrence. With the reduction of the imperial forces in
the colonies, and with the decline in the demand for
their exports, which occurred in 1815-1819, the comparative comfort of the Canadian position sensibly diminished.
The situation, nevertheless, was to all appearances one
in which there were both need and opportunity for banks.
In satisfying the needs of their communities for currency
and capital the banks might have been tempted unduly
to expand the structure of credit or to inflate their note
issues beyond the point of safety. But best to take
advantage of the lucrative opportunities of the specie
and exchange market, they were obliged to keep their
resources fairly well in hand, their position tolerably
sound. From the outset, directors and cashiers appear
to have kept steadily in mind the prospect of calls for
redemption either in specie or exchange. In Lower
Canada, of course, competition for the note issue caused
each of the banks to act on the other as a check. In the
upper province, where the Bank of Upper Canada had no
local rival, there were always need for exchange and a
well-nigh constant call for coin in the American trade*
Though it ceased to redeem its own notes in Montreal
in 1826, it was still obliged to furnish exchange upon the
Lower Canadian towns. Not seldom pressure was suffered
from agents or customers of the Lower Canada banks, such
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pressure being applied in the territory the Bank of Upper
Canada reckoned peculiarly its own.
Hence even in the western community, where nearly
forty years were to pass before strictly commercial banking was generally to supersede lending upon accommodation paper, or land banking thinly veiled, there was
abundant incentive to prudent administration. Rather
than statutory precautions, it was the process of frequent
redemption, the competition between banks, the size of
the capitals which their proprietors had at stake—large,
compared to the resources and development of their
several communities—and the restriction of the banking
franchise to a few which saved the first Canadian banks
from disastrous error and their creditors from serious
loss.
What was true then held true through most of the subsequent history of the Canadian banks. Worse frauds
and more scandalous bank failures occurred under the
developed Dominion legislation of 1871 and 1880 than in
any of the provinces prior to confederation. From 1829
to 1866, indeed, not one bank chartered by Upper Canada
Lower Canada, or Nova Scotia went down in failure.
There were losses, to be sure, and heavy ones, notably in
the middle twenties, and again after the panic of 1837, in
the trying times of 1848-49, and after the collapse of
1857, but, barring the expressly authorized suspensions
of 1837-1839, they managed, all of them, and throughout
the term, to uphold their solvency and to maintain the
redemption of their obligations in coin.
To describe the scene of the banks' expansion in numbers, offices, resources, and strength, to provide the set20




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ting for the story of their development, would be an
excursus into economic history beyond this paper's scope.
It will be necessary, for the most part, to confine the
sketch of events preceding 1867, to an account of the
changes in the statutes, regulating banks. And, since
the two Canadas, now known as Ontario and Quebec,
which were united into the Province of Canada in 1841,
became the dominant Provinces in the Dominion, possessing at Confederation the largest number of banks and
the most important body of bank legislation, the narrative will be concerned with the Canadian development in
the narrower sense of the term.

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I I . — B A N K E X P A N S I O N AND R E G U L A T I O N , 1825-1841.

English immigration, t h e spread of clearings and t h e
opening u p of farms, the growth of t h e milling industry
and generous expenditures upon public works, largely of
funds from abroad, combined t o give t h e Upper Canadian economy a decided upward swing, late in t h e twenties. How marked was t h e enhancement of prosperity
of t h e Province generally, t h e increase of land values or
t h e improvement of trade, is suggested b y t h e circumstance t h a t in 1830 t h e Bank of Upper Canada's capital
had been paid u p in full, and stood a t £100,000, as
against £10,640 eight years before. I t s discounts—
£107,598 a t t h e end of 1826—were £260,557 a t the beginning of 1831; its circulation had risen from £87,339 to
£187,039 and its specie from £19,066 to £42,664. A
dividend of 8 per cent every year b u t t h e first since
organization, and two bonuses of 6 per cent each, m a d e
t h e tidy sum of £51,000, distributed to shareholders
inside of nine years. Notwithstanding t h e increase of
its resources, t h e b a n k found itself unable t o meet the
rapidly growing d e m a n d for loans.
Accordingly, t h e management asked the authority
further to increase t h e stock. I n the session of 1831-32
t h e legislature permitted the addition of £100,000. In
t h e same session, t h e petition of merchants and others
of Kingston, who had been seeking a charter since 1829,
was finally given a favorable hearing, and authority




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accorded for the organization in their city of the Commercial Bank of the Midland district, with a capital
stock of £100,000. Except that returns of condition
were required in greater detail and in the form of a balance sheet, this charter showed few advances over that
granted the older bank thirteen years before. The bank
was suffered to begin business with £40,000 subscribed
and £10,000 paid up; but both the banks were forbidden at this time, on penalty of charter forfeiture, to
lend upon the security of their own shares. When the
Bank of Upper Canada opened subscription books for the
8,000 new shares, six months after the passing of the act,
individual subscriptions being limited to 80 shares, applications were received for no less than 25,679 shares, or
£320,987 10s. In Upper Canada, at least, there were
already in evidence an enthusiasm for banking ventures,
a belief in the sovereign advantages of banking establishments, which were soon to pass all bounds.
Rather more than a year after both the old and the
new banks had begun operations under the acts of 1832,
rumors of royal disallowance of the legislation became
current. Through 15 or more agencies, the banks had
discounted some £450,000. Their circulation amounted
to £300,000. The rumor caused a panic, a panic intensified when the banks ceased discounting, and only
allayed when they began again to lend. In point of fact,
the colonial office had not gone the length of recommending the disallowance of the acts. But, under date of
May 9, 1833, the authorities of Downing Street threatened
so to do unless the measures were amended in accord
with certain regulations of 1830 framed by the committee
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of the privy council for trade and plantations for observance in all legislation for the creation of new banks in
the colonies or for the increase of the capital of old ones.
" These were precautions," said the secretary of state
for the colonies, voicing the opinion of the lords of the
treasury, "rendered more necessary by an experience of
the prejudicial effects, which have in former periods resulted from the extension of the banking system in the
neighboring states without the restrictions they impose/'
In addition to those prescribed in 1830, the lords of the
treasury were of the opinion, certain other conditions
should be insisted upon with a view to the security of
the public, "both as regards the certainty of the convertibility of the paper issued into specie on demand,
as well as the prevention of a series of fluctuations in
the amount and value of paper money, which are attended with consequences yet more disastrous to the
community."
In deference, however, to the emphatic protests of representatives of Upper Canada, who were in London at
that time, the regulations thus revised and expanded in
May were modified in October. The substance of those
suggested for incorporation in the charter of the Commercial Bank was as follows:
1. The charter of the bank to be forfeited for suspension
of specie payments for more than sixty days consecutively or within a year.
2. Notes for circulation to be dated at the place of issue
and to be payable on demand, in specie, at the place of
date and issue, as well as at the principal office of the

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bank, it being expressly understood that it is not intended
by this regulation that any branch establishment shall be
called upon to pay the notes either of the principal bank
or of the other branches.
3. Half the subscribed capital to be paid in forthwith;
the moiety at the discretion of the bank.
4. Directors, whether as drawers, acceptors, or indorsers,
not to have more than one-third the total discounts.
5. The bank not to hold its own stock or to make advances thereon to shareholders.
6. Weekly balance sheets to be kept at the bank's head
office, and from these to be prepared half-yearly average
statements of the assets and liabilities, which, together
with a statement of the rate and amount of the dividend
and of the amount of reserved profits, shall be furnished
to the government and published; further returns to be
furnished if called for and if required to be verified under
oath.
7. The shareholders to be respectively liable for the
engagements of the company to the extent of twice the
amount of their subscribed shares—that is, to the amount
of their subscribed shares and to an equal amount in
addition.
8. The bank not to lend or to make advances upon
lands or other property not readily available to meet its
engagements, but to confine its transactions to what are
understood to be the legitimate operations of banking,
namely, advances upon commercial paper or good securities, and general dealings in money, bills of exchange, and
bullion.

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Only the second, fourth, sixth, and eighth provisions
were to apply to the Bank of Upper Canada generally;
the third and seventh to new shareholders only.
The revised provisions found scarcely less disfavor in
the eyes of the Canadians than those of May. True, the
president of the Commercial Bank, " t o avert the ruin of
his shareholders/' undertook to submit to the conditions
of the lords of the treasury, but for the time being the
legislature would have none of them. Those which were
not absolutely new, which were colorably covered by
clauses in the existing charters, they criticised as unnecessary; the limit put upon directors' discounts was described as higher than any permitted in the practice of
the banks. What aroused the strongest objection was
the imposition of a double liability upon holders of bank
shares. This was locally reckoned little short of an attempt, by intimidating capital, to stifle the prosperity
and stunt the growth of a community already suffering
from a famine of capital. The banks, on their side, opposed the regulation making notes payable not only at the
place of date and issue, but also at the principal office of
the promissor, as altogether too difficult and expensive of
observance. The heavy outlays for transporting specie,
and the dispersal of reserves, or the considerably larger
reserves which would be needed, were they subjected to
this obligation, lent a certain merit to their contention.
What the banks were doing, and wished to keep on doing,
was to date notes at the principal office and to conduct
branches merely as offices of discount and deposit which
would pay out, as circulation was needed, the notes of the
parent establishment.
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Instead of amending the Commercial Bank's charter in
the manner proposed by the imperial authorities, the
legislature of Upper Canada, after receiving the report of
a committee charged with considering the question in all
its bearings, adopted an address to the King, deploring the
exercise of the royal veto and praying that the bank acts
might stand as they were. Objection to any other course
was offered, not only because of the confusion and distress
which would follow the disallowance, but also because of
the undesirability of imperial interference in what the
Canadians were pleased to consider an entirely local affair.
In acquainting the lieutenant-governor, in May, 1834, °f
the King's purpose not to disallow the acts, the secretary
of state for the colonies justified this decision by the long
time the acts had been in force, the excellent practice of
the banks, and the inconvenience likely to follow any other
course. But at the same time he took care to insist upon
the right of the Crown to impose such conditions as
might be thought necessary for the regulation of colonial
banks.
Shortly before the Upper Canadian charters had drawn
the criticism of the colonial office, a new bank had been
chartered by the legislature of the lower province in answer
to a petition from merchants and others of Montreal. But,
notwithstanding its lack of provisions corresponding to
the original proposals of the committee for trade or to the
revised regulations of 1833, the act incorporating the City
Bank, met with no objection from Downing Street, except
on the score that the penalties provided against counterfeit and embezzlement were too severe. When this fault
was corrected, the act was approved. The home authori27




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ties, consequently, were more or less exposed to the
charges of inconsistence which the outraged Upper Canadians freely made. But while the first effort to impose
limits to colonial autonomy in the matter of banking was
not insistently carried through, it proved possible in the
end to subject Canadian banks, not only to the restrictions
already cited, but also to additional regulations considerably more comprehensive and distinctly better devised.
The City Bank was not allowed to begin business until
£40,000 of capital, out of £200,000 authorized, had been
paid up and was in the actual possession of the corporation. Notes for less than £1 5s. ($5) currency, were
limited to a sum not greater than one-fifth of the capital
stock paid up. Notes for less than 5s. were forbidden.
The total debts, as usual, were limited to thrice the capital
stock paid up, over and above such sums as might be
deposited with the bank for safe-keeping. The charter
was forthwith to cease and determine if at any time the
circulation should exceed the limit thus set by the act, and
the president, vice-president, and directors accessory to an
overissue were made personally liable. The bank, finally,
was required to furnish under oath, whenever the governor
or either branch of the legislature required it, a statement
of its condition in the form of a balance sheet. This form
of statement, borrowed from Massachusetts legislation,
was first adopted in 1830 at the time the charter of the
Bank of Montreal was continued until 1837. Together
with like new restrictions upon note issue, and the penalty
for overissue, the requirement was further embodied in
the act of 1831, renewing the charter of the Quebec Bank,
and permitting the increase of its capital to £225,000.
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Except for an act of 183G, continuing the charter of the
Quebec Bank for one year, the City Bank's charter was the
last banking measure to pass the legislature of Lower
Canada. This singular restraint is not to be explained by
any failure of Lower Canada to share in the speculative
expansion of the time. It was due rather to the opposition of the legislative council, where the influence of banks
already chartered was strong, to the establishment of new
ones, and to the hostility of the French in the assembly
to the enactment of charters in the interest of English
proprietors. The assembly was further influenced by the
circumstance that in 1835 a partnership en commandite
had been formed by a number of French Canadians and
opened for the business of banking, although without
legislative sanction. The growing bitterness and intensity
of the political controversy served but to enhance the
favor with which the French Canadian members viewed
the venture of their compatriots, and to strengthen their
determination to keep the field as clear as possible of
further competition.
When the bank charters expired, June 1, 1837, the corporations created by them continued their business at
first under temporary charters extending their existence
for a year, obtained from the Royal Government, or under
reversion to articles of association such as those by which
they were governed in 1817-1822. Thus the Bank of
Montreal shareholders, although a royal charter had been
obtained at considerable expense, sold out their bank to
an association of practically identical proprietary and proceeded to open subscription books for a quarter of a million additional capital, whereby the whole stock would
S. Doc. 332, 61-2

3

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be increased to £500,000. But in 1838 and 1839 aU
three of the banks obtained short-term charters frotn the
special council which had succeeded the constitutional
government of Lower Canada upon the outbreak of the
rebellion of 1837. These measures made no change in the
obligations or the privileges previously confirmed to the
banks, apart from authorizing the incr ease in the stock
of the Bank of Montreal.
In a time of grave political disorders, culminating in
armed resistance to established authority, the passing of
banking measures is generally limited to the absolutely
indispensable. It was certainly the case in Lower Canada
in the trying years 1837-1839. Even when, six months
before the rebellion broke out, the first suspension of
specie payments was decided upon by the banks, it was
undertaken without authority from the government.
Whether or no the suspension was justifiable must always
be a moot question. At the time and to those chiefly
concerned it seemed proper enough, if for no other purpose than to safeguard the banks' stores of specie against
an imminent drain to the United States, and to prevent
too severe and sudden a contraction in circulation and
discounts. The statistics of the two years, which are rather
full, show that, rather than obtaining an appreciable
expansion of loans, the public were subjected to considerable contraction, and that in procuring specie for
the payment of duties or exchange for the settlement of
obligations abroad they were obliged to pay as high as
13 per cent premium. The average discount upon suspended bank paper through 1837 was 6% to 7 ^ per cent;
in 1838, about 2 per cent.
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The first suspension in Lower Canada lasted from May,.
1837, to June, 1838; the second, brought on by a renewed
resort to arms by the disaffected element, from November, 1838, to June, 1839. For the second suspension the
banks had the authority of an ordinance of the special
council. During the term of the suspension banks were
forbidden to issue notes in excess of their paid-up capital
stock or to pay dividends. Another measure, indirectly
due to the disturbed financial condition both of the Canadas and of the United States, which the special council
passed at this period, was directed against the unauthorized issue of notes under £5 currency and the issue, howsoever, of notes for less than 5 shillings currency.
The discount upon bank notes had led to the export of
much of the country's small change, and resort was had
anew to the old plan of merchants' tons and due-bills for
small sums. The suspension had also furnished a chance
after their own heart for a number of irresponsible persons
to put into circulation, remote from their pretended
domiciles, the notes of banks which had no existence under
the law. It was mostly in the western United States that,
trading on the favorable reputation of the chartered
Canadian banks, these operators sought their victims out,
and it was generally a Lower Canadian town to which
they imputed the home of their banks. By redeeming^
as a preliminary, a few of the fraudulent notes at the pretended head office, or at some temporary office in New
York or Chicago, they got enough credit for their paper
eventually to float considerable sums. No less than
seven such ventures were known in 1837, and most of
them, though frequently exposed, kept going until the
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second resumption in Lower Canada put the value of their
pledges to too severe a test.
The ordinance of the special council limited the issue
of notes for less than £5 to persons or banks having a
license from the government, and it was evidently the
purpose to confine these licenses to companies having
royal or provincial charters, or other recognized standing.
Penalties, triple the value of the paper concerned, were
provided against issues for less than £5 not in accord with
the ordinance, and for issues less than 5s., a penalty of £5
for each offense.
Before it had been settled whether the Commercial
Bank's charter would be allowed to stand, there began, in
Upper Canada, an insistent agitation for numerous additional banks. Those already established also appealed
for authority to increase their capital stocks. The Reformers, as the party opposed to the family compact
called themselves, were strong enough in the assembly to
prevent favorable action upon a petition of the Bank of
Upper Canada, but the Commercial Bank was permitted
by an act of 1835 to open books for an additional £100,000.
The subscriptions for this, the books being closed after
one day, amounted to £1,937,125. The only regulations
of the committe for trade incorporated in the act permitting this increase were the limitation of directors'
borrowings to one-third the total discounts and the prohibition of loans on the bank's own stock. The same
year one further incorporation was granted, this to the
Gore Bank of Hamilton. A clause of its charter, unlike
any in those theretofore passed, forbade any incorporated
company to hold shares in the bank, except they had been
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conveyed to such company in payment of debts to it
previously contracted. In such case the holder was not
to be entitled to vote upon the stock for the election of
officers. Furthermore, there was imposed upon the
shareholders, for the first time in any bank charter, either
of Upper or Lower Canada, the double liability for which
the colonial authorities had contended. "The shareholders of said bank," ran the charter, "shall be respectively liable for the engagements of the company to the
extent of twice the amount of their subscribed shares,
including the amount of said stock held as aforesaid."
To enforce this liability the directors were authorized to
sue. If, in case of failure, the shareholders failed within
three months of the proper time to appoint directors, or
if the directors neglected or refused to call in the sums
for which the shareholders were liable, the government
was to have the power to appoint five commissioners to
close up the bank.
Neither the Commercial Bank act nor the Gore Bank
charter imposed the penalty of charter forfeiture for
suspension of payment for periods exceeding sixty days,
consecutively or during the year, nor were frequent
periodical statements required. Commenting upon this
failure to incorporate all the regulations suggested by the
Home government, the secretary of state for the colonies
wrote that, had he been governed by considerations of the
commercial policy alone, he could not have advised the
confirmation of the acts in the form in which they were
passed. The introduction of the double liability into the
Canadian legislation had been anticipated by Nova Scotia
in 1832, when the Bank of Nova Scotia was chartered,
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and by New Brunswick in 1834, in the act incorporating
the Central Bank of New Brunswick.
Thirty-odd bills, pertaining to banking, ¥/ere brought
before the legislature of Upper Canada between 1831 and
1840. It was proposed " t o regulate banking" and " t o
regulate the business of banking" in 1831; " t o make
general the privilege of banking," in 1833-34; a n ^ " t o
establish an uniform system of banking," in 1835. A
measure "for the better regulation of incorporated and
joint stock banks" received attention in 1835 and one
" for the better regulation of banks and for protecting the
interests of the public" in 1836; another, " t o require
banks and other corporations to pay a part of their profits
to the receiver-genera!," in 1836-37. None of these
thirty measures passed. Many of the proposals were
brought forward by the Reformers, who affected to believe
in the general principle, widely advocated in the states to
the south, of opening the business of banking under some
uniform scheme of safeguards to whomsoever should wish
to enter it. But, in 1833, the house of assembly actually
passed a bill to enable the receiver-general to issue bank
notes chargeable on the public, and, in 1835, a select
committee, after prolonged deliberation, reported to the
house in favor of the establishment of a provincial bank
on the basis of loans guaranteed by the province. Eleven
unsuccessful petitions for incorporations were presented
by divers groups of promoters or of persons wishing to
stake capital in banks between 1830 and 1840. Most of
these, of course, were presented prior to 1837. It was
truly a time of overtrading, land speculation, commercial
expansion, increased consumption, excessive borrowing,
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and undue conversion of floating capital into fixed forms.
Through the whole province and among both parties there
developed a confidence, a veritable faith in the magic
power of more banks, or of more bank capital, as a certain
instrument wherewith to augment wealth and to put the
colony's prosperity on a basis sound for all time. Three
or four other petitions were, or had been, before the
Assembly at the time the Gore Bank obtained its act, and
in the following )?-ear the Assembly was induced to pass a
number of charters, only to see them rejected by the
legislative council. In the session of 1836-37 no less than
nine new charters were passed by both branches of the
legislature.
By this time, fortunately enough, the imperial authorities had seen "only too much reason to anticipate the
rapid approach of a period in which the multiplication of
ill-secured representatives of coined money would involve
the British-American colonies in the most serious financial
difficulties." Under date of August 31, 1836, the colonial
office instructed the lieutenant-governor not to permit
any act, ordinance, or regulation, touching the circulation
of promissory notes, or the local legal tender, to come into
operation without having first received the royal sanction
conveyed to him by the secretary of state. For some ten
years previous the royal assent had been accorded by the ,
lieutenant-governor to measures against which there lay
no peculiar objections at the close of the session in which
they were passed. Together with acts permitting additions to the stock of the three existing banks, the nine new
charters authorized the increase of the banking capital of
the province from £500,000 to £4,500,000 currency, the
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increase of issue privileges from £ i ,500,000 to £13,500,000.
One project was to make the province a much larger shareholder than ever in the Bank of Upper Canada,. The
colony was supposed at that time to have about 400,000
of population. None of these bills was disallowed by the
home government, but all were sent back to the legislature for reconsideration. Meanwhile the speculative
collapse of 1837 occurred in the United States, and the
ardor of the Upper Canadians was somewhat chilled.
Not one of the reserved bills was reenacted. The peculiar
occasion for them having passed, the instructions of the
colonial office for the reservation of currency measures
were withdrawn at the same time as a new set of regulations for incorporation into colonial bank charters was
recommended to the local legislature.
While the prospect of obtaining new charters was still
obscured by the political jealousies of the province, efforts
were begun toward introducing into Upper Canada joint
stock banking without incorporation, after the English
model. Four of these organizations were formed between
1834 and 1836. The proposed or intended capitals were
ambitious, but the capital paid up of the whole group was
reported in June, 1837, as but £98,023, the note circulation, £17,148, and the loans and discounts at £143,718.
An increase of such ventures was stopped by an act of
1837, making unauthorized note issue a misdemeanor,
but excepting from the prohibition the four banks already
established. One of the four—the People's Bank—was
bought by the Bank of Montreal and used as the medium
of its operations in Upper Canada until, after the union of
the provinces, it could work that territory in its own name.
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The Agricultural Bank failed in 1837 (November). The
Niagara Suspension Bridge Bank appears gradually to
have wound up its business after 1841; the Farmers*
Bank, on the contrary, continued its operations in a
modest way at all events until some time after 1849.
One other new bank appeared on the scene in this
period and began business, not only in Upper and Lower
Canada, but also in Nova Scotia, New Brunswick, and
Newfoundland. This was the Bank of British North
America, founded for the most part upon British capital,
by British investors interested in the possibilities of
profit to be had from assisting the development of the
North American colonies. At first it was merely a copartnership or association, working under a deed of
settlement. It thus became necessary to obtain from
each province an act enabling the proprietors to sue and
to be sued in the name of an officer domiciled in the
province, and permitting operations which might otherwise be prohibited by legislation against unauthorized
banking. To this, after some preliminary conciliation of
the local banking interests, there was offered little objection in most of the provinces, the prospect of a substantial addition to banking resources being of itself
ample to win general favor for the new venture. Five
of the North American offices first projected were
opened early in 1837, a number of them being provided
with local advisory boards. Three more were by way of
being opened shortly and four others were in preparation. In 1840 the bank obtained a royal charter, one of
the conditions being that the whole capital stock of
£1,000,000 sterling should be fully paid up. Curiously
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enough, this charter specifically confirmed to the proprietary the privilege of a liability limited to the amount
of their subscriptions to the stock.
Together with certain of the Upper Canadian jointstock banks, the Bank of British North America was
largely responsible for the introduction of the practice of
paying interest upon deposits. And, although the plan
had been followed to some extent by the Commercial
Bank of the Midland district, this bank's officers also
brought into wider use a method of lending understood
by the colonists as the Scotch system of cash credits—a
plan whereby, upon proper security being given, a borrowing customer overdrew his account and paid interest
upon his debit balance. It might be doubted whether in
any community where the value of land at forced sale is
not reasonably near to what will have to be paid for it
in private treaty the Scotch system of cash credits is a
practicable plan. But however this phase of the newcomer's policy turned out, it is beyond question that the
bank gave valuable service to the country in which it
worked, not only by a considerable contribution to the
loan fund, but also by the introduction of a large staff
of officers trained in the best traditions of banking in
Great Britain. In 1868 no less than eleven sometime
officers of the institution were filling the chief executive
positions of Canadian banks.
The banks of Upper Canada did not follow the example
of their neighbors, either of Lower Canada or of the
United States, in suspending specie payments in the
spring of 1837. Authority for a suspension was granted
in the form of a stay law passed early in July, but this
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law limited note issues to the amount of paid-up capital
stock and forbade the sale of specie during suspension.
All the banks maintained specie payment until September. On the 29th the Commercial Bank took advantage
of the act. During this term and until it also, in March,
1838, suspended, the Bank of Upper Canada effected a
radical contraction in its discounts and practically ceased
to make new loans. It sought and found good profits
in the trade in specie and exchange, its position as banker
to the provincial government and to the commissarygeneral of the imperial government giving it exceptionally good command both of coin and of bills. As long
as exchange was at a stiff premium its interest was to
maintain payments. When exchange fell, as preparations for an early resumption in the United States proceeded, the bank's interest was reversed, and a large
note issue, together with a transfer of funds from New
York to London, became the thing. From the legislature, accordingly, where the Reformers had lost all
power or prestige through the hasty and ill-advised
armed uprising of December, 1837, there was obtained
an act permitting disposal of specie during suspension
and issue of notes to twice the amount of the paid-up
capital stock. The suspension of the Gore Bank was
authorized shortly after that of the Bank of Upper
Canada. In May, 1839, ^ e term of the stay law was
extended until November 1, 1839, a n ( i & w a s n ° t until
that date that the Upper Canadian banks resumed
redemption in coin.
The crisis of 1837 was as severe in Upper Canada,
probably, and the results as disastrous to the community
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generally, as anywhere on the continent. Much distress
was caused by the contraction in discounts, and many a
trader, prosperous at the high tide of the boom, found
himself in dire want. The collapse in land values was
of the most serious description, serving not only to render
worthless the security of many engagements entered
directly or indirectly upon the pledge or possession of
real estate, but also to prostrate confidence in the colony's future. Immigration fell off to a nominal volume;
emigration to the United States was begun by alarming
numbers of disappointed settlers. All of the banks
found themselves burdened by large lockups for which
the sole guaranty of payment was badly depreciated land
or the faith of sorely crippled borrowers of accommodation
loans. Unquestionably the expenditure upon imperial
account—outlays necessitated by the political ferment
and disorders of the end of 1837—helped considerably to
ease the condition both of the community at large and
of the banks. Considering how thoroughgoing was the
speculative inflation which preceded the collapse, it is little
short of remarkable that none of the colony's chartered
financial institutions went down in complete wreck.
Had it been possible or permissible in 1835-1837 to float
more of the projects which were put forward as the
colony's economic salvation, it is not to be doubted that
the subsequent confusion would have been indefinitely
more costly and long drawn out.
As it was, the provincial government fell into nearly as
difficult straits as the commercial and agricultural interests.
One outcome of this situation was a bill to authorize the
issue of bills upon the credit of the province, passed by
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the house of assembly early in 1838. The plan was for
the issue of small bills, payable after a term, but receivable for public dues, wherewith to continue the public
works, augment the shrunken circulating medium, and
revive the colony's trade. The legislative council threw
the measure out. The following session, however, both
houses passed an act " t o authorize the issue of bills of
credit." They were to be for £1 currency each, payable
twelve months after date, chargeable on the provincial
revenue, and of a total amount not to exceed £250,000.
The lieutenant-governor reserved the measure for the
consideration of the authorities at home. The colonial
office advised against the allowance of the act. "The
issue of such an amount of small inconvertible paper
money as a resource for sustaining the public credit,"
wrote the colonial secretary, Lord John Russell, "is not
to be justified, even by the present exigency of public
affairs."
In 1840 the legislature of Upper Canada decided to dispose of the government stock in the province's first
chartered bank. The 8,000 shares were accordingly sold
for £25,250, the par value being £25,000. In eighteen
years the dividends and bonuses upon this early investment had amounted to £38,315.

41




III.—1841-1866.
To temper the race jealousies in the lower province,
to allay the political discontent in the upper one, better to order the finances of both, and to establish a
firm, impartial, and vigorous government throughout
the territory, it was decided in 1839 and 1840 to unite
the two Canadas into one province. The union of
Upper Canada with Lower Canada and the creation of
the new Province of Canada became effective on the 10th
of February, 1841. To the new province was accorded
the boon of what was locally termed ''responsible government "—government, that is, by a committee of the
parliamentary majority, acting with a measure of autonomy theretofore persistently withheld by the authorities
overseas.
Under the jurisdiction of the new legislature there
naturally came the ten banks, the early history of which
has already been sketched. Exclusive of the Bank of
British North America, their reports of condition about
July 1, 1841, showed a total capital (paid up) of £1,485,881
currency, note issues of £871,423, specie for £341,059,
deposits of £626,292, and discounts of £2,693,723.

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In detail these reports showed:
Capital.

Total
specie.

Deposits

Discounts.

£227,048

£125.175

£234.686

£936, 553

108,572
58,211

20,378
8, 170

So. 700
25.360

340,391
183,378

45.122
100,000
75.000

205,429
142,849
i4,35o
77.177
37.787

82,890
55,125
7.867
26,385
15,069

98,671
144,093
3,079
14,481
55,219

461,615
406,927
54,281
165,236
145,362

1,485,881

Montreal Bank

Circulation.

^£500,000

Bank.

871.423

341,059

626,292

2,693,723

0 690,360

50,564

45,828

184,899

575,152

50,000

City Bank

200,000

H5.759
Commercial Bank of the
Midland District _
Bank of Upper Canada
Farmers' Bank
Gore Bank
Quebec Bank
Total
Bank of British
America

200,000
200,000

North

o Pounds sterling.

Three of the Lower Canada charters were about to
expire, and there were several applications for increased
capital in preparation, as well as one petition for a new
bank.
At the outset, the question of the revenue of the new
province was of more pressing importance than the question of banks. But among the suggestions advanced for
the betterment of the revenue there was one which
threatened the most important source but one of all the
banks' supply of funds. That was the note issue against
general assets from which, in conjunction with their
shareholders' capital, the banks derived means equal to
seven-eighths of their loans and discounts. The new
governor-general, Lord Sydenham (formerly Charles Poulett Thompson), a friend of Lord Overstone, and a champion of the " currency principle," which was to become
the basic theory of Peel's bank act of 1844, proposed that
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the issue of circulating paper be undertaken by the province. What he thus sought was, first, a paper currency
perfectly sure of convertibility into the value it represented
and free from injurious fluctuations; second, the whole
profit of the issue for the benefit of the province, a profit
estimated at £30,000 to £35,000 yearly, and capable of
being doubled or even trebled in time; third, the immediate acquisition of not less than £750,000 for expenditure by the province upon public works. To reach these
ends, Lord Sydenham suggested the establishment of a
provincial bank of issue, which, under the management
of three commissioners, was neither to discount, receive
deposits, or deal in exchange, but in which should be
vested the sole right of issuing notes payable on demand
for sums of $1 and upward, to a total of £1,000,000.
Any issue in excess of £1,000,000 was to be undertaken
solely to redeem notes or to buy bullion or coin. Onefourth of the proposed issue was to be covered by bullion
or coin, three-fourths by government securities bought
by the bank or paid into it. Part of the interest could be
used to meet expenses of management; the remainder
paid into the provincial revenue. Corollary to these
features was the proposal to prohibit the issue of notes by
banks after March 1, 1843; such charters as expired before
that date were to be continued with power to issue until
then, but without it thereafter. Banks whose corporate
existence had already been given a longer term, were to
be allowed 2% per cent on their circulation j^early, from
March 1, 1843, till the expiry of their charters.
The chairman of the select committee on banking and
currency, Francis Hincks, became a ready convert to the
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governor-general's views, and succeeded in inducing his
committee to report resolutions looking to the incorporation of the project into the law of the province. But
from the assembly's view, there were altogether too many
objections to the plan. One, as significant as any, was
the circumstance that in any economy the chief products
of which come from the soil or the forest, a currency of
fluctuating volume is no less desirable than wide seasonal
variations in the need for a circulating medium are inevitable. From the banks' view, the adoption of the plan
meant the loss of a lucrative source of profit, and the
necessity of closing branches so as to reduce their lending
business to smaller bounds. In the assembly the banking
interest was distinctly strong. Upon this occasion, it
was backed by the borrowing interests, or, at any rate, by
those who looked to the banks for loans. Such persons
feared that if the plan went through it would cause a
radical diminution in the available resources of those who
had to lend. Of some influence, too, was dread lest a
provincial bank might unduly strengthen the executive's
hand. Although the resolutions were proposed as a government measure, the assembly decided that it was inexpedient to establish a provincial bank of issue or to issue
in any way a paper currency on the faith of the province.
It was twenty-five years before the promises of the province were issued in substitution for money systematically
and in any considerable volume. When these notes were
assumed by the Dominion, four years later still, the chairman of the committee on banking and currency of the
union was become the confederation's minister of finance.
The principles which he then laid down for the regulation
S. Doc. 332, 61-2

4

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of a government issue of circulating paper were those
underlying the rejected measure of 1841.
Partly to make up for the revenue lost by refusing Lord
Sydenham's expedient, a tax of 1 per cent per annum was
laid upon bank notes issued or circulating in the province.
This proved by no means an equivalent, although in
1841-42 the annual revenue reached £9,560 and in 1845-46
ran up to £15,899. Another general measure passed at
this time extended to the whole province the powers of
banks chartered by either one of the two from which the
union was made up. It was stipulated merely that notes
of Upper Canada banks issued in Lower Canada should
bear date at the place of issue and be payable there as
well as at the principal office of the bank.
A revolution in the colony's traditional system of banking having been averted by the decision not to withdraw
the issue privileges from chartered companies, action upon
petitions for charter renewal and for increased capital
became urgent. Petitions considerably to increase the
stocks of the old Upper Canada banks and to incorporate
two new ones had found approval in the legislature of that
province the last session before the union. The bills
passed to this end fell before the veto of the colonial office,
a veto prompted by the continuance in this legislation of
the permission to issue notes for less than £ 1 each.
Apart from the bank of issue proposed by Lord Sydenham and rejected by the assembly, three other plans were
under discussion. A provincial bank in which both individuals and government held shares and to which should
be granted an exclusive right to issue paper for circulation, while it was allowed to make discounts and to take
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deposits like other banks, was believed to be too monopolistic in its tendencies and fraught with grave political
dangers. The adoption of a general banking law, under
which anyone complying with the statutory restrictions
might enter the business, was condemned by the experience with such measures in the United States, by the
multiplication of small local banks to which it led, and by
the excessive issues, as well as the weakness and deficient
responsibility shown by such banks in times of stress.
Remained the third plan, the continuation of the existing
system of chartered banks with comparatively large capitals, a system at times liable to put out too many notes,
and subject occasionally to undesirable fluctuations, but
nevertheless to be preferred. The select committee on
banking and currency accordingly recommended the extension of expiring bank charters under uniform regulations and restrictions, most of which had been suggested
by Her Majesty's principal secretary of state for the colonies (Lord John Russell) with the expectation that provision for their observance should be made in all colonial
bank charters. Since these regulations, together with the
supplementary instructions transmitted by William Ewart
Gladstone, then colonial secretary, in 1846, contain the
elements of any lasting improvement or permanent progress made by Canadian bank legislation between 1841 and
1867, they are worth repeating here in some detail:
''First. The amount of capital of the company to be
fixed; and the whole of such fixed amount to be subscribed
for within a limited period, not greater than eighteen
months from the date of the charter or the act of incorporation.
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" Second. The bank not to commence business until the
whole of the capital is subscribed and a moiety a/t least
of the subscription paid up.
" Third. The amount of the capital to be paid up within
a given time from the date of the charter or act of incorporation, such period, unless under particular circumstances, to be not more than two years.
"Fourth. The debts and engagements of the company
on promissory notes or otherwise not to exceed at any
time thrice the amount of the paid-up capital, with the
addition of the amount of such deposits as may be made
with the company's establishment by individuals in specie
or government paper.
"Fifth. All promissory notes of the company, whether
issued from the principal establishment or from the branch
banks, to bear date at the place of issue and to be payable on demand in specie at the place of date.
"Sixth. Suspension of specie payments on demand at
any of the company's establishments for a given number
of days (not in any case exceeding sixty) within any one
year, either consecutively or at intervals, to forfeit the
charter.
" Seventh. The company shall not hold shares in its own
stock nor make advances on its own shares.
"Eighth. The company shall not advance money on
security of lands, or houses, or ships, or on pledge of merchandise, nor hold lands or houses, except for the transaction of its business; nor own ships or be engaged in
trade, except as dealers in bullion or bills of exchange;
but shall confine its transactions to discounting commer-




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cial paper and negotiable securities, and other legitimate
banking business.
' 'Ninth. The dividends of the shareholders are to be
made out of profits only and not out of the capital of the
company.
"Tenth. The company to make and publish periodical
statements of its assets and liabilities (half-yearly or
yearly), showing, under heads specified in the annexed
form, the average of the amount of its notes in circulation
and other liabilities at the termination of each week or
month, during the period to which the statement refers,
and the average amount of specie or other assets that
were available to meet the same. Copies of these statements are to be submitted to the provincial government,
and the company shall be prepared, if called upon, to
verify such statements by the production, as confidential
documents, of the weekly or monthly balance sheets from
which the same are compiled; and also to be prepared,
upon requisition from the lords commissioners of Her
Majesty's treasury, to furnish in like manner such further
information respecting the state or proceedings of its
banking establishments as their lordships may see fit to
call for.
"Eleventh. No by-law of the company shall be repugnant to the conditions of the charter or act of incorporation or the statutes of the province.
"Twelfth.
* * * The provisions of charters or
acts of incorporation should be confined as far as practicable to the special powers and privileges to be conferred
on the company, and the conditions to be observed by the
company, and to such general regulations relating to the
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nomination and power of the directors, the institution of
by-laws, or other proceedings of the company as may be
necessary, with a view to public convenience and security.
"Thirteenth. No company shall be allowed to issue
promissory notes on demand for an amount greater than
its paid-up capital.
Form of return.
Return of the average amount of the liabilities and assets of the Bank
of
during the period from
to
Promissory notes in circulation not bearing interest...
Bills of exchange in circulation not bearing interest
Bills and notes in circulation bearing interest
Balances due to other banks
Cash deposits not bearing interest
Cash deposits bearing interest

£

Total average liabilities
Coin and bullion
Landed and other property of the corporation
Government securities
Promissory notes or bills of other banks
Balances due from other banks
Notes and bills discounted or other debts due to the corporation not included under the foregoing heads
Total average assets

"

Subject to restrictions of this tenor, to the limitation
of the small-note issue to one-fifth the paid-up capital
stock, and of directors' discounts to one-third of the total
discounts, to the prohibitions of loans to a foreign state,
of voting by alien shareholders, or of holding stock of
other banks except when taken for bona fide debts, to the
injunction to cease discounting during suspension, and
finally to the double liability of shareholders in case of
failure, the charters of all the Lower Canada banks were
continued to 1862. For these corporations the most
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radical innovation, of course, was the double liability of
shareholders, and next to that, probably, the limitation
of note issues to the amount of the paid-up capital stock.
The Bank of Montreal was permitted to add £250,000 to
its half million of capital and the City Bank £100,000 to
its £200,000, while the increase of the Quebec Bank's
stock to £225,000, first planned in 1837, was confirmed
on condition that the additional shares should be fully
paid up by November 1, 1844. Further, a charter was
granted to the Bank of the Niagara District at St. Catharines, the capital for this project being fixed at £100,000.
All the stock of the new bank was to be subscribed for
and half of it paid in before the bank began business. For
transgression of the conditions of issue and for the suspension of specie payment for more than sixty days consecutively or through the year, the penalty provided in
all of these acts was forfeiture of charter.
The following session, measures were passed again with
the purpose of extending till 1862 the charters, and of
increasing the stock of the Commercial Bank of the
Midland District and of the Bank of Upper Canada.
Acts passed with this in view in the same session as those
for the Lower Canada banks failed of the royal assent.
Each was permitted to call up an additional £300,000
within five years. How limited at this time was the
supply of capital for banking enterprise may be judged
from the fact that in 1846 the banks procured the extension of the term for paying up the new stock to 1850,
while the Bank of the Niagara District, even with the
permission it shared with the other Canada West banks
to set aside a proportion of "English stock" transferable
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in London, never found the capital required to begin
business.
Not all of the regulations framed by the British lords
of the treasury in 1840, as norms for colonial bank legislation, were adopted by the Canadian committee on banking and currency. The document received from the
colonial office carried a prohibition of notes for less than
£1 each. This both the committee of 1841 and the legislature they advised had ignored. Working as they
were, with an arbitrary money of account, the Canadians
had tolerably sound reasons for retaining the dollar
notes. The only coins of nearly equivalent value were
the Mexican, Spanish, and South American dollars, and
those coined in the United States. In practice, Canada
was thrown almost altogether upon the Philadelphia Mint
for her supply of silver coin. In practice, too, so far as
can be judged from examples of the early issues wilich
have been preserved, notes even for £1 currency were so
engraved as to have the $4 value considerably the more
conspicuous. The pound sterling was ordinarily rated at
£1 4s. 4d. currency. The British shilling had long passed
for is. 3d. currency in Upper Canada; in the lower province it was rated at but is. id. The important trade
relations between Canada and the United States, and the
considerable note circulation the Canadian banks enjoyed
in communities just beyond their southern borders, made
it essential that, in some respects at least, the monetary
units of the two countries should be alike. The familiarity of the people with the decimal system and well-nigh
every consideration of convenience in business or ease in
replenishing stores of specie pointed to the eventual
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assimilation of the Canadian currency system to that of
the United States. Inasmuch as silver was underrated
by the American legislation of 1834, the silver dollar had
become worth intrinsically 5s. id., Halifax currency.
The new eagle, howrever, had been valued by Canadians
at £2 1 os. and was the only important coin of any minting
rated at even multiples of 5s. There arose in this circumstance, therefore, a further reason for the Canadian
circulation of dollar notes.
The imperial government, guided still by the doctrine
that the smaller exchanges should be made in coin, were
anxious that the colonies should enjoy the benefits of a
currency founded on a sound and metallic basis, and avoid
the evils of a note circulation of small denominations,
which could only subsist by the exclusion of specie. But
they forbore to recommend adverse action upon the bank
charters on the grounds that the measures had been fully
considered by the legislature and governor-general and
recommended by both; that a refusal to confirm them
might cause embarrassment, and that the legislature had
reserved the power of regulating the note issue in the
future. When the act to incorporate La Banque des
Marchands was presented for the royal assent, in 1846*
and the obnoxious provision for a limited issue of dollar
notes was found in the act, the colonial office sent the
charter back to the governor-general with an energetic
renewal of the criticism of 1842, but with a collateral
promise that, if the executive council thought a change
inexpedient, assent would not be withheld. The Canadians
stood by their dollar notes and the charter became effective by proclamation early in 1848, although none of the
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privileges accorded by this particular measure was ever
used.
While the revival after the crisis of 1837 had been slow
in beginning, marked and general improvement in commercial conditions and a lively demand for capital
appeared in 1844. The movement took the usual course
of an economic expansion, although in Canada the development along speculative lines was carried to no such
extremes as in the British railway mania. Still, shrewd
observers complained of excessive importations in 1847,
and viewed the great increase of staple exports as something most unlikely to endure. Curiously enough, unless
the circumstance is to be explained by the dearth of free
capital seeking investment and by the difficulty oldefr
banks found in obtaining subscription and payment for
new shares, there was no widespread agitation for new
bank charters. The French partnership in commendam,
Viger, Dewitt et Cie., was granted a charter, it is true, in
1844, under the style of the Banque du Peuple, and with
an authorized capital of £200,000. The act recognized
the unlimited liability of the 12 principal partners and
the limitation of the liability of the other partners or
commanditaires to the amount of their subscriptions.
Apart from the Banque du Peuple and the Banque des
Merchands already cited, no new bank was authorized
until the session of 1847, and this, the District Bank of
Quebec, failed to get the money wherewith to start business. In 1847, however, bills passed the legislature permitting additions, £650,000 in all, to the capitals of the
Quebec and the City banks and to that of the Bank of
Montreal.
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The brunt of the crash in England, so far as it affected
the North American possessions, fell upon Lower Canada
or Canada East, for it was the merchants in Montreal and
Quebec whose connection with Britain was the closest, by
reason of their dominance in the export trade. Commercial failures in number, a great falling off in overseas
shipments of timber, wheat, and produce, heavy reductions of discounts by the banks, and a sharp contraction
in their circulation made 1848 a hard year. How severely
the banks were affected appears in the losses written off,
and the reductions of capital effected shortly after.
More than £206,000, most of it in Canada East, was written off capitals and rests in 1848-49, and dividends generally reduced by one-fifth to two-fifths from the rates
paid before the crisis. Some of these shrinkages, beyond
question, represented part of the losses suffered by Canada at the beginning of Britain's fiscal policy of free trade,
and the consequent abolition of preferential advantages
in the British customs for Canada's lumber and timber,
wheat and flour.
So great was the government's need in 1848, and so
hopeless the borrowing of money abroad, that resort was
had to the issue of debentures upon the credit of the
province. A total issue of £125,000 was authorized, but
nothing said as to form, amount, or due dates of the promises. Interest, it was stipulated, should not exceed 6 per
cent. The government prepared the debentures as notes
of the form and appearance of bank notes for sums as
low as $10, made them payable in one year with interest
at 6 per cent, and receivable for public dues. A step not
contemplated by the act was the reissue of the paper
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after it had once been paid into the public chest. For
this, the government took indemnity the following year,
and at the same time obtained authority for a new issue
in debentures for less than £10, payable on demand or
after any date, with or without interest. As it happened,
the authority thus granted was not used, and the debentures of 1848 soon disappeared from circulation.
For the oppressive sequels of the difficulties of 1847-48,
rather an unjust proportion of blame was laid at the doors
of the banks. In point of fact, much of the security now
offered them was inferior, the banks' resources were more
or less crippled, the volume of business legitimately in
need of credit had fallen off, and the prices of Canadian
exports could not well be expected to rise until recovery
from financial and political disturbance across the ocean
permitted consumption there to return to something
nearer its normal volume. Those most affected by the
situation in Canada, however, were disposed to look for
explanations nearer to hand, to ascribe their embarrassments to agencies actuated by a will. Hence arose varied
complaints of the facilities accorded by the chartered
banks; hence there started anew a movement for the
provision of banking facilities by the geographical! plan,
a bank, that is, for each district or for every city and town.
The government of the day included among its members
a number of some-time advocates of the Upper Canada
scheme of 1835 for a provincial bank; others had favored
a general banking law; others yet, among them the
finance minister, Francis Hincks, had supported Lord
Sydenham's project for the monopolization of the issue
privilege by the state. For the time being, the credit of
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the province was none too good; neither was the government's command of funds all that could be desired.
Finally, across the southern border, the great State of
New York had abandoned the plan of chartered banks
empowered to issue notes against their general credit, and
as early as 1838 turned over to a system of note regulation, under which paper could be issued for circulation
only against specially pledged securities lodged with
officers of the State.
By dint of various amendments to the original legislation, devised as the defects of that measure appeared
from time to time, the free-banking law of New York
had become a practicable system of regulation. That
under it an economical banking organization was possible,
or that it possessed advantages equal to these of other
carefully thought-out schemes of banking law, would be
less easy offhand to concede and harder still to prove.
Neither is it in the least clear that the Canadian government was acting on the precept "like symptoms, like
cure." Indeed, the experience prior to 1847 ought to
have shown that what the country needed was not more
banks, but more capital to be put at the disposal of the
banks in the shape of deposits or stock. Furthermore,
the strength of the individuals of the Canadian system,
their comparatively small number, and the prudent
fashion in which they had handled their affairs, no less
than the way charters had been granted, left no room
for such reproach against these banks as lay against all
too many of the chartered or safety-fund banks of New
York and the charter mongering through which they
obtained their rights.
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If they had any, these considerations had no sufficient
weight against the prospect of bettering the market for
provincial funds, or the possibility that legislation of a
new sort would still the popular discontent with the
province's banks. The government brought down in
June, 1850, their plan for bond-secured notes in " a bill
to establish freedom of banking in this province and for
other purposes relative to banks and banking," which
was avowedly nothing more or less than a copy of the
free-banking act of the State of New York. The bill was
duly passed by both the assembly and executive council,
and in August received the royal assent.
In brief, this law confined the issue of notes intended for
circulation to chartered banks or persons thereto authorized by the act. None might be for less than 5s. Individuals, general partners, or joint-stock companies might
organize banks. The least capital permitted was £25,000.
Any bank formed under the act might have an office in
but one place and in but one city, town, or village. Articles of agreement in notarial form, showing the name,
place of business, capital stock, number of shares, names,
and residences of shareholders, and time when the venture
was to begin and end were made the basis of organization.
Filing such articles in designated courts of record incorporated the bank and limited the liability of shareholders to double their subscriptions to the stock—to the
original subscription, that is, and to an equal amount in
addition. As in New York, each bank was required to
keep in good faith an office of discount and deposit,
to keep on view a list of its shareholders or partners*
to make half-yearly returns to the government, and to
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submit to government inspection at the discretion of the
government. Liabilities in excess of thrice the paid-up
stock were forbidden the banks.
Banks thus organized could issue notes only after the
deposit with the receiver-general of the province of provincial securities for not less than £25,000 ($100,000) par
value, as pledge for the ultimate redemption of the notes.
Interest would be paid to the pledgor as it accrued. In
return for the bonds, the receiver-general was authorized
to turn over to the bank an equal amount of registered
notes, printed on paper selected by the government from
plates furnished by the bank. Such notes properly
signed became notes of the bank, payable in specie on
demand at the bank's office. So long as redemption was
maintained, the notes of a free bank were receivable for
customs and other dues to the government. Chartered
banks were permitted to surrender circulation rights and
obtain secured notes upon deposit of securities equal in
par value to the sum desired. Upon secured notes the
province levied no tax. Additional securities might be
deposited from time to time, or securities withdrawn, provided the sums so withdrawn were not less than £5,000*
and the nominal deposit of £25,000 were not impaired.
Should a bank suspend specie payment and fail to redeem, with interest at 6 per cent, its notes within ten
days after the requisition issued by the inspector-general
upon receipt of protested paper, that officer was charged
with the duty of closing the bank and winding up its
affairs, in case no valid excuse was offered for the default.
The first step in liquidation was to pay off the notes from
the proceeds of pledged securities. Remaining pro59




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ceeds were then to be applied to other debts of the bank;
but if the securities sold should not fetch enough to meet
the notes, other assets were to be applied to the purpose.
In other words, note holders were given a prior lien upon
all the estate of the issuing bank.
Partly in deference to criticism from Downing Street,
the free-bank act was amended the following year by the
requirement of monthly instead of half-yearly returns.
The obligation to maintain specie reserves at not less
than one-third of the notes outstanding, also suggested
by the lords of the treasury, was not imposed. Rather
than make the imported fashion of banking more difficult,
the legislature sought to attract the chartered banks to
the plan. An act was passed exempting from half the tax
on circulation for the three years next following such banks
as would restrict their circulation forthwith to the highest
amount shown in their last return, and at the end of
three years to three-quarters the average of 1849 and
1850. After the first three years, banks thus restricting
their issue were to be exempt altogether from the circulation tax, while during the whole term of the restriction
they might issue additional notes to the amount which
they might hold of coin, bullion, and debentures of the
province. Chartered banks were not required to deposit
with the receiver-general securities against which they
might elect to issue such notes. There was, to be sure,
provision made that in case of failure the proceeds of
bonds so held should be used solely for paying the notes,
but the fact remained that here was an earnest effort
making to extend the circulation of bond-secured notes
against which the legislature was providing for no special
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deposits of bonds. Two years later (1853) the method
of reckoning the tax on circulation was changed so that
1 per cent was collected from the chartered banks upon
merely the excess of issue over securities and specie on
hand. Chartered banks were also permitted by this act,
this time also without special deposit of the securities,
to issue their ordinary unsecured notes for so much in
excess of their paid-up capital stock as they had of specie,
bullion, or debentures of the province on hand.
Unless it were merely a fiscal purpose, the motive of
these amendatory measures would be hard to conceive.
The concession to the chartered banks certainly involved
a complete negation of the security principle of the original law, while the attractions devised to induce larger
holdings of debentures were altogether too slight to serve
that end. Had the government been determined to force
their free banking scheme to general adoption through
the province, a much better plan than anything tried
would have been to tax the chartered banks out of existence, or to refuse, as the legislature of New York had
refused, longer to continue their powers.
As a means to the diffusion of banking facilities the act
to establish freedom of banking did not prove a success.
The chief beneficiary was the Bank of British North
America, whose managers were enabled by this measure
to evade, legally enough, the clause in the bank's royal
charter prohibiting notes for less than £ 1 . Even three
years and a half after the act had become law, in December, 1854, there were but four banks working under its provisions. Of the total bond deposits, £287,125, that of the
British Bank stood for £162,125. The three free banks
S. D o c . 332, 61 • - 2 • • -

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proper had received notes of a value of £124,499 and had
£106,030 outstanding. The largest amount of notes
taken out under the act was reported late in 1855, £309,549; after that there was a steady diminution. The free
banks first organized, three of them, sought and obtained
charters in 1855. After that they retired as fast as might
be their issues of bond-secured notes. The only other
two companies organized as free banks began in their
turn to retire their paper and withdraw securities as early
as 1858, and by December, 1861, the free-bank paper
other than that of the British Bank in the hands of the
public had fallen to $25,440. Not until 1866, however,
was the law finally repealed.
The reasons for the failure of this experiment are not
far to seek. William Hamilton Merritt, who presented
the measure to the assembly in 1850 and believed to the
end that it was "the best system adopted in any country
from the beginning of the world to the present time,"
summed the explanation up in certain observations he
offered to the legislature in 1859. "Why did not other
banking companies seek charters under the free banking
act? Simply because they made more money under the
old system.'' This was no more nor less than the truth.
Once capital enough to start a free bank was brought
together in any community, it was necessary forthwith to
send that capital out of the community, in order to buy
the bonds required as an initial deposit against notes.
The notes came back, to be sure, but barring such small
interest as they earned on the bonds, the proprietors were
in exactly the same case with respect to the amount of
loanable funds at their disposal as they were before.
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They were worse off in this, that they were under obligation thenceforward to keep an office for discount and deposit and to be ready at all times to pay in specie aH
notes presented for payment.
In such circumstances, it would be difficult if not impossible to keep the whole of any one bank's note issue
in the hands of the public. Contrast now the position of
a chartered bank. Issuing notes against its general
credit, it would have the control both of its original capital and of the resources arising from whatever proportion
of its authorized note issue it could keep in circulation*
Upon both these components of its loan fund it could
earn the current local yield of money invested in discounts and whatever additional gain was incidental to
banking operations in its territory. The community, on
the other hand, would have the advantage not only of
the bank's original capital, or whatever part thereof
might be lent safely, but also of the resources derived
from circulation. The chartered bank was thus the more
efficient instrument, whether for the advantage of its proprietors, or for the increase of banking accommodation in
the community where it worked. The most significant of
any acknowledgment of this principle is probably to be
found in the clause of the statutes of the United States
which imposes upon the notes of state banks a tax of 10
per cent each time they are paid out.
The failure of bond-secured issues either to further prosperity or to provide the capital needed for the colony's
development became obvious early in the history of the
act. At the same time need for additional capital was
recognized and provision for it urged by those best quali63




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fied of any, perhaps, to judge the market position. In
1854, existing chartered banks petitioned for authority to
increase their capital stocks. To look for additional capital In Canada was reckoned comparatively hopeless; to
obtain it abroad the opportunity for investment would
have to be such as was preferred abroad. The English
capitalist was unlikely to be attracted to small or private
banking ventures, whereas the stocks of the large chartered banks had been known for years as safe investments.
Force was lent to this argument by the promptness with
which the Bank of Montreal had obtained subscription
and partial payment of a quarter million addition to its
capital authorized in 1852.
The policy indicated was adopted by the legislature and
provision made for increasing the capital of existing banks.
Altogether the addition of £2,010,000 was permitted to
the stocks of the six banks who applied. In the case of
the largest bank the directors' discounts were limited to
one-tenth of the whole. Payment of dividends and transfer of shares in Great Britain were permitted in most
of the acts, and in every one of them was included a new
condition, fulfillment of which was obligatory if the bank
increased its stock. In that case, 10 per cent of the whole
paid-up capital had to be invested in debentures of the
province or of the consolidated municipal loan fund.
Although the majority of the charters had some eight
years to run, the corporate existence of the banks was
continued to January 1, 1870, and the end of the next
session of parliament.
Continuation of the established and so far fairly successful scheme of regulation thus decided, the legislature pro64




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ceeded in 1855 to P a s s n e w charters for three of the companies first started as free banks and to three wholly new
ventures, the total capital authorized amounting to
£1,450,000. In the next two sessions five additional charters, all to new banks, were passed, authorizing a further
increase of £2,466,666 in the banking capital of the province. All in all, the new policy which followed the abandonment of the free banking scheme had permitted in four
years the addition of £5,926,000 to the authorized stock
of Canadian chartered banks-—a sum more than twice
their paid-up capital in 1851, and within a few thousand
pounds as much as their paid-up capital in 1861.
Few new features of a distinctly restrictive character
appeared in any of the new charters passed at this time, or
in the acts consolidating the legislation pertaining to some
of the older banks, which were obtained in behalf of these
corporations in 1856 and 1858. One of the more notable
was the requirement of monthly statements of actual instead of half-yearly statements of average condition, which
first appeared in the acts of 1854, extending the capital
of the older banks. Another innovation was the restriction of directors' discounts or discounts of firms in which
they were members to one-twentieth of the bank's total
discounts, loans, or advances. For the voting scale customary since 1817 there was substituted, in the new charters, the rule of one vote for each share. In respect of
provisions calculated to insure the payment of a good proportion of the subscribed capital the new charters were
deficient, so much so that if it wished an unscrupulous
board might put out £35,000 in notes, even £110,000,
upon scarcely more capital than the £10,000 needed at the
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outset for the purchase of provincial debentures. Although
the payment of £25,000 upon the subscribed capital was
the least amount upon which a bank was nominally permitted to begin business, no way was provided to make
certain the sum was in hand. Charters, moreover, were
granted in some cases without sufficient inquiry into the
antecedent character and responsibility of the petitioners,
with results injurious as well to the standing of the Canadian banks generally as to no small groups of wild-cat
promoters' dupes.
All this expansion of old banks or rapid multiplication
of new ones forms, of course, but one aspect of the tremendous economic advance which the province was making between 1850 and 1856. A rising tide of immigration, great expenditures upon public works, a succession
of excellent harvests, high prices for produce, partly as
the result of the Crimean war, cheaper freight rates to and
from Canadian ports following the repeal of the British
navigation laws, the construction of some 1,500 miles of
railway between 1852 and 1858, and, finally, the reciprocity
treaty of 1854, which opened up the markets of the United
States to a trade of highly lucrative returns, combined to
lift the province to a pitch of prosperity hitherto unknown.
Upon railways and canals alone it was reckoned some
$60,000,000 was spent in the six years following 1850, the
bulk of the money coming from Britain.
Along with all this—and much of it, indeed most of it,
meant sound and lasting progress—there was a deal of the
unsound. Importations, as might be expected, rose to
extravagant volumes and land to artificial and inflated
Yalues. That speculation, originating in a genuine and
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justifiable demand for more agricultural land, soon turned
into a frenzied trade in wild or unimproved tracts, in which
many of the farmers, then selling produce for cash and
buying supplies on credit, locked up an undue proportion
of their means. City and town holdings also changed
hands at prices which a subsequent generation would
scarcely credit. To cite an extreme example—it is of record that near one town of Canada West a property which
sold in 1854 f ° r $48,000 went begging fifty years later for
$8,000.

Following the poor crop of 1857, low grain prices, and
heavy reduction of the inflow of British funds, came the
financial crisis in Great Britain and the United States.
Thrown as they were almost entirely upon capital and circulation for their lending resources, and confronted at this
juncture by the prospect of large demands for note redemption, the Canadian banks ceased to discount. They either
could not or would not begin again in time to furnish funds
wherewith to move the crops. Within the year their circulation had fallen to two-thirds its volume in 1856; discounts, of course, were cut down in corresponding degree.
Failure of the usual means for getting the crops to market
tied up the milling industry, threw many out of employment, prevented the customary settlement of farmers'
debts, and, as a consequence of this, interrupted the normal
course of liquidation in all channels of trade. Without
their usual advances, divers local industries were forced to
run short time or not at all, while throughout the province,
but more especially in the western part, many failures occurred and much distress followed the abrupt fall in the
land values. The year 1858 was one of deep depression, a
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depression from which there was only the beginning of recovery in 1859.
No Canadian bank failed at the height of the crisis of
1857 or immediately thereafter. Most of the banks were
apprehensive of trouble early in the year and proceeded as
best they might to set their houses in order against the
time of collapse. Even if none other were present, a strong
motive for caution was provided in the constant pressure
on each for the redemption of its notes exerted by practically all the other banks, and the consequent necessity of
keeping well supplied with specie. At this juncture, as in
many a preceding time of danger, this incidental effect of
a competitive issue of circulation against general assets
served as the most powerful influence for careful management, the most efficient deterrent from reckless ventures,
of any probably, to the action of which the Canadian banks
were exposed. Unfortunately the factor was of the greatest force, not in the early and middle but rather in the
final stages of an expansion. When, therefore, it did develop its full effect and the banks changed their policy accordingly, a deal of popular complaint, not to say clamor,
was provoked by what the critics called the niggardly
timidity and selfish indifference of the banks. Discontent
with the currency or rather with the wTay the banks furnished currency, whether or no this discontent was wholly
justifiable, together with the exigencies of the provincial
treasury, furnished the main promptings for the plans for
a different sort of circulating medium which were brought
forward in i860.
That the banks had not come through unscathed was
revealed by the losses acknowledged and the appropria68




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tions made for bad and doubtful debts in 1858 and 1859.
Just to what degree certain of the older companies had become involved in the land and railway ventures did not
come out until some years later. Meanwhile enough faith
in the country's future remained among some capitalists
to prompt applications for the incorporation of yet more
banks. The legislature was complaisant, and in 1858 chartered the proprietary of the projected Bank of Canada
(afterwards the Canadian Bank of Commerce). Three
charters followed in 1859, two more in 1861, one in 1864,
three in 1865, and yet two in 1866. The new capital thus
authorized was no less than $16,460,000, much more than
was actually added for many years to corned
Only seven of the banks ever started. Some of these,
like other banks chartered prior to 1858, found it necessary to procure from a lenient parliament an extension of
the time first set for forfeiture for nonuser. None of the
twelve charters passed 1858-1866 authorized less, in the
first instance, than $1,000,000 of capital stock, of which at
least $400,000 was to be subscribed and $100,000 paid in
(in a number of cases, "actually deposited in specie with
some existing chartered bank") before the beginning of
business. In three instances the capital first authorized
was reduced to $400,000, while in other cases the repeated
extensions of time for payment brought about a practical
negation of any effort to safeguard the public by insisting
o Under legislation which became effective January i, 1858, Halifax
currency ceased altogether to be the official or statutory money of account.
Thereafter Canadians reckoned in dollars and cents by law as they had for
decades theretofore in fact. The British sovereign was continued as a
legal tender for $4.86% and the American eagle coined after 1834 as legal
tender for $10

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that new ventures should be equipped with a large paid-up
stock.
Just as the first signs of rally from the depression of
1858 became evident the provincial minister of finance,
ostensibly to obtain the facts upon which to frame the
banking policy of the assembly, procured the appointment
of a select committee on banking and currency. The new
charters of 1859, however, were passed before the house
received the committee's report. The interesting part
of this document was not so much the report proper, which
criticised existing arrangements for insuring the safety
of the bank note circulation as the evidence of bank
officers, which accompanied it. There the loopholes in
charters were frankly and emphatically exposed. One
grave defect was the authorization of banking investment
beyond the country's needs. Another was the failure to
hedge the privilege of circulation with necessary safeguards. Again, no means were provided to insure the full
payment of the capital required of a bank, nor was there
any obligation to publish the names, holdings, and addresses of the owners of its stock. Limitation of circulation rights to paid-up capital, plus specie and debentures,
was illogical and illusory. Coin or bonds could only be
bought with capital or deposits. A livelier interest on the
part of directors should be incited by requiring of them
larger holdings of paid-up stock. Banks were hampered
by the usury law; instead of giving warning by raising
their discount rates when trouble seemed imminent, they
were forced to refuse some applicants altogether and confine accommodation to customers with valuable accounts,
or those only of whose solvency there could be no doubt.
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It was a mistake to encourage the organization of small
banks. Compared to those of larger capital, experience
in the United States had shown that the small bank was
unstable and unsafe.
Point was lent to this last criticism by the failure, late
in October, of the International and Colonial banks, both
recently chartered concerns. Nominally, their head offices
were in Toronto, but their operations, consisting chiefly
of note issue, were mostly in the United States. The
Colonial had reported at the end of September, 1859, a
note circulation of $75,300 and total liabilities (exclusive
of capital) of $99,878; the International, on the same day,
$119,021 of notes issued and liabilities of $134,087. No
great loss was caused the Canadian public by their collapse,
but the scandal and the ease of acquiring dangerous privileges which had led to the scandal, called forth bitter and
general complaint. Not until 1863, however, did the legislature finally repeal these two charters, and two others,
which had been exploited with similar irresponsibility
and intent to defraud. One of them, the Bank of Clifton
(previously the Zimmerman Bank), had pretended to redeem or to cash its notes in Chicago; the other, the Bank
of Western Canada, owned by a York State tavern keeper,
sought to float its issues in Wisconsin, Kansas, and
Illinois.
For such evils as were thus revealed, or as the bankers
had pointed out to the select committee on banking and
currency, the finance minister (then A. T. Gait) devised
a remedy all his own. Rather than the improvement of
existing bank charters or increased care in the grant of
new ones, he invited the assembly in the session of i860
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to consider proposals involving as sharp a break with
the past as Lord Sydenham's project of 1841. His plan
was " t o separate currency from banking;" his purpose,
" t o put the currency of the country on a perfectly sure
and safe footing by separating it from the banking interests and removing it from the possible suspicion of being
affected by political exigency." "If the state supplies
the credit." argued Mr. Gait, " i t is fairly entitled to the
profit which arises from its use. The specie resources
of the banks are so much capital kept unproductive, and
to that extent produce loss of profit. And while the
present system lasts it will be necessary that each bank
should keep not only a sufficient reserve of specie to
protect its own circulation, but to a certain extent that
of others. Under the system I propose this necessity
will, to a great extent, be obviated, for the whole resources
of the country will be pledged for the redemption of the
circulation." He proposed to do directty what the free
banking system attempted by a side wind—to achieve the
benefits of the Sydenham scheme without endowing the
bank of issue with the immense political powrer involved
in the right and obligation to discount for ordinary banks.
The first resolution accordingly set forth the proposal
that no paper money be issued except on the credit of
the province; the second, that such notes of the province
be a legal tender and redeemable on demand in specie,
that the maximum issue be fixed at $10,000,000, and that
the* notes be put into circulation by the banks, who
should obtain them from the treasury on delivery of
one-fifth the amount of the notes in specie, one-fifth in
government securities, and three-fifths in a privileged lien
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upon their assets, paying the government for the privilege of circulating amounts up to half their paid-up
capital stock at the rate of 3 per cent per annum, and
for amounts in excess of half their capital at the rate of
4 per cent. Specie and securities so received the treasury
department was to hold as a reserve against the notes.
Since the average of three years showed the banks to
have been carrying $2,422,000 odd of specie and $2,460,000
of debentures, Mr. Gait figured that under his plan close
to $1,000,000 of resources would be released for the uses
of trade. To meet the seasonal fluctuations (in 1859 the
circulation rose from $8,122,000 in May to $11,236,000 in
October) the minister suggested that banks be supplied
with notes on their monthly rather than yearly averages,
and thought that the collection of interest upon balances
would induce the banks to give any necessary elasticity
to the circulation. Further, he proposed the repeal of
the free bank act, of the tax upon the circulation of
chartered banks, and of the clauses in their several
charters which obliged them to invest a tenth of their
paid-up stock in the debentures of the province. Relief
from the circulation tax and from the duty to own bonds,
however, was to run only in favor of such banks as
surrendered their rights to issue their own notes and
substituted notes of the province. Banks already chartered and in operation, or new banks which should open
for business within two years, were to be confirmed in
their issue privileges to the expiry of their charters, but
no longer. The treasury department was to be endowed
with authority to issue 4 per cent exchequer bills, which
would provide a preferred form of short-term investment
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and a medium for settling bank balances. In this last
proposal the minister touched upon what was counted by
some critics a serious defect in the existing banking
organization—the customarily rigid insistence upon specie
settlements at places where two or more banks had
offices. It had been proposed in Toronto, nearly three
years before, to square the monthly settlement by sterling
exchange instead of specie, but the Montreal banks
refused adherence to the plan.
None of the chartered banks showed any eagerness to
exchange a franchise to issue at no cost beyond the cost
of printing notes for a right which would cost them 3 per
cent on three-fifths of the notes taken out and the
current rates upon the specie or the cash paid for debentures with which they were to pay for the other twofifths. Condemned by the banks as a currency fatally
inelastic for a country in which the autumn maximum
reached 140 and even 150 per cent of the spring time
minimum of circulation, suspected by the people as capable of exploitation for dangerous political abuse, and
criticized by the commercial community as substituting a
dear currency for one which was ideally cheap, issues by
a treasury department found scant approval in the legislature. Less than two months after the introduction of
the resolutions the government withdrew them. In the
next session a proposal introduced by the minister to borrow on exchequer bills in the sum of $4,000,000 was
passed. But it was not until 1866, after Mr. Gait's party
had lost and recovered its majority in parliament, and the
Canadian treasury was come into yet sorer straits, that
the bank of issue scheme, much modified, was given
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standing in the statutes as the provincial note act, the
forerunner of the legislation subsequently to govern the
issue of the present Dominion notes.
Something over $5,000,000 was the sum immediately
needed in 1866 to meet the floating debt of the province.
Of this, $2,250,000 was owing to one bank and that bank
was pressing for payment. Balances in arrears had been
renewed so often in England that the credit of the province
had suffered. English bankers were having extreme difficulty in selling Canadian government debentures to yield
even 8 per cent. Mr. Gait, finding the banks of the province unwilling to advance the government a sum equal to
15 per cent of their capital, proposed that the government
should "resume a portion of the rights which they had
deputed to others, and meet the liabilities of the country
with the currency which belonged to it." What basis,
either in law or in fact, there may have been for this express
assumption that the function of issue was a prerogative of
the Crown it is needless to inquire. The resolutions declaring the expediency of an issue of legal-tender paper, which
the government brought down, proposed no cancellation
of existing issue privileges; whatever the banks might
give up in furtherance of the scheme, they were to give up
of their free will. Before the measure had been carried
through all stages of consideration in the lower house it
encountered so much criticism in point both of principle
and detail that the ministry took alternative authority to
borrow $5,000,000 on direct loan, and agreed not to use
the power of issue if funds could be obtained otherwise.
The act finally passed authorized the issue of not more
than $8,000,000 in provincial notes, payable on demand
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N a lion al

M on et ary

Com m i s s ion

in specie, either at Toronto or at Montreal as the notes
might be dated, and legal tender except at those offices.
Arrangements for the surrender of its right to issue its
own notes might be concluded by the governor-in-council
with any chartered bank prior to January i, 1868, such
bank, however, retaining the right to resume its issue
privileges upon three months' notice. To any bank so
surrendering its issue and withdrawing its notes from
circulation within a year, compensation would be payable
till the expiry of its charter, at a rate not to exceed 5 per
cent per annum upon the amount of its circulation on
April 30, 1866. For the service of issue and redemption,
one-quarter of 1 per cent was to be paid every three months
to each bank circulating provincial paper instead of its
own, the commission to be reckoned on the average amount
outstanding of the notes so issued by the bank. Banks
relinquishing issue privileges were further exempted from
the obligation to hold a tenth of their paid-up capital in
provincial debentures, and were permitted to exchange
such debentures at par for provincial notes. Likewise,
having surrendered their own circulation, they were to
escape all further outlays for circulation tax.
As a reserve against the legal tenders, the receivergeneral was commanded to hold 20 per cent in specie for
the amount in circulation up to $5,000,000, and against
amounts in excess of that sum 25 per cent in specie.
Cover of provincial debentures to the full amount was
required for the difference between specie reserves and
notes outstanding. In all but what concerned the issue
of notes for $1 and $2 by the British Bank, the act to
establish freedom of banking was repealed. Further,
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H is tor y of Bank i n g i n

Canada

banks were relieved from the traditional penalties for
usury retained by inadvertence or intent in the legislation by which they had been permitted to take up to 7
per cent, and to exact certain specified commissions in
discounting paper, payable at offices other than the place
of discount.
But one bank proved willing temporarily to surrender
its rights of issue and undertake the circulation of provincial notes. That was the Bank of Montreal. For the
time being, it would seem, the provincial note issue was
the Bank of Montreal's favorite scheme. In actual operation, the first effect of the measure, so far as this particular bank was concerned, was to liquidate what had
been a distinctly inactive asset. The funds the bank had
locked up in the loan to the province, equally with its
investment in debentures, were converted into provincial
notes available for use in any kind of exchange. In the
second place, the bank was not out of pocket by the shift,
for upon such paper it drew compensation and commission
of 6 per cent from the government, and could still use
the notes as it pleased in making loans. The maintenance
of reserves and waiver of the circulation tax made the
advance cost the province, however, somewhere between
8 and 8>£ per cent.
So far as the other banks and the country were concerned the effects were less simple, although it is not
clear that the new issue caused any serious or widespread
harm. Unquestionably the other banks found cause to
acknowledge the power of the one institution which had
the government account and had undertaken the issue
of government notes. A number were induced regularly
S. D o c . 3 3 2 , 6 : 2

6

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Commission

to hold from $50,000 to $200,000 each, under an arrangement that practically precluded the use of the notes as
ready cash. The adherence of others to a like arrangement was gained by the decision of the Bank of Montreal
to demand settlement in cash at different points outside
the centers, rather than to continue the practice of settling by drafts on Montreal or Toronto. At such points
the other banks would thus be obliged to pay in specie;
the Bank of Montreal, which was generally a creditor in
these settlements, could pay when it had to pay in gold
or legal tenders. Confronted by the option of scattering
their reserves to all the points where they met the Bank
of Montreal, and by the same token of considerably increasing their specie holdings, demurring banks generally
agreed to keep a quantity of the legal tenders continually on hand. About $1,000,000 of the notes were thus
kept permanently outstanding. Altogether the average
circulation of legal tender paper the first year of its issue
was a little over $3,000,000, or about what was outstanding of the Bank of Montreal's own notes in the spring of
1866. Some part, about $1,000,000, of the treasury needs
had been obtained by direct loan.
Such pressure as was used to inject a proportion of the
notes into banking reserves, no less than the device of
paying out in Montreal notes redeemable in Toronto,
Toronto notes dated at Montreal, provoked considerable
criticism. Along with certain incidents preceding the
financial disturbance in which the Commercial Bank suspended payment, they furnished the material for a bitter
and violent controversy, in the course of which the provincial note act, the Bank of Montreal, and the minister
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Canada

of finance were all roundly condemned. It is unnecessary
here to consider how much truth there may have been in
testimony so obviously and so strongly colored by the
passions of the time. The only permanently evil effect
of the government issue, if that be an evil, has been the
diminution of the country's specie reserve, brought about
under the legislation which created the issue and subsequently increased its volume. Even before 1870 the mere
consideration of convenience led a number of banks to
effect a decided increase in their reserve holdings of legal
tender notes.
The year 1866 wTas marked by the definitive failure of
the Bank of Upper Canada, the old upper province's first
chartered bank. Considering the forty-four years the
corporation had been carrying on its business and the preeminence it had once enjoyed in the communities it
served, its bankruptcy caused singularly little concern.
But evidence of coming trouble had been abundant for
some years before; indeed, since 1862 the bank's operations had consisted of little more than quiet liquidation
with open doors. The immediate interest of the provincial government in the bank through the ownership of
shares had ceased, of course, with the sale of those shares
in 1840, but the prestige and dignity of a government
connection persisted through more than twenty years.
In 1850, moreover, the bank had managed anew to obtain
the government account. The exclusive mark of confidence thus conferred probably served somewhat to exalt
divers grandiose notions the management already entertained concerning their institution's policy, position, and
strength. To the economic development of the western
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Co mm is s io n

province which marked the early fifties, the extension of
railways, to the increase of municipal indebtedness, to the
expansion of milling properties, and, as appeared in the
end, to the speculation in unimproved lands, the bank
found both duty discharged and profit gained in lending
ready aid. Lawyers, legislators, the gentry and professions, civil servants and politicians properly connected or
properly introduced, were suffered participation in the
banks' loan favors on the strength of mere accommodation paper, or on the ultimate and none too remote security of inflated real estate. Down to 1858, however, the
bank had paid good dividends, although in calling up capital it had made repeatedly the mistake of distributing
the premiums received on new as bonuses to holders of
old stock. Considering the volume and character of their
business, the management had consistently failed to build
up an adequate surplus or rest.
With the great increase of railways in Canada West
there came a shift of the routes of trade, no less than of
the centers of the milling and lumber industry which
made recovery from the crisis of 1857 slower in the older
country, where the bank had long been established, than
in the newer districts. The bank was sorely hit by the
commercial failures of 1858; at the same time it found
itself obliged to take possession of much depreciated
real estate. One in particular of the larger transactions
with railway obligations turned out badly to the tune of
nearly half a million dollars. The sum of $220,000
was appropriated for bad debts in 1858, one of $400,000
in 1859, and $294,000 in i860. The bank was in such
position that the government could not consider avail80




History

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able their credit balance, then considerably in excess of
$1,000,000. In 1861 a new manager was given charge of
the bank. Upon his recommendation to the shareholders, a million and a quarter of bad debts still awaiting
provision after the appropriation of all the rest, authority
was obtained from parliament in 1862 to reduce the par
value of the shares from $50 to $30, the paid-up stock
from $3,186,000 to something more than $1,900,000.
The results of an official investigation of the finance
department begun in 1862, determined the government
of the day, then lately come into power, to shift the
bank account of the province to the Bank of Montreal.
The debt of the Bank of Upper Canada to the province by way of deposits was fixed at $1,150,000 and
transferred to a special account. The disclosures of the
report and the further loss of standing caused by the
transfer of the government account made the task of
rehabilitating the bank hopeless. The dividend wras
passed in 1864 and 1865 and a steady, significant falling
off appeared in the bank's return of circulation, deposits,
and discounts. Authority for a further reduction of the
stock to $1,000,000 was obtained in August the following
year, but before action could be taken upon this the
bank was obliged to close its doors September 18, 1866.
When the estate was transferred to trustees in November the notes in circulation were reported at $722,000;
balances due other banks, $299,000; deposits by the
public, $395,000, and deposits of the government,
$1,149,000. Specie had fallen to $42,000, but the landed
and other property of the bank amounted to $1,673,000;
securities, $17,000; bills and judgments, $2,225,000;
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s io n

bonds and mortgages, $97,000. Liquidation of the estate
was slow; for some obscure reason—ostensibly, to be
sure, because it was thought necessary first to realize
the assets—the double liability of the shareholders was
not promptly enforced (in fact, it was never enforced);
no creditor was paid in full; claims against the bank
had to be or were taken at face value in settlement of
debts due to it; the administration of trustees cost large
sums; there was further depreciation in the real estate
and doubtful debts. In 1870 the whole property was
turned over to the Crown. The Crown redeemed liabilities at 75 cents on the dollar, but forbore to insist upon
the Crown priority. In the end about $1,000,000 of
the sum due the province in 1866 proved a total loss.
Apart from interest or from discounts suffered in realization upon claims before the liquidators were ready to
pay, creditors of the bank among the Canadian public
(exclusive of the government) lost rather more than
$300,000; the shareholders, all the stake they had in
the bank.
One other of the Upper Canada banks, the Commercial
Bank of Canada, first known as the Commercial Bank of
the Midland District, failed in 1867. It had helped and
to some extent had shared in the speculative movement
prior to 1857, but when the crash came it was nowhere
near so badly involved as the Bank of Upper Canada, and
rallied quickly from the losses then suffered. Shortly after
1857, however, when the bank took over the account
of the Great Western Railway from its old rival, it
opened extensive cash credits toward the operation and
construction of the Detroit and Milwaukee Railway,
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supposedly on the faith of £250,000 granted to this
enterprise by the Great Western. The Great Western subsequently repudiated responsibility, and in 1862 the bank
brought suit for considerably more than a million. No
settlement was obtained until the fall of 1866, when
$1,770,000 Detroit and Milwaukee 7 per cent bonds were
turned over to the bank. Instead of realizing upon
these quickly, the bank waited and thus prolonged its
lockup. Blind popular faith in banks had been shaken
by the Upper Canada failure, and a proposal at the meeting
in June, 1867, to reduce the capital stock by 25 per cent
started a quiet but persistent withdrawal of the Commercial Bank's deposits. Help was had from another
bank in September to the extent of $300,000. A joint
advance of $750,000 was asked of its colleagues on October
21, with the idea that half this sum for four and half for
six months would enable the bank to pull through. At a
meeting held to consider this request, the banks could not
agree as to the conditions of allotment and guaranty.
The government were under pledge to extend no help
without their bankers' consent, and on the morning of
October 22 the Commercial Bank stopped payment. The
company was really solvent at that time, but lacked
ready cash. In a little more than two months note and
deposit liability of $2,786,000 out of total liabilities on
this score of $4,657,000 was paid in full. Seven months
after the failure the shareholders ratified the contract by
which the Merchants' Bank of Canada acquired their
property, paying therefor at the rate of one share of Merchants' stock for every three of the Commercial Bank.

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In the twenty-six years between July i, 1841, and
July 1, 1867, the number of banks working under the
laws of the Province of Canada was increased from 9 to 19;
their capital paid up, including the capital of the British
Bank employed in the Canadas, from $9,106,548, or its
equivalence in currency, to $27,618,440. A total note
circulation (exclusive of the provincial notes issued by
one bank) of $8,312,386 was reported in 1867 as against
one of $3,676,180 in 1841. Deposits not bearing interest
and sums not otherwise specified due by the banks had
grown from $3,145,872 to $13,938,447, deposits bearing
interest from $219,432 to $14,765,879. Of the banks
working under colonial charters in 1841 but one had a
capital greater than $800,000; in 1867 there was one with
$6,000,000 paid up; another with $1,999,100; a third with
$1,600,000, and two others with $1,200,000 or more.
Excepting the largest bank, the four newest and smallest,
and the Commercial Bank, then soon to fail, the average paid up capital of the 13 companies reporting was
$1,257,830. Deposits, which in 1841 were but 37 per cent
of capital, had increased to slightly over 100 per cent of
capital. In respect of circulation the change was in a
contrary direction. The precise position is obscured in
any return of the quarter century by the peculiarity of the
practice or condition of the British Bank. Its note issue
was regularly small compared to its capital stock. Banks
acting under colonial charters generally showed a considerable reduction in the proportion of circulation either
to capital or to total liabilities between 1841 and 1867.
A summarized statement of the condition of the banks at
ten-year intervals and for 1867 is printed in the table
herewith:
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Statement of chartered hanks in the Promnce of Canada.
LIABILITIES.
1

" 1841.

b 1851.

c 1861.

< 1867.
*

Number of banks in opera- ;
8

Capital stock authorized by \
act
£•2, 2 7 6 , 6 3 7
Capital stock paid up
Promissory notes in circulation not bearing interest..
919,045
Balances due to other banks.
34o,771
Dividends unpaid
21,025
Net profits or contingent
146.410
fund
Cash deposits not bearing
interest, and all sums not
otherwise specified due
786,468
Cash deposits bearing inter54,8s8

16
$35,266,666
c
2 4 , 4 1 0 , 796

e

£3,897,619
1,623,435
271,621

19
$3 7 , 4 6 6 , 6 6 6
27,618,440

e

11, 780,364
444,120

8,312,386

1, 1 2 6 , 3 0 5

9.175.957

13,938,447

565,326

9,545,341

14,765,879

3.741,757

3o,945.34i

39,788,638

2,771,925

933
59.845

Total liabilities other
2, 2 6 8 , 5 7 7

ASSETS.
Coin, bullion, and provincial notes /
Landed or other property of
Government securities
Promissory notes or bills of
other banks
Balances due from other
banks and foreign agenNotes and bills discounted. _
Other debts due to the bank
not included under foregoing heads
Total assets

£392,540

£413,422

$4,96o,439

$ 7 , 3 8 4 . 197

46,101
24,661

135.313
43,825

1,429,324
2,735,956

6,142,573

148,342

*44.375

1. 1 3 6 , 1 5 3

1 , 6 5 1 , 772

203,586
3,282,150

218,501
5.S73.983

4. 157, 286
39,588,842

48, 158,431

4,064,389

2, 2 9 7 . 4 1 4

58,072,391

72,213,597

!
4, 0 9 4 , 068

6,529,769

1.510,572

5,068,635

* Journal, Can., 1841, Appendix O.
b
Journal, Can., 1851, Appendix I, No. 1 to 8 inclusive.
<=The Canada Gazette, Vol. XX, p. 1736.
d The Canada Gazette, Vol. XXVI, p. 2245.
« This includes £620,000 sterling, being the capital allotted by the Bank of British
North America to its Canadian branches.
/"Provincial n o t e s " occurs only in the statement for 1867.

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Taken all in all, the twenty-six years under the union
form a period of marked advance by the Canadian banks
along the lines they were subsequently to follow in point
of increased stability, greater versatility, and more thorough diversification of risks. Much, perhaps most of the
the improvement was by way of internal organization,
the multiplication of branch offices, the standardization
of practice, and the elimination of methods and of business not now accounted commercial banking in the best
sense of the term. Two world-wide and more or less
disastrous financial and speculative upheavals had been
weathered by the banks without suspension of payment,
and indeed without failures whatsoever at the time stringency was most acute. Neither the collapse of the Bank
of Upper Canada nor that of the Commercial Bank can
be explained as ultimately due to anything but circumstances and proceedings, mistakes and misapprehensions, peculiar to the institutions directly involved.
For contemporary critics, to be sure, both banks served
as dire examples of the evils brought about by the existing system of bank regulation, and as pointed argument
for revolutionary change. But the complaints of some
such observers, certainly, were too often tinged by sympathy for the unfortunate holders of failed banks' shares.
It is much to be doubted whether in the twenty-six years
under review the public creditors of the Canadian banks
lost half a million dollars all told.
Down to 1867 the deposit function was still of higher
importance only in the cities and to the banks which
served the wholesale, manufacturing, and financial communities in which cheques were used as means of pay86




History

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Canada

ment. Some growth of deposits came about in the
rural districts after 1854 o r I ^55 when an increase of
housebreaking in the country induced farmers somewhat to depart from their habit of hoarding notes. But
in the western part of the province, where wheat and
flour, timber and wool had to be moved each year, where
the produce buyer, then as now, needed to pay for produce in cash, the note circulation was of predominant
consequence. All kinds of business slackened considerably in the winter when the water routes of transportation were closed; many kinds of trade were much more
active in September and October than at other seasons
of the year. Hence a wide and regular expansion of the
note issues in the autumn to the highest volume of the
twelvemonth; hence a rapid contraction in the early
winter which persisted until the low point was reached
again in May. Increased provision for borrowers' needs
was furnished by the banks without other cost than
paying out notes. There was no occasion to import coin
or other valuable money from without the district where
the augmented demand for credit appeared; no necessity
to call up additional capital to supply a demand for loans
which endured but fourth, a third, or at most but half of
a year. It was a cheap currency, this issue against general assets; but without the profits of issue, borrowers in
the western country would have had to pay more for their
credits, or, in many cases, to contrive to manage in their
neighborhood without a bank. It was a currency of
wide and comparatively rapid fluctuations in volume, as
the lords of the British treasury had remarked from time
to time with every sign of concern. But in an economy
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such as the Province of Canada then had, or as the
Dominion has to-day, a fluctuating currency is precisely
what the country wants.
The filling up of the Mississippi Valley and the growth
of population in New York, the increase of export and
import trade wTith Great Britain which marked the fifties,
the influx of foreign capital into the colony, the reciprocity
treaty with the United States, these were all productive
of a much larger business in exchange than any which
had previously engaged the attention of the Canadian
banks. Prior to the suspension of specie payments in
the States, following the outbreak of civil war, the
Canadian banks enjoyed a considerable circulation south
of the frontier. In the earliest sixties they participated,
in no small way, in moving the American crops. A number of the larger banks, through agents at first, afterwards by direct representation, traded in specie and
exchange in New York, where two of them became leaders
in the market for gold and sterling bills. In Canada
itself, moreover, there had already begun that connection
with railway enterprise, municipal borrowings, and extensive joint-stock projects—not always felicitous beginnings,
to be sure—which later was to constitute the more or less
typical Canadian corporation of this sort, a financial as
well as a commercial bank.

88




IV.—THE FIRST BANK ACT OF THE DOMINION.

Under the British North America act passed by the
Imperial Parliament in 1867, and the confederation of the
Provinces of Canada, Nova Scotia, and New Brunswick,
which this measure brought about, the parliament of the
new Dominion was given exclusive authority in all matters
pertaining to currency and coinage, banking, the incorporation of banks and of the issue of paper money, savings
banks, bills of exchange and promissory notes, interest
and legal tender. Subject to this jurisdiction, directly
the act came into force, therefore, were the 18 banks chartered by Canada (thereafter divided into Ontario and
Quebec), 5 by Nova Scotia, 4 by New Brunswick, and 1
working in all the colonies under royal charter, but obligated to accept such general regulations as the Dominion
might impose. The banking legislation of the maritime
provinces, though often different in phrase and sometimes
in detail from that of Canada, was based upon substantially identical principles. The chief contrasts between
Nova Scotia and New Brunswick banks on the one side,
and those of Canada on the other, lay in the small capitals
of the maritime province banks, and in their tendency to
confine their operations to restricted fields. The total
paid-up capital at the moment of confederation, including
the bank with the royal charter among those of Ontario
and Quebec, was for these two provinces, $29,467,773; for
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Commission

Nova Scotia, $1,552,389; for New Brunswick, $1,480,000;
for the whole Dominion, $32,499,162. Granted prior to
confederation and not yet used, but not yet forfeited
for nonuser, were 3 charters passed by the Province of
Canada, 2 by Nova Scotia, and 5 by New Brunswick. Of
the banks already in operation, 17 charters were to expire
by July 1, 1871.
In the first session of the new parliament little was done
by way of general legislation affecting banks. True, the
eleventh chapter of the first volume of Dominion Statutes
is an "Act respecting Banks" (31 Vict., c. 11), but it
merely extended the powers of banks previously incorporated by any of the provinces to the Dominion, subjected the banks of Nova Scotia and New Brunswick to
the circulation tax, and reenacted for the whole country
such general legislation in respect of banks as was then
on the books of the Province of Canada. One of the
more important of these paragraphs empowered banks
to hold and dispose of mortgages taken as additional
security for debts contracted in the usual course of their
business, to purchase and to hold lands thus mortgaged
to them, to bid in lands auctioned at their suit, and acquire
absolute title therein, to act on power of sale, and the like.
Other sections dealt with loans upon warehouse receipts,
bills of lading, and the like, taken as security at the time of
negotiating the loan, and the prior lien accorded to the
lending bank against the unpaid vendor of the commodities involved. The banks generally were exempted from
penalties for usury, though not permitted to recover at
law a higher rate than 7 per cent, and were specifically
permitted collection and agency charges not to exceed
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one-half of i per cent upon notes payable at places
other than that at which the loan was made.
In 1868, again, a further extension of the laws of the
Province of Canada was undertaken in a measure which
declared the provincial notes of 1866 to be Dominion
notes for which the Dominion alone was responsible, and
continued the provisions first enacted in respect of this
issue. Authority was also given for the establishment of
branches of the receiver-general's department in Montreal,
Toronto, Halifax, and St. John for the issue and redemption of the Dominion notes. Until the unification of the
currencies, notes payable in Halifax were to be issued at
the rate of $5 the pound sterling, and to be legal tender
only in Nova Scotia (31 Vict., c. 46). The last of the
preliminary legislation extended the charters of 11 of the
Province of Canada banks to the end of the first session
of parliament after January 1, 1870. (32-33 Vict., c. 49.)
For what he had done or had omitted to do in connection with the provincial note issue and the failure of the
Commercial Bank, A. T. Gait, the first finance minister
of the new Dominion, received a deal of blame. He felt
that public opinion held him responsible to some extent
for the losses suffered by investors in consequence of that
failure. His usefulness being thus marred, he resigned
from the ministry early in November, 1867. Under his
successor, John Rose, reports upon the banking system of
the country were presented by select committees both of
the Senate and of the House. That of the Senate committee condemned the provincial note act in set terms and
recommended a return to the conditions obtaining prior
to 1866. The committee were further of the opinion,
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however, that if the government were determined by some
new system somehow to take possession of the currency
of the country, such a change, which the committee
strongly deprecated, should be in the direction of a paper
currency based on Dominion securities, but immediately
redeemable on demand, like the national-bank notes of
the United States.
The first report of the house committee submitted to
the Commons in the session of 1868-9, consisted merely
of the answers to a series of questions drawTn up with the
evident view of eliciting evidence favorable to the introduction of bond-secured bank notes. Among these
queries, for example, was one concerning the expediency
of issuing government paper; another related to the practicability and advantage of introducing a system of banks
issuing currency based on deposits of government securities analogous to the American system. Notwithstanding the manifest bias of the committee the inquiry was
given a wide scope, some of the questions calling for comment upon the past services of existing banks and their
present practice and business; others still for discussion
of the defects of the system and the means of improving it.
Twenty-two sets of answers appeared in the report, 11 of
them from the principal executives of chartered banks.
The weight of the evidence thus collected was against
the issue of a government currency and against the issue
of bank notes upon special security. Four main objections were offered to the American plan of protecting
holders of bank notes; first, the reduction of the loan fund
involved in the purchase of the necessary bonds; second,
the tendency under such a plan to permit and even to
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encourage t h e organization of small local banks with a
consequent lessening of t h e stability of t h e banking syst e m ; third, the lack of elasticity of bond-secured issues,
t h e deficient force of t h e motives acting upon t h e issuers
either t o expand or to contract t h e circulation in full and
automatic accord with t h e needs of t r a d e ; and fourth,
the probability t h a t , with only a comparatively expensive
currency available for agricultural loans, such credits
would be reduced, and numbers of offices in t h e country
districts closed up.
Certain objections to t h e existing system turned upon
t h e lack of any requirement t o hold a minimum fixed
proportion of cash against liabilities on notes and deposits; others, again, upon t h e failure of t h e traditional
scheme of regulation to conform t o theories derived from
the doctrine t h a t t h e right to furnish currency is originally
a right of t h e State, or t h e faith sometimes based upon this
doctrine t h a t money m a y be and ought to be m a d e b y
t h e fiat of t h e State. The valuable constructive criticism,
however, consisted chiefly of these suggestions of particulars in which b a n k charters might be improved:
" (a) T o establish a minimum capital t o be required
from newly chartered banks, and to limit t h e number of
branches in proportion to t h e paid-up capital stock.
" (b) To prevent the beginning of business until a certain p a r t of t h e capital stock is paid u p , held in specie,
and t h e fact certified to b y a government officer.
" (c) To m a k e the double liability available in case of
need within a reasonable period, b y assessment of shareholders for t h e deficiency a t t h e end of, say, six m o n t h s
after suspension, and by provision t h a t t h e subsequent
S. Doc. 332, 61-2

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proceeds form the dividend of t h e shareholders, r a t h e r
t h a n t h e creditors.
" (d) To m a k e transfers within three months of t h e
suspension, and a t any time thereafter, void.
" (e) To require such statements of accounts as would
check illegitimate operations.
" (/) To prohibit any b u t moderate dividends till a reserve fund should be accumulated, such t o be m a d e good
if impaired.
" (g) To m a k e circulation a first charge upon the assets
of an insolvent bank.
" (h) To prohibit t h e issue of notes for less t h a n $4.
" (i) To require a certain proportion of demand liabilities t o be held in specie, say, 20 per cent.
" (/) To limit t h e circulation to paid-up capital stock
and government securities, and provide t h a t any excess
should be covered by specie in h a n d over and above the
a m o u n t required t o fulfill the previous recommendations.
il
(k) T o require each half year t h e publication of a certified list of t h e shareholders.
" (Z) To prohibit the reduction of capital stock, and t o
compel t h e stockholders to make good the capital if it
should b e impaired."
W h a t t h e new minister of finance offered Parliament
in t h e way of a banking policy was rather a ready-made
scheme t h a n a project founded upon t h e recommendations
of t h e experts who testified t o t h e committee of the house.
T h e resolutions presented to t h e Commons in May, 1869,
called for t h e reconstruction of Dominion b a n k legislation
upon t h e model of the " n a t i o n a l b a n k a c t " of t h e United
States. I n substance it was identically t h e proposal p u t
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forward by E. H. King, the general manager, and approved
by the board of the Bank of Montreal in November, 1867.
In the memorandum describing his plans this officer had
declared the belief " t h a t the interests of the country will
be best served by the diffusion of banking interests in
different localities, leaving to the greater banks, in large
measure, the care of the mercantile and foreign trade of
the country, and to the lesser, in their own districts, the
care and support of local enterprise." Then followed the
plan to deprive the banks of the power of the issue against
their general credit, to permit the issue only of notes prepared by the Government and turned over to the banks
only on deposit of equivalent amounts of bonds; to permit the foundation in each county of a local bank with
small capital, and to provide for recurring needs for expansion of the currency by requiring maximum deposits
of bonds as note security, and by periodically moving the
currency from east to west as in the United States.
Among the bankers of the time, responsibility for the preparation of the government's project was commonly imputed, probably with ample basis of fact, not to John
Rose, the minister of finance, but to the chief executive
of the government's bankers and fiscal agents, E. H.
King.
Apart from the limitation of issue to notes secured by
pledge of Dominion securities with the government, and
the provision that no bank should issue in excess of its
paid-up capital stock, the resolutions carried the proposals, first, that so long as they were redeemed in specie,
such notes should be a legal tender throughout the country except at the office of the issuing bank and at a
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redemption agency to be established in Montreal or in the
capital city of the province in which the bank was situate;
second, that banks should maintain reserves of specie equal
to one-fifth their note issue and one-seventh of their deposits at call; and, third, that notes should be the first
charge upon the estate of a failed bank; deposits at call,
not bearing interest, the second charge. Further proposals concerned the continuance of sundry safeguards
already in force or the adoption of others suggested by
bankers whose testimony was before the House, If approved the plan was not to go into effect until July i,
1871.

In the speech with which he brought the resolutions
down, the minister put most stress upon the duty of the
Government " t o see that the circulation which the public
at large is bound to take should be placed on as sound and
uniform a basis as possible." " I t is of essential importance to the interests of the country," he argued, " t h a t
the circulating medium be placed on a sound and uniform
basis." There, undoubtedly, the minister touched upon
one of the weak points of the note circulation as it then
was. Notes were not of uniform value the country
through. A note was payable, under the law, only at the
place or office where it was dated. One branch sometimes accepted in payment the notes of another branch
of the same bank, but merely as a matter of courtesy,
not as of right. Bank notes circulating in districts at all
remote from the place of date and issue were subject to
a discount. As a rule Montreal notes would pass at par
in Toronto, but that was because the exchange was in
favor of the eastern city. Toronto notes would not
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ordinarily be worth their face in Montreal. Furthermore,
t h e course of the paper involved by the two most recent
b a n k failures h a d shown t h a t , quite apart from questions
of ultimate security, the immediate redemption of bank
notes in all circumstances was not yet fully assured.
B u t whatever the defects of the existing system, it soon
became clear t h a t the' community was too well content
with sundry p a t e n t advantages peculiar to banks of t h e
Canadian t y p e , lightly or willingly t o suffer a revolutionary
change. The appearance of t h e resolutions precipitated
a storm of criticism, objection, and protest. Indeed,
already in April, the b a n k s of Ontario and Quebec had
adopted resolutions against any fundamental changes in
the system, and for the preservation of the note circulation as it was. Naturally neither the Bank of Montreal
nor t h e Bank of British North America, both of whose
chief executives favored bond-secured issues, subscribed
to these resolutions. Halifax banks declared t h e existing
system was satisfactory and t h a t change was neither
asked for nor desired. Over 70 petitions " t h a t t h e circulation of the banks be preserved on substantially the
present b a s i s " or t h a t " n o changes of a fundamental
character be m a d e in t h e present system of banking,"
petitions from boards of trade and t h e leading towns and
cities, as well as from 10 of the banks, were presented t o
t h e Commons in the spring of 1869.
Opposition of a determined and significant character
also developed in the House itself. The expansion of the
note issue each fall was effected mostly in Ontario, and in
Ontario's behalf. Ontario was in no wise ready forthwith to share the profits of crop moving with the east, or t o
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conduct that operation with less expedition or greater
expense. It was felt, too, that the province needed all
the resources of credit already at its command. Even if
the change to specially-secured notes was to be gradual
and requirement of a fixed reserve in specie delayed until
1871, it was asserted, with every show of reason, that rising
eight millions would be needed to put the banks in as good
case as under issue against their general credit. That
sacrifice would be independent of the loss of cheap till
money, and of the possibility of maintaining country
branches at low cost, which would follow the shift to issue
against deposits of bonds.
Only one day's debate, that of June 1, 1869, was
devoted to the resolutions in the House of Commons.
Pronounced hostility to the proposals was shown not
only by the Opposition but by Ontario members generally, and by some of the staunchest supporters of the
government. It was known that the Senate was even
less likely than the Commons to favor this scheme. On
June 2, the resolutions were considered by the Cabinet,
with what degree of unanimity was not disclosed. The
project lost rather than gained in favor the following
fortnight. On June 15, the finance minister announced
that the government was willing temporarily to withdraw
the proposals but would bring them before the House for
consideration the following session. But before the following session was opened the Hon. John Rose, believing
that the rejection of his banking policy was definitive, gave
up his portfolio. With his withdrawal from the ministry
there vanished any immediate prospect that the banking

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system of the country would be recast upon American
lines.
Sir Francis Hincks, for fifteen years in the British
colonial service, and but then lately returned to Canada,
succeeded Mr. Rose as minister of finance. Whatever the
preconceptions or preferences of the new minister in
respect of banking or currency, he seems to have set to
work to form new conclusions concerning current needs
upon the basis of the facts at hand. After numerous
conferences with bankers, merchants, and publicists, and
after careful study of existing legislation, Sir Francis
formulated measures which, though intended to put the
banking of the country upon a safe and stable basis,
yet introduced no radical departure from the system to
which the Dominion was used. The proposed legislation
was brought before Parliament early in the session of 1870.
In presenting his proposals to the House, the minister
pointed out that sufficient need for a uniform and
general banking law applicable to the whole Dominion
was indicated as well by the number of charters about to
expire as by the application for new ones already presented. Further, recent experience showed that the
holders of bank notes should be given greater security.
Used as the people were, however, to advances of credit
in the form of notes, it was inexpedient to force the cover
of the currency by deposit of government securities, and
cause such advances to be reduced or withdrawn. Public opinion, finally, was against the establishment of a
bank of issue such as had been proposed some thirty
years before.
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The main purposes of the bill submitted by the minister
and with slight changes of detail accepted by the House,
may be summed up thus (33 Vict., c. X I ) :
First. To require the security of a large paid-up capital.
It was first proposed to insist upon $1,000,000 authorized
stock, all to be paid up within five years, but in deference
to the needs of the maritime provinces, the minimum
authorized capital was cut to $500,000, with $200,000
paid in before the beginning of business and 20 per cent
each year thereafter. Certification of the fact of the first
payment was required from the treasury board.
Second. To restrict the circulation of the banks to
notes of $4 and upward. What the banks gave up here
they gained in exemption from the circulation tax and
from the obligation to invest a tenth of their paid-up
stock in government securities. The government, on
their side, wanted the room made by the retirement of
small bank issues for the circulation of $1 and $2 Dominion notes.
Third. To oblige every bank to receive its own notes
in payment at any of its offices, and thereby somewhat
to reduce the discount upon notes circulating remote
from their place of date. Notes were to be payable, however, only where they were expressly made payable, one
of which places was always to be the principal office of
the bank.
Fourth. To extend the circulation, or rather the amount
outstanding, of Dominion notes by obliging each bank to
hold usually half and not less than one-third of its cash
reserve in Dominion notes. In so far as such notes held
by the banks were not covered by specie, this provision
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h a d all t h e air of a forced loan. The minister did not
deny t h a t t h e step was one of fiscal expediency rather t h a n
b a n k reform. A t t h e same time the complaints of t h e
Opposition t h a t t h e proposal unduly diminished t h e country's gold reserve, t h a t it involved t h e borrowing of a
large sum practically at call, and t h a t it was of objectionable morality in a political sense, were calmly waved aside.
Sir Francis felt obliged " t o contend in the interests of
t h e public at large t h a t they were entitled to some share
in t h e profits of the circulation."
Fifth. To prohibit loans by a b a n k on its own stock,
saving its lien upon the shares and unpaid dividends of
its debtors on overdue debts.
Sixth. To prevent the impairment of paid-up capital
by undue division of profits. Directors concurring in
such impairment were to be individually liable as for
debts due t h e bank. With the intent to forestall applications for reductions on account of losses, it was
further provided t h a t capital lost should be made up
forthwith b y calls upon the unpaid portions of shareholders' subscriptions and by the application of all net
profits.
Seventh. To keep dividends within bounds until the
b a n k should accumulate a rest or reserve fund. Taking
a lesson from t h e extravagant policy of the Bank of Upper
Canada, Parliament forbade dividend or bonus in excess
of 8 per cent per annum until t h e rest or surplus of a
bank, after deduction of all b a d or doubtful debts, should
equal 20 per cent of t h e paid-up capital stock.
Eighth. To penalize the b a n k for suspension of the
p a y m e n t of any of its liabilities, continuing for ninety
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days, b y forfeiture of its charter, except for t h e purpose
of making certain calls and of winding u p its business.
Ninth. To m a k e t h e liability of shareholders to t h e
a m o u n t of their subscriptions and to an equal a m o u n t in
addition certainly available and effective. Directors
were empowered t o enforce this liability to t h e extent
deemed necessary without waiting for t h e collection of
debts to t h e b a n k or the sale of its property. Calls for
not more t h a n 20 per cent at intervals of not less t h a n
t h i r t y days or on less t h a n thirty days' notice became
m a n d a t o r y so soon as a suspension had continued for six
months. Shareholders defaulting lost all claim in t h e
estate of the b a n k without preventing t h e recovery of t h e
calls. By this provision, likewise suggested b y t h e recent
failure, it was expected to shift the burden of waiting for
dividends from t h e creditors to t h e shareholders of a failed
bank. Further, to safeguard such creditors, t h e liability
of the transferor of bank shares, t h e transfer of which
should be registered within thirty days prior t o a suspension, was continued, saving his recourse, of course,
against t h e transferee.
Tenth. To give shareholders the right to cast in t h e
meetings of t h e bank each as m a n y votes as he h a d held
shares for three months prior to t h e meeting.
Eleventh. To require t h a t directors should each hold
of the stock of t h e b a n k not less t h a n $3,000 when paidu p capital was $1,000,000, not less t h a n $4,000 when t h e
capital was $1,000,000 to $3,000,000, and not less t h a n
$5,000 when the capital was over $3,000,000; to empower
shareholders to regulate by by-law t h e qualification a n d

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number of directors, which should be not less than 5 nor
more than 10, the method of filling vacancies occurring
between annual meetings, and the remuneration of the
president, vice-president, and directors; finally, to continue the restriction of directors' discounts, whether
for themselves or for firms in which they might be
partners, to one-twentieth of the total discounts of the
bank,
Twelfth. To require the transmission of certified lists
of shareholders, showing their residences and their holdings, to the minister of finance each year.
Thirteenth. So to amend and expand the monthly
return to the government that the condition and character
of each bank's assets and liabilities could be better understood. Thus the new schedule contained a special
heading for government deposits, whether payable on
demand or after notice; on the assets side, separate headings for loans to the government, overdue discounts not
specially secured, overdue debts secured and for real
estate, other than bank premises, and mortgages on real
estate sold by the bank.
Fourteenth. To constitute the making of willfully false
returns, and the giving of an unfair or undue preference
to any creditor of a bank, misdemeanors, the guilty
persons being further held responsible for all damages
sustained by those whom they set about to injure or to
deceive.
Fifteenth. To provide for the extension of existing bank
charters, with amendments embodying the foregoing
provisions, by a species of letters patent, which would be

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issued by the governor in council upon a favorable report
from the minister of justice and the treasury board. a
Further provisions limited to chartered banks the issue
of notes intended for circulation by a penalty upon unauthorized issue of $400 for every offense, forbade the issue
of notes for less than $4, applied all pertinent clauses of
the measure to the bank acting under royal charter and
to the bank of the principal partners en commandite, and
continued the bank charters then in force to January
1, 1872.

Contrary to the minister's first suggestion, new banks
were not allowed to come into existence, as old ones were
to be continued, by letters patent. Parliament refused
to give this element of its jurisdiction up. Neither were
the banks required to keep cash in reserve in an amount
equal to at least a fixed proportion of their liabilities.
Sir Francis Hincks had favored this requirement at first,
and a few of the bankers took the same view. But the
argument against the theory of a fixed reserve offered by
most of the bankers, in conference with the minister during the preparation of the resolutions, was strong enough
to persuade him to abandon it. Much could be said, and
in fact was said, in favor of making its notes a first charge
upon the assets of an insolvent bank. The possibility that
depositors might start runs in order to convert ordinary
into preferred claims seemed to Sir Francis to jeopardize
the stability of the banks, and accordingly he rejected the
proposal of a noteholder's prior lien.
« The treasury board is a commission consisting of the minister of finance
and any five of the other members of the privy council. The minister of
finance is the treasurer, and has as assistant a deputy minister to whom
most of the routine is intrusted.
Rev. Stats, of Canada, 1906, chap. 23.)
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Obliging the banks to use government paper for a good
proportion of their reserves was only one way in which
the finance minister proposed to invade what champions
of the banking interest were pleased to consider vested
rights. Another limb of his policy was considerably to
augment the general circulation of Dominion notes. By
canceling the privilege of bank issue under $4 a further
certainty of markedly wider use for the legal-tender paper
was established. The minister took care to have the
power to meet such demands ready at hand. The arrangement for issue and redemption by one of the chartered banks, in force since 1866, was brought to an end,
and the management of the government circulation
turned over to officers of the government. Authority
was taken to establish offices for issue and redemption—
branches of the receiver-general's department—in the provincial capitals, and to increase the whole issue, by not
more than a million at a time, at intervals of not less than
three months, to the total of $9,000,000. Against this
the act (33 Vic, c. 9) ordained that the receiver-general
should hold specie and Dominion debentures to the
amount of the circulation outstanding—debentures not
to exceed 80 per cent of the circulation; the specie, as a
rule, to be equal to 25 per cent of the debentures (20 per
cent of the circulation) and never less than 15 per cent,
Issues in excess of $9,000,000 were to be covered by
specie, dollar for dollar, and of notes so covered the issue
to any quantity necessary might be undertaken.
So far as circumstances permitted, the measure " t o
regulate the issue of Dominion notes," was meant to
reproduce in Canada, the issue department of the Bank
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of England, in all that department's essential principles
of organization and work. Sir Francis Hincks believed
" t h a t the functions of the issue department should be
automatically confined to the exchange of gold for notes
and vice versa; that an amount can be established which
may, with perfect safety, be issued upon public securities,
and all beyond that fixed amotmt in gold.'' Under pressure
of political exigency, excess of issue over $9,000,000 was
permitted in 1872, against gold holdings of but 35 per
cent. (35 Vic, c. 7.) The Liberals, newly come into
power in 1875, changed the rule to 50 per cent in gold
for the amounts outstanding between $9,000,000 and
$12,000,000, and dollar for dollar against circulation in
excess of $12,000,000. (38 Vic, c 5.) As the area of
the Dominion extended, additional branch offices of the
receiver-general's department were opened in Prince
Edward Island, British Columbia, and Manitoba. In
1880 the limit of issue against specie and debentures was
extended to $20,000,000 and the specie reserve required
against anything less than that sum reduced to 15 per
cent, cover for another 10 per cent of the circulation,
however, being stipulated in the form of debentures of the
Dominion guaranteed by the government of the United
Kingdom. (43 Vic, c 13.) Thirteen years later, an act
of 1903 once more increased the amount but partly to
be covered by specie to $30,000,000. (3 Edw. VII, c 43.)
In later years the government has held gold in amounts
generally equal to, and sometimes greater than, the
quantity of Dominion notes in the reserves of the banks.
No serious practical inconvenience has been caused by
the legislation in the shape it was given under Sir Francis
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Hincks, while t h e treasury has gained considerably from
t h e privilege of providing t h e small notes needed b y the
country a t only nominal cost. With t h e chartered institutions furnishing the fluctuating volume of issues of
larger denominations, a n d the government the small
change from $i upward, Canada has presented, since
confederation, rather an exceptional example of t h e concurrent circulation of currencies regulated b y t h e antagonistic theories of the banking principle a n d of the
currency school.
F u r t h e r to increase the Dominion's command of ready
funds, t h e minister of finance, and parliament with him,
decided in 1871 to t a k e over the government savings
banks and savings banks authorized to invest their
deposits only in government securities, which h a d been
established prior to confederation in the maritime provinces a n d to provide for t h e opening of additional offices.
At t h e same time changes were made in t h e regulations
governing the post-office savings banks, authorized in
1867. Henceforward the receipts of these offices, as
well as those of the government savings banks, were to be
paid into the consolidated revenue fund, and payments
which might be demanded from such offices were to be
m a d e out of t h a t fund. No arrangement for a reserve,
nor for the investment of deposits in securities was provided for either sort of bank. In the administration of
its own savings banks, or of the post-office savings banks,
the government took no particular care to limit the
advantages of this service to the need)' and uninformed.
The interest paid was so high (4 per cent until 1889, a n d
then 2>% P e r cent until 1897) and the limit p u t upon
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individual deposits so generous t h a t for rising t h i r t y
years t h e chartered banks found the government one of
their strongest competitors, as well for more or less
permanent deposits a t interest, as for saving deposits in
the stricter sense of t h e term.
In t h e form it finally took, the b a n k act of 1870 was not
acceptable to the banks. T h e provisions for continuing
by letters p a t e n t t h e corporate life of banks whose charters were a b o u t to expire was a n innovation to which t h e
grant of charter b y Parliament was preferred. Inasmuch
as b u t one b a n k had taken advantage of t h e measure
passed the preceding session, the ministry determined
early in 1871 to draft a new law, " a general banking act,
which would embody, not only t h e provisions of t h e previous act of the last session, b u t also t h e general provisions of what might be termed t h e internal regulations of
b a n k s . " In this the bank charters were to be extended
for ten years.
The measure thus described, a document of some
seventy-seven sections and t w e n t y three pages, became,
when passed, the first bank act of the Dominion under
which the banks actually worked. (34 V i c , c. 5.) Only
a few changes were made in t h e new provisions enacted t h e
preceding year. One such change—it can scarcely be
called an improvement—relaxed the requirement of a
large paid-up capital as a security to the public creditors
of a bank. The least authorized and subscribed capital
on which a bank might start operations was left as before
a t $500,000, b u t the new b a n k might now open for business with only $100,000 paid up, t h e p a y m e n t of a further
sum of $100,000, however, being required within two
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years. The provisions regarding loans upon warehouse
receipts a n d similar documents, in one aspect really m a t ters of commercial law, b u t now, as in previous legislation,
developed as b a n k law, were revised and amended. The
double purpose of these changes was to simplify procedure
and to extend the application of the statutes permitting
loans on the security of commodities stored and awaiting
sale, or on the way to market, passing into, out of or
through the country or in process of conversion from t h e
raw state to finished manufactured product. One short
declaratory clause, struck out in 1879 (42 V i c , c. 45) after
convincing experience of its pernicious possibilities, permitted a b a n k to lend upon the collateral security of the
shares of a n y other bank. The prohibition against lending on the b a n k s ' own shares was retained, and in 1875,
made still more severe by clauses forbidding banks t o
trade or to deal in its own stock. In other particulars,
the new law presented no departure in principle from, the
general measure passed t h e year before. For t h e purposes
of closer examination, however, the document is presented in full in Appendix 1.

S. Doc. 332, 61-2

8

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V . — L E G I S L A T I O N AND D E V E L O P M E N T ,

1867-1890.

F r o m the date of confederation to the 1st of J a n u a r y ,
1890, the number of banks under Dominion jurisdiction
increased from 28 to 1,8; their paid-up capital from
$32,500,000 to $60,289,910; circulation from $10,102,439
t o $33,577,700; total liabilities, other t h a n capital a n d
rest, from $44,548,376 to $171,684,322; and their total
assets from $80,722,834 to $252,166,623. T h e periods of
most rapid growth were 1869-1873 and 1880-1883*
There was little rally from the stagnation of the middle
eighties prior to 1888.
Adequately to set forth the reasons for t h e fluctuating
fortunes of the banks in this period, or to explain t h e
forces making for t h e marked expansion of the decade
1898-1907, is decidedly the task of the economic historian.
To separate the story of the growth of a group of b a n k s
in point of profit or resources, or even of variety of business, from t h a t of the agricultural, industrial, commercial,
a n d financial progress of the community from which the
banks draw their gains, is scarcely practicable here.
Comprehensively to set forth the intimacy of t h e connection of individual banks with certain industries, or
groups of industries, or with certain sections of t h e country, even in t h e case of banks so catholic in their choice
of business and of scene as the Canadian banks h a v e
come to be, involves too m a n y personalia, too great a n
abundance of minute detail. So far as the first great
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expansion of 1869-1873 is concerned it is not clear that
the Canadian economy was under influences essentially
different from those which brought about the tremendous
increase of trade and speculation which preceded the crisis
of 1873 *n other parts of the commercial world.
Contemporary observers called the period, and rightly,
' 'an era of remarkable prosperity." Swift advance was
the characteristic condition in almost every direction.
Thus the Dominion government was able between 1867
and 1874 to increase the public debt from $93,000,000 to
$141,000,000; the federal revenue from $13,600,000 to
$24,200,000; total exports, $57,000,000 in 1868, rose to
$89,000,000 in 1873-74; imports in the like period, from
$73,000,000 to $128,000,000. Between 1870 and 1875 the
railways of the country were extended from 2,497 to 4,826
miles. Upon the Intercolonial road there were spent
some fifteen and a half millions. Railway construction
and building operations at home, and the insistent demand for products of the forest abroad, greatly enhanced
the value of all kinds of timber, with the ultimate effect
of attracting excessive investment in the lumber industry
and of inflating the value of timber limits and timbered
land. Under the stimulus of the prospective cheapening
of freights, and of the sanguine confidence with which men
generally viewed the future, there were large and sometimes
more or less extravagant projects of manufacture floated,
artificial impulse being supplied in many cases by the disposition of municipalities liberally to bonus incoming concerns. Easy money and what were read as certain signs of
enduring possibilities of profit, combined to assure a ready
welcome for promotions of joint stock companies, and
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especially of those devoted to financial and public-service
schemes. Greater still, perhaps, was the influx of capital,
and rather too often of credit, into a wide variety of commercial endeavor. Long time accorded wholesalers by
the English export houses, liberal terms passed on by
these to retail traders, and granted with a deal of carelessness concerning the record or sagacity of the recipients
of credit, prepared the way for widespread embarrassment
when the power or disposition of the consumer to maintain purchases at boom volume suddenly fell off.
While the country prospered, the banks fared well.
With the great advances making in manufacture, transportation, and general trade, and with millions of bank
capital struck off the provision of Ontario by the failures
of 1866 and 1867, there naturally appeared a call for more
facilities from the borrowers' side, and, from the investors'
view, an opportunity for additional banks. What followed justifies the inclusion of bank expansion, whether
in point of number or of apparent resources, among the
most conspicuous of all the speculative growths of the
period. Beginning in May, 1868, the movement for new
banks continued until June, 1874, with the result that no
less than 28 projects were carried to the point of obtaining incorporation from Parliament. Nine of these charters
were forfeited for nonuser, but by the end of 1874 the
number of new banks opened for business in this term had
risen to 19.
Larger and more rapid than any additions due to new
ventures, however, was the increase of banking capital
effected by the older banks through calling up new shares.
In this same term, when $31,000,000 net, or more than
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$34,000,000 gross, were added to the paid-up capital stock
of the Canadian system, half the sum was provided by
three of the banks established prior to confederation.
Twenty others of the older banks added some eleven millions to capital in blocks of from one to eleven hundred
thousand each. In a little more than seven years the
capital invested under Dominion regulation was doubled.
Total liabilities were nearly trebled, having been increased
from $44,500,000 to $126,000,000; total assets from about
$80,000,000 to more than $200,000,000. The increase of
bank capital continued for some time after the beginning
of the general reaction which followed the panic and
crisis in the United States. Figures for paid-up stock
came close to the high point of the thirty-three years,
1867-1899, in June, 1876, when 41 banks reported $67,199,051. In so far as there had been speculation in bank
shares upon borrowed funds, there was an element of
artificiality in this increase. Loans upon the collateral
security of shares of other banks were reported for a total
of $3,813,000 in December, 1873, and at $5,308,000 a year
later. How much surreptitious lending there was by
each upon its own shares, a practice in which some of the
banks had certainly engaged, the return to the government does not reveal. As late as 1890 the banks were
faring comfortably with $6,000,000, in round numbers,
less paid-up stock than they nominally had in 1876.
That once well started, the movement was pushed to
excess seems beyond question, but justification for a
good part of the expansion could be derived from the
development of the banks' business. Thus their note
issues practically trebled in volume between 1868 and 1873
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(December), the rise being from $10,157,483 to $29,016,659,
while notes and bills discounted increased in the same
time from $54,899,000 to $131,996,000.
However reckless, however frenzied, the fashion in
which the future had been discounted, the records of the
time seem to show little in the trade or banking situation
of Canada, in the latter part of 1873, wholly parallel to the
American crisis of that year. In the strict sense of the
term, Canada suffered no panic. Money became scarcer
and dearer, a deep depression of the timber market began
as early as June, and, except in the grain business, which
was helped by good English demand, a general slackening
of trade occurred. Through 1874, the effort to restrict
accommodation was hampered by the necessity of supporting many debtors whose assets were likely to prove deficient, if realization were forced forthwith. It was not
until 1875 that the stringency was generally felt in the
fullest force. Early in that year a heavy contraction
occurred in both the circulation and deposits of the banks,
but although the drain reached $12,500,000 in three
months, total discounts were reduced by scarcely 2
per cent. Failures for $28,843,000 occurred in Canada
in 1875, or in twice the number and for nearly four times
the liabilities of the year before. The period of readjustment was long; the recovery exceedingly slow. Just
when normal conditions were restored would be hard to
determine; little marked improvement in business appeared
before the fall of 1879. Meanwhile, not only in the carrying trade, in the lumber and timber industries, and in
retail trade, where many of the gravest excesses had
occurred, but also in the coal, cotton, salt, and slate
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industries, the process of sanitation was proving difficult
and costly for those immediately concerned. At the
same time it was expensive for the banks. In December,
1874, their current loans were reported at $139,379,000;
four years later at $97,603,688; the circulation on like
dates fell from $29,000,000 to $22,000,000. Notwithstanding all that was written off in these trying years,
unsecured overdue debts rose from$ 1,494,000 to $2,921,000,
while overdue debts secured by real estate were doubled,
and the holdings of real estate, other than bank premises,
increased from $575,499 to $2,383,474.
By way of reductions of capital stock, amalgamations
in which proprietaries of one or both banks took new stock
of less value than the par of their old, or by voluntary
liquidation, seven banks effected, independently of anything written off their surplus funds or rests, a diminution
of the paid-up banking capital of Canada amounting to
$6,500,000 between 1875 and 1880. La Banque Jacques
Cartier reduced its capital from $2,000,000 to $500,000;
the Merchants Bank of Canada from nearly $9,000,000 to
a little over $6,000,000; the St. Lawrence Bank, changing
its name to the Standard Bank, reduced its stock by about
$150,000. The Metropolitan Bank of Montreal, with a
capital of $800,170, went into voluntary liquidation in
1876, the shareholders eventually receiving about 57 per
cent upon the par value of the stock. Stockholders of the
Stadacona Bank, who decided on like action in 1880,
recovered the full face value of their shares. In 1875 the
Bank of the Niagara District was amalgamated with the
Imperial Bank, and in 1876 the Royal Canadian with the
City Bank, the corporation thus formed being renamed
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t h e Consolidated Bank. In these two cases, however,
there appears to have been no noteworthy lessening of t h e
capitalization involved. The market course of b a n k
shares, a n d t h e hardships suffered b y shareholders in t h e
period of contraction may be judged b y estimates of t h e
depreciation in t h e value of bank stock, made a t t h e time.
I n 1879 Sir Francis Hincks reckoned the shrinkage of five
years a t nothing less t h a n $25,000,000. If account were
taken merely of what appeared in the government return,
or in the annual balance sheets, the calculation of t h e
changes in t h e par value of paid-up stocks and surplus
funds or rests would show shareholders' losses of practically
$12,000,000 on this score alone.
Such figures of course include allowance for capital sunk
in banks which failed. Of downright failures there were
three. Three other banks stopped p a y m e n t in the spring
or summer of 1879, b u t were enabled to resume operations
in time to save their charters. The worst of t h e failures,
whether in point of liabilities or creditors' losses, was t h a t
of the Mechanics' Bank of Montreal. Suspended for three
months in 1875, it had managed, b y a reduction of capital
amounting to 60 per cent and more and b y subscriptions
to new stock, to get once more on its feet. B u t it found
little, if any, support in reputable business circles. I n the
diflicult period succeeding 1876 its discount business
shrank to an inconsiderable volume of undesirable loans,
while its circulation, much larger in proportion to capital
t h a n t h a t of the other Montreal banks, was kept o u t only
b y improper and illegal means. After the failure, solvent
shareholders were called upon for t h e whole of their double
liability, b u t even with w h a t this added to t h e estate
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neither note holders nor other creditors received more t h a n
5 7 / ^ per cent of their claims. At the final suspension t h e
total liabilities, exclusive of stock, were $547,238. Independently of interest losses the public lost some $240,000
by t h e collapse. So m a n y of its obligations were in the
form of notes, and held by those who could ill afford to lose,
t h a t t h e possibilities demonstrated by the Mechanics' failure aroused general indignation and concern.
The failure of the Bank of Liverpool was different, in this
wise; t h a t its note issue was small and appears t o h a v e
been redeemed rather promptly by t h a t bank, the chief
creditor of the one in default, which bought t h e Liverpool's assets. T h e Dominion government's claim was
$84,996, t h a t of other banks $35,000, and of the public
$12,671. After long litigation the double liability was
enforced against the shareholders and about 96 per cent
distributed upon t h e liabilities a t the time of failure—
$136,480. The Consolidated Bank, although in August,
1879, ^ also had become bankrupt, was wound up with less
discredit t h a n either of the other two. Eventually b o t h
notes and deposits were paid in full, and enough was saved
from the wreck to divide among its proprietors about 23
per cent of the par value of a stock reduced from the original sum by 40 per cent. While shareholders sunk more
t h a n $3,000,000 in this venture, the public loss was limited
to such discounts as were taken on claims by notes or deposits between the time of suspension and the time t h e
liquidator w a s x e a d y to redeem/'
a
From 1867 to 1876 there was but. one failure of a chartered bank in
which the public suffered loss, that of the Bank of Acadia, which went down
in 1873, after a corporate existence just short of four months. Out of this
wreck, however, neither noteholders nor other creditors recovered more

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trends. One of these was towards the issue of irredeemable paper money by the government. Conceived and
held partly as logical corollary to the doctrine underlying
the "national policy" of high protection, which had been
approved at the polls such time as the Conservatives were
returned to office, the theory that exchanges should be
made with currency based upon labor, land, or the faith
of the state, was embraced by such numbers and with
such enthusiasm that the leaders of the party in power
felt bound to show it no small respect. Any indigenous
preferences for fiat money had been strengthened, of
course, by comparisons, usually to Canada's disadvantage, between the progress of the Dominion and the
growth of the United States since the civil war. Many
of what were dubbed the "rag baby" arguments used in
Canada were drawn from the arsenal of the influential
and energetic greenback party south of the border.
Champions of a "national currency," however, lacked the
backing of business which stood the national policy in
good stead, and apart from considerate, even deferential
attention to the presentation of their proposals in the
house, got nothing further from the government than an
increase, cited earlier in these pages, of the limit upon
the amount of Dominion notes which might be but partly
covered by coin.
The other movement, to which most thinking persons
lent their sympathy, if not their active help, took shape
as a demand for a better regulation of the issues of the
banks. The notes of the banks which had failed in 1879
fell to a discount directly they could no longer be redeemed. What faith there might have been that the
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Since the lives of all the banks acting under Dominion
charter were to expire July i, 1881, it became necessary
in t h e session of 1880 to take up the question on w h a t
terms to renew them. Some amendments to t h e legislation of 1871 had been m a d e from time to time as t h e need
appeared. Most important of these was the substitution,
already noted, of prohibition for permission of t h e practice
of one bank's lending upon another bank's shares (42
V i c , c. 5). Both in 1873 (36 V i c , c 3) and in 1875 (38
V i c , c 17) t h e form of the monthly return h a d been expanded to the end of exposing separately as well the accounts with t h e provincial as with the Dominion governments, of distinguishing between balances due to or from
banks or agencies in the United Kingdom and similar accounts in foreign countries, and of presenting the liabilities of directors, whether as primary promissors or as indorsers. These were minor changes; now, it was expected, a general extension of charters would be marked
b y an effort more or less thoroughly to revise the b a n k act.
I n the discussion a n d thought of this time upon questions of banking and currency and in the movements
which proceeded from them, there appeared two main
t h a n 20 per cent upon total liabilities of $106,914. The debts of the
Commercial Bank of Canada were redeemed at face during its suspension,
and of course assumed in full by the bank, to which the estate was sold.
Payment in full was also made to the creditors of the Commercial Bank of
New Brunswick, which failed in 1868. The Westmoreland Bank, likewise
domiciled in New Brunswick, was creditably liquidated, though at the
expense of the shareholders from whom the double liability was called up.
The Gore Bank—third of the banks to begin business under an Upper
Canada charter and the last to give up the fight—was absorbed by one of
its younger rivals in 1869, at about 5 7 ^ per cent on its nominal capital,
after the stockholders had already effected a 40 per cent reduction in t h e
value of their shares.

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issues of the Consolidated Bank would be paid a t par
was shaken b y disclosures of the shameful mismanagement and b y the notorious inadequacy of the assets of
the Mechanics' Bank. Besides, there was m a n y a holder
of failed b a n k s ' notes who could not wait; between
realization a t a discount and waiting for p a y m e n t in full
he had no choice when such a note was all t h e cash he had.
To cure such troubles as had appeared under the
Canadian system of regulation, those were not lacking
who believed the prescription ready in the example of
the United States. Once again, though without t h e
ministerial backing it had in 1869, there appeared t h e
plan to remodel Canadian charters on American lines
and to secure t h e note issue by special deposits of bonds.
Again, also, the inferior stability, the deficient elasticity,
and the higher cost of the service of the " n a t i o n a l "
banks proved sufficient argument against t h e plan.
Others suggested an audit by shareholders or inspection by
the government, believing t h a t with earlier discovery and
recognition of questionable assets in the bill books of t h e
banks bank embarrassments would be less frequent and
serious t h a n in 1876-1879. This proposal was rejected,
partly because of the great practical difficulty—some
called it the impossibility—of an inspection b y any b u t
a bank's own officers, when t h e property to be scrutinized was not under one roof b u t in as m a n y different
places as a bank happened to have branches. Not without
weight, too, was t h e responsibility likely to be imputed
to t h e government in the case of failure b y banks which
its inspectors had passed.

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The plan most widely favored and the protection for
note holders which was advocated by the banks themselves was to make the paper intended for circulation
a first charge or prior lien upon the assets of the issuing
banks. The total assets of all the banks were then about
eight times their debts upon notes; for single banks the
proportion was seldom as low as six, and for some it
stood as high as ten. Failure, it was believed, would
inevitably befall a bank before its assets could be squandered or mismanaged until they would fetch but a sixth
or a tenth of their nominal worth. Over and above the
assets, there was the contingent or reserve liability of
shareholders upon their stock, equal, if all collected, to
the highest amount of circulation a bank might lawfully
put out.
Sir Leonard Tilley, finance minister in the government
of the time, made the prior lien of note holders a central
feature of his proposals for revision. Objection to the
change was offered by the Opposition on the old score that
the preference of note holders enhanced the danger of
depositors' runs. With the banks now willing to take
the risk—asking for it, in fact—the objection had lost
most of its weight. It was provided in the act to amend
the bank act, to which the royal assent was given May
7, 1880, and which was to become effective July 1, 1881,
" that the payment of the notes issued by any such (chartered) bank and intended for circulation, then outstanding, shall be the first charge upon the assets of the bank
in the case of its insolvency " (43 Vic, c. 22, s. 12.)
In increasing to $20,000,000 the quantity of Dominion
notes for which cover of but 25 per cent in specie and
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guaranteed debentures of the Dominion needed to be
kept, the ulterior purpose of the government was to
expand this form of non-interest-bearing debt ; so soon as
might be, to the new limit allowed by law. To serve this
purpose, the banks, which had been issuing notes for $4
each since they were deprived of their $1 and $2 note circulation in 1871, were now restricted in their issue privileges to notes for $5 and multiples of that sum. Further
to facilitate the injection of more legal tenders into the
country's currency, it was enacted that every bank when
making payments should pay, if the payee so desired, any
due sum up to $50 in Dominion notes for $1 or for $2
each. The proportion of Dominion notes which banks
were obliged to keep in their reserves was increased from
usually half and not less than one-third to not less than 40
per cent. Being but incidental to the government's
Dominion note policy, already approved by the house,
these clauses provoked less criticism than if they had
stood alone. Along with the other amendments and additions to the bank act, recommended by the ministry,
they were passed with practically no debate.
Chief, perhaps, of these other provisions was that by
which the form of the monthly return became fuller and
more detailed. Henceforth separate report was to be
made of loans from or deposits made by other banks in
Canada, secured; loans from or deposits made by other
banks in Canada, unsecured, and of the corresponding
items on the assets side; of Dominion securities, of other
government securities, of loans to corporations and of
loans to municipal corporations, of real estate other than
bank premises, and of mortgages on real estate sold by
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the bank. Another suggestion, derived from the experience of 1879, ted t ° the exemption from liability on bank
shares of persons holding stock as executors, guardians,
administrators, or trustees, if the representation were declared in the bank's books. Recourse in such cases was
reserved against the estate and funds held in trust. The
term for which a bank might hold real property, not
needed as bank premises, was limited to seven years from
the time the property was acquired. Legislation of 1879,
which required that contracts for sale of bank shares
should specify the numbers of the shares, having proved
impracticable of enforcement, was repealed.
Such sections of the bank act as dealt with loans upon
bills of lading and warehouse receipts were expanded and
considerably improved. Finally, clearly to distinguish
credit establishments recognized by the Dominion from
private ventures—some of them of questionable creditworthiness—the use of the title " b a n k " by others than
chartered banks was made a misdemeanor.
Three years after the first general revision, or in 1883,
the government came to the conclusion that the penalty
of charter forfeiture provided as sanction for certain prohibitions of the bank act was too severe. Accordingly,
money penalties were established for a number of infractions in punishment for which the government would be
reluctant to deprive a bank of its existence. Every day's
delay after the time set for the annual dispatch of the
list of its shareholders subjected the bank in default to a
fine of $50. Against note issue in excess of paid-up
capital stock a fine of $100 was provided for issue of less
than $20,000 beyond the limit; one of $1,000, for $20,000
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to $100,000; of $5,000, for $100,000 to $200,000; a n d of
$10,000 for $200,000 or more of excess. Neglect to keep
40 per cent of t h e reserve in Dominion notes cost $250
for each offense; failure to transmit the monthly return
within twenty days of the end of t h e month, $50 for each
day's delay. F o r infraction of the clauses (sees. 40, 43,
46, and 51) of t h e b a n k act prohibiting loans upon real
estate, t h e bank's own stock a n d t h e like, a fine n o t to
exceed $500 was provided for each offense. To t h e form
of t h e monthly return were added headings for t h e a m o u n t
of the rest or reserve fund and t h e rate of t h e last dividend. F u r t h e r to guard against misapprehensions by the
uninformed public, the use of the titles banking company, banking house, banking association, banking institution, or banking agency b y persons or firms not working
under the b a n k act was made a misdemeanor except t h e
phrase " n o t incorporated" were added to the title.
The multiplication of bank charters all b u t ceased with
t h e close of t h e year 1874. ^n t h e seven years 1875-1881,
only two new incorporations w~ere passed by Parliament;
for neither one of these projects were the promoters able
t o find t h e capital. But the improvement in business
conditions which began to be perceptible late in 1879,
presently, under the impulses provided b y t h e new
protective tariff, extensive railway construction and the
rapid development of the province of Manitoba, took the
form of an active expansion which lasted well into 1883.
This improvement served again to stimulate the organization of additional banks. Thirteen new charters were
granted between 1882 and 1886—four each in 1882 and
1884, three in 1883, and two in 1886. Eight of these
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charters were forfeited in time for non-user within the
term prescribed by the several acts. Of the five banks
which did start but two survived the year 1894. Meanwhile reductions of capital by some six of the banks,
amounting in all to $4,070,000, four failures, and two
liquidations left the capital at the end of 1889 at
$60,057,235, $72,000 less than four years before. The
highest amount reported at the end of any year was in
1885—$61,763,279—when 41 banks were reporting, as
compared to 36 in 1879 a n < i 3$ in 1889. The business of
these institutions, however, showed substantial growth,
deposits by the public having increased by 85, circulation
by 50, total liabilities by 63, and total assets by 42 per
cent. On the whole, a considerable advance in practice
appears to have marked the decade. The lessons of
1876-1879 were fairly fresh in mind; the soundness and
security of business offering was given more attention
than in the days when expansion was accounted an end
in itself. The application of borrowed funds became a
point for minuter inquiry, and, as a rule, the banks less
frequently discovered, too late to be of much help, that
they had been finding the price of real estate, plant, or
other fixed investment. The increase of branches contributed also to the stability and strength of the banks.
Seven of them, for example, had agencies in Manitoba
when the land boom collapsed in 1882. So serious were
the losses there, not by reason of participation of their own
in the inflation of land values, but because of the thoroughness with which the whole commercial community
had been infected with the speculative virus, that three
out of the seven Winnipeg managers were dismissed.
S. D o c 332, 61 ~2

9

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Bad debts which would have swamped local banks, perhaps for all time, were taken care of by the Canadian
banks which suffered them without other outward sign
than reductions of capital, smaller additions to rest
account, or lower dividends upon their stock.
Of the banks which failed in this period, the Exchange
Bank of Canada, domiciled in Montreal, went down the
first. Chartered in 1872, it had called up the whole of
$1,000,000 authorized capital by June, 1875. I*1 August,
1879, its position became such that it had to suspend payment, though only for a month. Half its capital was
written off in 1881, the directors admitting losses to the
amount of $341,000. After this untoward episode, the
directors appear to have engaged in the effort to bolster
the standing of their bank by extensive trading in its
stock. A twelvemonth before bankruptcy stock fetched
as high as $179 a share of $100 par. For reasons that the
government never made satisfactorily plain, the bank,
more than half of whose stock was owned by prominent
Conservatives, got help from the government in the
spring of 1883, in the sum of $300,000. Probably there
was abundant truth in the criticism of the Opposition that
the bank was a political bank, and an example of the
disasters awaiting a political bank. Apart from that,
the management was both unscrupulous and unsound.
Indeed, the managing director was discovered himself to
be owing the bank $226,000 when it failed September 15,
1883. A note issue of $380,218, government deposits of
more than $300,000, and public deposits (many of them
attracted by rates considerably above the market) rising
$1,600,000 were the principal items of liabilities for
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$2,430,000 at the time of the final suspension. By virtue
of the priority accorded such claims, the notes were paid
in full, or rather payment could be had in full, within
two months of the suspension. The discount upon this
paper, suffered by those who sold it in the street, was
never reported as higher than 10 per cent. To other
creditors, even with the help of all that could be collected
upon the double liability of shareholders, the dividends
were only 6 6 ^ P e r cent.
A worse outcome awaited the creditors, other than
note holders, of the Maritime Bank of the Dominion of
Canada, whose head office was at St. John, New Brunswick. From the time of its organization in 1872 to 188384, nearly $600,000 of its resources were sunk in a series
of more or less speculative operations, most of them
unduly large advances to a few favored firms or individuals.
For this period of its existence it was in a great measure
a one-man bank. Though reorganized in 1884, on a capital
reduced to $247,000 and placed in new hands, the bank
seems still to have followed the course which its experience
roundly condemned. By 188 7 its overdue debts amounted
to $650,000, more than half of this owing by bankrupts. A sum exceeding twice or thrice its capital had
been put by the bank into certain lumber accounts, for
the payment of which the sponsor was really but one
concern. To the end of prolonging its existence, the
management resorted to the plan of kiting sterling bills.
A week before the bank failed, in March, 1887, it had
$205,000 on deposit by the Province of New Brunswick
and $70,735 of Dominion funds, among total liabilities
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cessful in suits to enforce the crown priority, the law in
New Brunswick being more favorable to the Crown than
in Quebec, where like litigation begun by the Dominion
against the Exchange Bank had failed. Other creditors,
apart from note holders, received 10.6 per cent of the
amount of their claims. The note holders, though two
years passed before the operation was complete, were
paid the face of their claims in full, the amount outstanding at failure being $314,000.
By the Exchange Bank failure, public creditors lost
close to $690,000, exclusive of interest; by that of the
Maritime Bank at least $750,000. From the two bank
failures which occurred in Ontario in August and November, 1887, the public loss was less than $15,000. The first
of these bankruptcies was committed by the Bank of
London in Canada, first established in 1883, and soon
involved by a speculative president in a variety of precarious ventures, among them a loan company under his
control which later became insolvent. Both note holders
and other creditors were paid in full, • and more than
$80,000 upon the $241,000 paid-up stock returned to the
proprietary. In winding up the Central Bank of Canada,
also chartered in 1883 and bankrupt in November, 1887,
it was necessary to collect the double liability from the
holders of the stock. With this help, notes were redeemed
at par and claims of other creditors at 992/ percent. The
history of this bank was one of discreditable practice,
scandalous mismanagement, and more or less dishonest
diversion of the bank's resources to the benefit of an inner
clique.
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The Pictou Bank, having suffered large losses through
the failure of some of the principal debtors, went into
voluntary liquidation in 1887, and after discharging all its
debts, distributed among its shareholders $68,000 odd upon
a capital of $232,000.
The second example of voluntary liquidation was provided by the Federal Bank. Incorporated in 1872, the
bank had gradually increased its capital to practically
$3,000,000. Its management was enterprising, ambitious,
and inclined somewhat to scoff at the conservative policies
pursued by other and older concerns. One of the devices
to which the management resorted was the formation of
a subsidiary company for the purpose of lending upon the
bank's own stock and of supporting the market for its
shares. So well did this ''little machine" work for a
time that the $1,500,000 new capital issued in 1883 w a s
floated at a premium of 40 per cent. All of the new
capital and $250,000 more disappeared in 1885, when the
stock was reduced by act of parliament to $1,250,000.
The year before, in July, losses in Michigan lumber deals,
lockups in Manitoba, and the operations of the machine
having crippled its resources, the bank was saved from
suspension only by the help of $2,000,000 lent for a brief
season by other banks. The new manager then appointed
struggled along until the fall of 1887, when the stock of
the Federal Bank, never high in the public confidence
since the disclosures of 1883, fell below par. Withdrawals
of deposits and redemption of notes for a total of $1,632,000
occurred in the last two months of 1887 and the first of
1888. Called into consultation upon the Federal's case,
bankers of Toronto decided to advance enough cash to
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pay off the liabilities of the bank, provided it were
wound up forthwith with open doors. With the failures
of the Central and London banks fresh in men's memories,
the step was probably a wise one. It meant, to be sure,
an advance of some $2,700,000 at a time when reserves
were particularly low, but it also meant, or at least so
bankers believed, escape from something like a panic and
calls for considerably larger amounts of cash before the
uneasiness roused by another bank failure could be
allayed. The estate of the bank proved sufficient, not
only to repay the helping banks but also to permit a
substantial dividend to shareholders.
In the twenty-three years, 1867-1889, the sum total of
losses suffered by the holders of shares in Canadian banks,
whether by reductions of capital, voluntary liquidation,
failures, or contribution upon the double liability, was not
far short of $23,000,000. Were reductions of rests or the
sums appropriated for losses out of profits to be included
the total of investors' losses would be still higher. But
notwithstanding the failure of 10 banks and the withdrawal, for cause, of 8 others from the field, the loss of
principal inflicted upon the creditors of the banks in this
period was not more than $2,000,000, no matter what the
nature of such creditors' claims.

i3$>




VI.—BANK ACT REVISION OF

1890.

The ultimate security of the Canadian bank note circulation had been put beyond question, in all but the
most exceptional circumstances, by the legislation of
1880, which made the note holder's claim a prior lien. But
the bank disasters of 1883 and 1887 had shown that there
could be a serious interruption of the immediate convertibility, directly the issuer of the notes had failed. Neither
the Exchange Bank's notes nor those of the Central Bank
were subjected to discount greater than 10 per cent in
the time between failure and the beginning of payment,
but in the two years and more which passed before the
liquidator was ready to redeem its paper, those of the
Maritime Bank, fetched as little at one time as 40 per
cent of their face. And in exceptional circumstances,
even the ultimate security was not all that could be desired. Some part of the outstanding issues of banks going into voluntary or involuntary liquidation—that part
which was not presented within the stipulated time—
had been affected by the clauses in the winding-up acts
passed for such banks which permitted the liquidators
or the liquidators' trustee, after a term of years and due
notice, to distribute among shareholders such sums as
had been reserved for the redemption of notes outstanding. It had been found that not all the notes of a failed
or otherwise liquidating bank could be called in within
any set term.
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Still another cause for complaint was to be found in
the circumstance that bank notes did not circulate at
par in all parts of the country. Notes ordinarily were
subject to a discount equal at least to the domestic exchange on the place where they were payable, when offered
in places remote from that of issue. When a branch
office of the promissor was in the neighborhood, the notes
could be used in making payments to such a branch and
hence had better standing. But although the number of
offices had nearly trebled between 1869 and 1889, there
were but 402 offices of chartered banks in the whole Dominion. Being a frequent annoyance, the discount for
geographical reasons constituted no inconsiderable grievance.
A fourth objection to the bank act, as Sir Francis
Hincks had framed it and Sir Leonard Tilley left it, was
the comparative ease of the terms upon which a charter
could be obtained. The increase of small banks, or of
banks started by persons of small responsibility, had been
productive of financial episodes for which the community
had small relish. Even the stanchest champions of competition were agreed that the paid-up capital required of
new organizations should be increased.
Finally, as in previous discussion about banking legislation, advocacy of bond-secured circulation was not
lacking. Among the most conspicuous supporters of proposals to import the system of regulation adopted in the
United States were the president and some of the directors of the Bank of Montreal. The Gazette of that
city presented through 1889 l° n g arguments in favor of

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the plan, mainly because of the security and uniformity
of value it would give the country's currency.
The banks, on their side, began to prepare for revision
as early as December, 1888. One measure contrived to
keep notes at par, however far they might be from the
place of issue, was the completion in 1889 of arrangements by most of the banks under which, working generally in pairs, one bank took up at face, in its own
neighborhood, such notes of the other as might be presented for redemption. Another step, which eventually
led to the organization of the Canadian Bankers' Association, was the decision jointly to work out and to present to the ministry certain suggestions for reform. One
of the most significant and far-reaching of these was the
establishment of a safety fund, calculated to prevent discount whatsoever on the notes of a suspended bank.
The bankers and the minister of finance, then the Hon.
George E. Foster, met in Ottawa January 25, 1890, and
on February 11 and 12. What the government proposed
to do in respect of revision was not communicated to
the bankers at the first meeting, but an expression of
views was invited upon the questions of making the bank
act a permanent statute, of preventing the discount on
the notes of a solvent but distant bank, of preventing
discount on the notes of a bank no matter what the
issuer's condition, of restricting the circulating privileges
of a bank, say, to 60 or 70 per cent of its paid-up stock
or to the average of the past three years, of requiring
the banks to hold fixed proportions of their liabilities in
cash, and of requiring a larger paid-up capital for new
banks.
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I n order t o prevent t h e discount upon notes of a solvent
but distant bank, t h e bankers proposed t h a t banks be
obliged t o maintain t h a t which most of t h e m h a d already
voluntarily arranged, namely, the redemption of their
notes in a n u m b e r of centers sufficient to insure their circulation a t par t h e country through. This was fairer,
t h e y thought, t h a n to compel each b a n k to accept t h e
notes of all other b a n k s ; under t h e suggested plan
t h e burden of redemption would fall on t h e b a n k which
h a d t h e benefit of circulation. To prevent discount upon
notes of a suspended bank, there was submitted t o t h e
m i n i s t e r s consideration t h e project of a safety fund, later
enacted into law, and the suggestion t h a t liquidators
should deposit with t h e Crown, before the final distribution of surplus assets, enough to redeem any notes t h e
books of t h e banks might show as still outstanding.
Objection t o further restriction of circulating privileges
was offered on t h e ground t h a t t h e business of m a n y of
t h e b a n k s was of a sort to which large though fluctuating
amounts of circulation were well nigh indispensable.
There was a possibility of working needless hardship
were rights of issue restricted t o a fixed percentage of
capital, while if t h e limit imposed were t h e average of
three years, some banks would be unable t o meet t h e
annual expansion in t h e demand for notes.
The chief argument, however, was directed against t h e
suggested requirement of a fixed reserve. E v e n conceding t h a t some of t h e Canadian banks had been sailing
too close t o the wind in t h e m a t t e r of reserves, it was held
t h a t a reserve is no reserve if it m a y not be used when
needed. The bankers contended t h a t in the United
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States, where the law fixed the least proportion of cash
compared to liabilities a bank might carry, the rule was
all too frequently honored by its breach, and that it was
a fruitful source of violent fluctuations in interest rates
at the financial centers. Worse than all else, the fixed
reserve was unsuited to Canadian conditions.
Wherever, as in Canada, a borrowing customer is expected to bank with but one bank, the bank, having
granted the customer a line of credit, assumes a tacit
obligation to meet his demands for credit to the amount
of the grant. Multiply such an obligation by thousands,
as a bank with many branches must do, and it becomes
clear that the bank is more or less in duty bound to find
and to advance large sums at times impossible exactly to
foresee. Unusual conditions of trade or finance or even
exceptional weather could conceivably necessitate an
expansion of liabilities, such as is usually coincident with
an expansion of assets in modern banking, which would
reduce the proportion of reserve below the minimum
fixed by law. In such cases, the bankers argued, the
freedom of action would be hampered, and the efficiency
of the country's institutions of credit impaired, to no good
purpose. Further, the obligation to maintain a fixed
reserve would grievously and injuriously weaken their
power to cope with situations such as the difficulties of
the Federal Bank had brought about. The finance minister, however, was obdurate. From his decision to insist
upon this radical innovation the bankers appealed to the
cabinet. Partly by argument, partly by none too closely
veiled a threat to make the question a political issue, the
privy council was induced to overrule the minister of
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finance. The proposals for bank-act revision he submitted
to parliament carried no provision for a fixed reserve.
In the house of commons two other details of his
original project were either modified considerably or
abandoned altogether. One was the proposal of a compulsory external audit, to be conducted by nominees of
the shareholders, the results of which should be communicated to the shareholders at their annual meetings and
to the minister of finance. To this it was objected that
an auditor could not be expected accurate^ to ascertain
the character and value of a bank's discounts—the key
to its whole position—and that consequently a favorable
report from an auditor would be no guaranty that the
condition of a bank was sound. The shareholders' audit,
therefore, was rejected. The other, and subsequently
modified proposal, was one to the effect that a return
should be made each year of the dividends unclaimed for
five years, and of balances in respect of which no transaction had occurred or on which no interest had been paid
for five years. Together with the amounts involved, the
names and last-known addresses of the persons to whom
these sums were due, and the place and time of their last
transaction were to be set forth in the return, and sums
not claimed within three years after the first return in
which they were reported were to be paid to the minister
of finance for the public uses of the Dominion, saving the
right of the person entitled to any sum to recover it on
proper proof of claim. The effort exactly to copy for
Canada provisions more or less common to the bank law
of India, some of the Australian colonies, and Natal failed
in the form first proposed, but the banks were obliged
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each year to report to the government the amount of
balances and dividends, unclaimed and dormant, for five
years preceding, and all the other details which the minister had desired. As it happened, therefore, the revision of
the bank act under Doctor Foster was considerably closer
to his own description than he at first intended—"to
keep the existing system, but to improve it, obviate the
objections and difficulties, and establish new safeguards/'
First of the improvements was the establishment of a
safety fund—the bank circulation redemption fund, it was
styled in the act—to prevent discount upon the notes of a
failed bank between the time the failure happened and
that at which the notes could be redeemed. As originally
constituted, and lodged in the keeping of the minister of
finance and receiver-general of* the Dominion, this fund
was to be made up from contributions of the several banks
enjoying issue privileges, equal each to 2>£per cent upon
their average circulation in the year 1890-91, and to
a further 2% percent upon their average circulation in the
year 1891-92. Thereafter it was to be adjusted annually so that it would be equal to 5 per cent of the average
circulation of the contributing banks, as shown by the
monthly return of notes outstanding in the twelvemonth
preceding the 30th of June, the average being calculated,
however, on the greatest amount outstanding during the
month and not upon what might be in circulation at the
end of the month. "The bank circulation redemption
fund * * * ," it was provided by section 54 of the
ac
t (53 Vic.,c. 31), "shall be held for the following purposes and for no other, namely: In the event of the suspension by the bank of payment in specie or Dominion
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notes of any of its liabilities as they accrue, for t h e p a y ment of the notes t h e n issued or reissued b y such b a n k
and intended for circulation, and interest thereon; and
the minister of finance and receiver-general shall, with
respect t o all notes paid out of t h e said fund, have t h e
same rights as any other holder of the notes of the b a n k . "
The last clause, of course, related to t h e note holder's
private lien.
No p a y m e n t was t o be made out of the fund, however,
unless t h e liquidator of the bank originally responsible
for t h e notes should fail to make arrangements for their
redemption within two months of the bank's suspension.
B u t when occasion should arise to use the fund, p a y m e n t s
were to be m a d e from it, irrespective of the a m o u n t
contributed by t h e bank on whose behalf the p a y m e n t
might be made. W h e n payments should exceed t h e
contribution of such a bank, other issuing banks could be
called upon t o m a k e good the a m o u n t of t h e excess, b u t
not in sums greater in any one year t h a n i per cent of
their average circulation for t h a t year. Such contributions were t o be returned to the banks making them, pro
rata t o their a m o u n t , in case recovery of the whole or any
p a r t were obtained from the failed bank's estate. F u r ther clauses permitted t h e return of its contribution t o
t h e liquidator of a b a n k in process of winding u p , directly
it was clear t h a t adequate provision had been made for
its notes, and enabled t h e minister of finance to enforce b y
suit t h e p a y m e n t of any sum due b y a bank under t h e
regulations governing t h e fund. The precise terms of t h e
b a n k act of 1890 as amended in 1900 and consolidated in
1906 are printed in full in Appendix I I .
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Significant as were the creation of machinery by which
the chartered banks became joint guarantors of each
one's issue of notes, and the psychological effect, due to
this change, upon the standing of the bank-note circulation, practical consequences of at least equal importance
were brought about by the provisions for the payment of
interest upon a failed or suspended bank's notes. Directly
default upon any of its liabilities was committed by a
bank, the act provided, its notes intended for circulation
should bear interest at the rate of 6 per cent per annum
until such time as the liquidator, or other proper official,
published notice of his readiness to redeem them. Should
he fail so to announce his readiness, or, having published
notice, fail to redeem notes as they were presented, they
were to bear interest for such further time as passed
before they were redeemed out of the safety fund. It
was in this manner that in Canada the paper of a failed
bank became worth more in some circumstances, and
never less in any, than the paper of a going concern. In
practice, moreover, not one dollar has ever been paid
from the bank circulation Redemption Fund in the
redemption of failed bank's notes. " The notes of such
banks failed since 1890 have all been met in the ordinary
course of winding up, without resort to this interesting
provision of the bank act." ft
To the end of doing away with the discount upon the
notes of solvent but distant banks, the ministry and
Parliament made obligatory the maintenance of arrangements similar to those already begun by many of the
a Letter of T. C. Boville, Esq., deputy minister of finance, under date
of May 25, 1909.
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banks of their own motion. In requiring the banks,
generally, to insure the circulation of all their notes at
par in any and every part of Canada, the act specifically
commanded the establishment of agencies of redemption
and payment of notes at the commerical center of each
province—Halifax, St. John, Charlottetown, Montreal,
Toronto, Winnepeg, and Victoria. Obedience to the
specific mandate of this section (sec. 55) has sufficed to
effect execution of the general injunction. At the same
time, in forcing notes more quickly back upon the issuing
bank, it has served beyond question as a potent corrective
of any tendencies to inflation of the circulation which the
disappearance of all doubt about its security and convertibility may have brought into play. Whether from
real concern or in a spirit of heckling, the Opposition had
made much in the debate of the possible weakening of
motives for redemption and the likely loss of one of the
most important safeguards peculiar to the traditional
scheme of regulation.
The third and last of the major changes affecting circulation repealed the statute of limitations so far as it
affected the notes or deposits of banks which might
become insolvent or go into liquidation under a general
winding-up act. Moneys of this character payable by
the liquidator and remaining unpaid for three years after
insolvency was committed or winding up began, or remaining unpaid at the time of winding up, if that were
sooner finished, had henceforth to be paid to the minister
of finance, who was to hold them for the uses of the
Dominion, saving the rights of the owners of the unclaimed
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ment by this provision also gained what slight advantage
there might be from notes lost or destroyed, while for
holders of notes current in 1890 or thereafter the certainty of collecting the face of their claims was permanently assured. At the same time the contributors to
the safety fund were protected from claims for redemption which might be repudiated by the estate of the
original promissor on the ground that the time within
which they ought to be presented had expired.
To provide the security of a larger paid-up capital, the
amount upon which a new bank might begin business
was increased to $500,000 subscribed and $250,000 paid
up. And the better to satisfy the public and the government that the foundation was real, it was stipulated
that no bank should issue notes or begin business until
$250,000 of its capital should have lain on deposit with
the minister of finance for at least four weeks, and such
longer period as might elapse until the issue of a certificate from the treasury board. Such a certificate was to
issue only in case the treasury board were satisfied that
the new organization had complied with all the pertinent
provisions of the bank act, and only within one year from
the date the bank's charter was passed.
The clauses pertaining to loans upon warehouse receipts
and bills of lading were once more recast and the provisions as to loans intended to aid in the manufacture of
goods considerably extended. The marked peculiarity of
the provisions, both as to warehouse receipts and bills
of lading, and as to loans to " manufacturers" consisted
in this, that the banks might not take the security or
document transferring the title to goods, wares, or merS Doc 332. 61-2

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chandise, except they acquired such security, or a written
agreement that such security would be given, at the time
of the negotiation of the bill, note, or debt for which the
security was a pledge. Due formalities being observed,
the bank taking documents for the commodities concerned acquired a lien prior to the claim of the unpaid
vendor. For the purposes of the bank act the word
"manufacturer" was defined as including "maltsters, distillers, brewers, refiners, and producers of petroleum, tanners, curers, packers, canners of meat, pork, fish, fruit, or
vegetables, and any person who produces by hand, art,
process, or mechanical means any goods, wares, or merchandise/' Apart from the things usually understood as
goods, wares, and merchandise, the phrase was defined as
further including "timber deals, boards, staves, saw logs,
and other lumber, petroleum, crude oil, all agricultural
produce and other articles of commerce." As first brought
down, the bill permitted loans on the security given by
any person engaged as a wholesale manufacturer or " producer/ ' For fear that "producer" might be held to
include the farmer, whose general credit depended on the
visible possession of divers chattels, such as grain, cattle,
and implements, and because assignment of these under
the form for such transfer would not become notorious
like a chattel mortgage, the word "producer" was struck
out. In their amended form the clauses read:
" S E C . 74. The bank may lend money to any person
engaged in business as a wholesale manufacturer of any
goods, wares, and merchandise upon the security of the
goods, wares, and merchandise manufactured by him or
procured for such manufacture.
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" 2 . The bank may also lend money to any wholesale
purchaser or shipper of products of agriculture, the forest,
and mine, or the sea, lakes, and rivers, or to any wholesale
purchaser or shipper of live stock or dead stock, and the
products thereof, upon the security of such products or
of such live stock or dead stock and the product thereof.
" 3 . Such security may be given by the owner and may
be taken in the form set forth in Schedule C to this act,
or to the like effect; and by virtue of such security the
bank shall acquire the same rights and powers in respect
to the goods, wares, and merchandise, stock or products
covered thereby, as if it had acquired the same by virtue
of a warehouse receipts
" S E C . 76. If goods, wares, and merchandise are manufactured or produced from the goods, wares, and merchandise, or any of them, included in or covered by any
warehouse receipt, or security given under section 74 of
this act, while so covered, the bank holding such warehouse receipt or security shall hold or continue to hold
such goods, wares, and merchandise during the process
« Following is the form given in Schedule C:
In consideration of an advance of
dollars, made by the (name
of bank) to A, B. for which the said bank holds the following bills or notes
(describe fully the bills or notes held, if any), the goods, wares, and merchandise metioned below are hereby assigned to the said bank as security
for the p a y m e n t on or before the
day of the said advance, together
with interest thereon a t the rate of
per cent per annum from the
day of
(or of the said bills and notes or renewals thereof or
substitutions therefor, and interest thereon, or as the case may be).
This security is given under the provisions of section 74 of " t h e bank
act," and is subject to all the provisions of the said act.
The said goods, wares, and merchandise are now owned by
and
are now in
possession, and are free from any mortgage, lien, or charge
thereon (or as the case may be), and are in (place or places where goods
are), and are the following: (particular description of goods assigned).
Dated at
, 18
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and after the completion of such manufacture or production with the same right and title and for the same purposes and upon the same conditions as it held or could
have held the original goods, wares, and merchandise."
Apart from the four main changes and the legislation
respecting secured loans now reviewed, the revision of
1890 was mostly devoted to points of minor detail. In
one such clause, there was enacted a declaration of the
priority of the Crown as creditor of an insolvent bank,
already a prerogative by the common law, in provinces
where the common law obtained, but one not recognized by
Quebec courts, construing the civil law, in the suit brought
by the Dominion against the estate of the Exchange Bank.
The notes being always the first claim, it was now provided
that any amount due the government of Canada in trust
or otherwise should be the second charge on the assets of
an insolvent bank; any sum due governments of the provinces, a third charge. Another amendment changed the
qualification of directors in respect of stock holdings, by
stipulating that they should own certain amounts of paid-up
rather than merely subscribed stock, namely, $3,000 when
the paid-up capital was less than $1,000,000; $4,000 when
it was between $1,000,000 and $3,000,000; and $5,000
when it was more than $3,000,000. The requirements as
to directors were perhaps relaxed in this, that henceforth
only the majority of a board needed to be British subjects.
The increase or decrease of capital stock was permitted
to shareholders acting by by-law passed in general meeting,
though such by-laws were not to become effective till
approved by the treasury board. Banks were required to
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u p stocks before distributing dividends of more t h a n 8
per cent in any one year. T h e liability of all b a n k s upon
deposits or dividends declared and payable was continued
indefinitely, notwithstanding a n y s t a t u t e of limitations.
T h e t e r m prior t o a suspension during which t h e liability
of t h e owner of shares in a b a n k which subsequently fails,
cannot b e evaded b y sale, was extended from t h i r t y t o
sixty days. The use of divers titles, such as bank, banking house, banking company, b y persons n o t authorized
thereto b y t h e b a n k act was forbidden altogether. E x t e n sion of u n d u e or fraudulent preference t o creditors became
punishable b y imprisonment n o t t o exceed t w o years;
the making of willfully false or deceptive returns or statements, b y imprisonment not t o exceed five years. Offenses
against t h e b a n k act, among which was t h e unauthorized
use of t h e title bank, were penalized b y fines n o t exceeding
$1,000 and imprisonment for five years, or b o t h a t t h e discretion of t h e court. F o r t h e comparatively mild penalties against overissue, provided b y Sir Leonard Tilley,
Doctor Foster now substituted fines which were exceedingly severe. For issue in excess of t h e paid-up capital,
less t h a n $1,000, t h e fine became t h e a m o u n t of such
excess; for a n overissue of $1,000 t o $20,000, $1,000; for
one of $20,000 t o $100,000, $10,000; of $100,000 t o
$200,000, $50,000; a n d for a n overissue of more t h a n
$200,000, a fine of $100,000 was t o be imposed.
The special provisions relating t o t h e banks under royal
charter a n d t o t h e Banque d u Peuple (en commandite)
were renewed. T h e only noteworthy contrast between
t h e position of these banks and those with ordinary charters, was t h e limitation of t h e note issue of t h e Bank of
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British North America and of t h e Banque du
75 per cent of their respective paid-up stocks.
of Canadian origin and subject, or likely shortly
ject, t o t h e jurisdiction of t h e Dominion, t h e
life was continued till July i, 1901.

Peuple t o
For b a n k s
t o be subcorporate

I n t h e shape to which it was wrought b y t h e painstakingable, and thorough revision of 1890, t h e b a n k act of the
Dominion has stood with b u t little change in form and
none in its underlying principles for t h e past eighteen
years. W h a t new provisions have been added t o the
s t a t u t e have been prompted b y t h e purpose to facilitate
rather t h a n hinder the growth of t h e banks, or b y t h e determination to round out and to perfect t h e new measures
whereby t h e circulation has been safeguarded since 1891.
One a t least of the Canadian banks having opened
offices in another British colony where t h e pound sterling
was t h e monetary unit, a law of 1899 (chap. 14) permitted
t h e issue of notes intended for circulation in denominations
of 1 pound sterling or multiples of t h e pound sterling. I t was
stipulated, however, t h a t such notes should not be issued
in Canada (notes for $5 being the lowest permissible there)
and t h a t they should bear legibly across their face the
n a m e of t h e place where, in the colony for which they were
intended, they would be redeemed a t par. In 1904 similar
branches having been established in other British colonies
where a dollar of different value t h a n t h e Canadian dollar
was t h e monetary unit, banks were permitted to issue, b u t
only in such colonies, notes for $5, and multiples of $5,
redeemable at par in the dollars recognized in t h e place of
issue as the legal tender and the money of account. (4
Edw. V I I . , chap. 3.)
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The third of these measures suggested b y t h e expanding business of t h e banks was n o t passed until 1908.
F o r some years, however, a need for i t h a d appeared, in
t h e closeness with which t h e circulation of a number of
the banks, notwithstanding large increases of paid-up
capital, h a d approached t h e legal limit in t h e active
season of a u t u m n . I t was now enacted t h a t in t h e cropmoving time of any year—from October 1 t o J a n u a r y 31
of t h e following year—a bank might issue notes in excess
of its unimpaired paid-up capital t o t h e a m o u n t of 15
per cent of the sum of its paid-up capital and rest account
(surplus) as shown b y t h e monthly return t o t h e government. (7-8 Edw. vii, chap. y.)a As price for t h e privilege
of overissue, a n y bank taking advantage of t h e amendm e n t was required to pay interest upon t h e excess, a t a r a t e
not t o exceed 5 per cent per annum, to be fixed b y t h e governor in council. Whatever is realized b y w a y of such
interest accrues t o t h e general revenue of t h e Dominion.
I n t h e m o n t h of October, 1908, five banks reported t h e
greatest a m o u n t of their notes in circulation a t $700,000
more t h a n their capital stock; in November like figures for
six banks showed an excess of $788,710, b u t in December
all b u t four banks, with a n excess of $304,000, were again
within t h e limit of normal issue, and these four reported
circulations less t h a n their paid-up capitals throughout the
m o n t h of J a n u a r y , 1909. At t h e highest amount outstanding in November there was still a reserve power of
issue, independently of emergency privileges, of $6,865,692,
shown b y a comparison of t h e total notes in circulation
to t h e paid-up stock of t h e banks.
«See Appendix 111.
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VII.—AMENDMENTS OF 1900.

As the time for the decennial revision of 1900 drew
near, there began among the Canadian chartered banks a
movement intended to bring about, if possible, the extension to its logical conclusion of the principle recognized
in 1890 by the establishment of the fund for the redemption of failed banks' notes. The initial advance had been
to make the banks the joint guarantors of each others'
notes; the next step, it was believed, should be to give
the banks a measure of joint control over the issue, circulation, withdrawal and destruction of notes. The possibilities of the original suggestion developed under discussion; it is not too much to say that in a union for
insuring the security of their circulation there finally
appeared the beginnings, at any rate, of common effort
toward encouraging and, if need be, enforcing the general observance of high standards of banking, the maintenance of adequate reserves, the prevention of frauds
in the issue, and the administration of insolvent banks'
estates to the best interest both of their creditors and
of those who held their shares.
As the instrument of these purposes, the bankers
suggested the Canadian Bankers' Association, a voluntary organization formed in 1892, for the common benefit
and protection of the banks. Chartered banks were its
members; its associate members, bank officers and bank
clerks. In meetings of the association members were
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represented by their chief executives for the time being;
between meetings, the interests of the organization were
watched, and its affairs managed, by an executive
council whose liberty of action, subject, of course, to
approval of the association at the annual meetings, was
as wide as could be desired. In the session of 1900
Parliament gave this voluntary association the status of
a public corporation in a special act and with the declared
object " t o promote generally the interests and efficiency
of bank officers and the education and training of those
contemplating employment in banks, and for such purposes, among other means, to arrange for lectures, discussions, competitive papers and examinations on commercial law and banking, and to acquire, publish, and
carry on the Journal of the Canadian Bankers' Association. (63-64 Vic, c. 93.)
Power was accorded the association to establish subsections, to establish a clearing house for banks in any
place of the Dominion, and to make rules and regulations
for the conduct of clearing houses, but with the provisos
that membership in a clearing house should be voluntary,
that members of such organizations should have equal
voice in making the rules and regulations, and that no
such provisions should become effective until approved by
the treasury board. " The objects and powers of the association," declared the act of incorporation, "shall be carried out and exercised by the executive council/' or under
norms fixed by the council. Fourteen chief executives
of chartered banks, and the president and vice-president
of the association, as elected at the annual meetings, made
up the executive council. Resolutions, by-laws, rules,
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and regulations passed by the executive council had force
only until approved at the next meeting of the association and none thereafter if not approved. By-laws affecting clearing houses were of no effect until approved by
the treasury board.
Further powers and functions were confirmed to the
association in the measure by which the several charters
were continued to 1911—the bank act itself. (63-64
Vic, c. 26.)a There the means were provided for taking
away the control, or, at any rate, the unsupervised control
of a suspended bank from its officers directly a default
occurred. Under such by-laws as it might adopt the
association was authorized to appoint some competent
person a " curator,'' to supervise the property and conduct of a suspended bank. His duty was to " assume
supervision of the affairs of the bank" and arrangements
for the payment of outstanding notes. Generally, he was
to have the powers and to take the steps necessary or
expedient to protect the creditors and shareholders of
the bank and to conserve and properly to dispose of its
assets. Toward these purposes the curator was given
access to all books and papers, documents and accounts,
and was to remain in office until removed, or until the bank
resumed business, or until a liquidator had been appointed
for the purpose of winding it up. Under the act of 1890, as
under that of 1871, a bank might suspend payment for
ninety days consecutively or within the year without becoming insolvent or forfeiting its charter. The presence of
a curator directly any bank suspended became especially
° S e e Appendix I I for the Bank Act as revised in 1890, amended in 1900,
and consolidated in 1906.
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desirable as precaution against note issue during suspension. Resort to this practice, which would enable favored
depositors to convert their claims into prior liens, had
been prohibited in previous legislation only by the clauses
against giving undue, unfair, or fraudulent preferences.
Now, the law forbade it specifically by a fine of $2,000 or
imprisonment for seven years, or both. Henceforth a
bank once suspended had no right to resume business
until the curator had given his consent in writing or to
issue notes again until authorized by the treasury board
so to do. The removal of a curator, no less than his
powers and duties, was subjected to such rules as the
association might prescribe. His remuneration as fixed
by the association was made a charge upon the assets of
the bank to the supervision of which he might be assigned.
Besides its duties in respect of suspended banks, the
Bankers' Association was given more or less inquisitorial
powers as against banks which were going concerns. It
was permitted at any meeting to make by-laws, rules,
and regulations respecting " the supervision of the making
of the notes of the banks which are intended for circulation, and the delivery thereof to the banks, the inspection
of the disposition made by the banks of such notes, the
destruction of the notes of the banks, and the imposition
of penalties for the breach or nonobservance of any bylaw, rule, or regulation made by virtue of this section."
But before any by-law or rule concerning either the
appointment, powers, duties, and removal of a curator,
or the exercise of supervising privileges in respect of the
circulation could become effective, it was stipulated the
measure should receive the approval of two-thirds of the
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banks represented in the meeting at which it was put to
vote, the banks so approving having two-thirds in par
value of the paid-up capital represented. Nor could it
become effective then, except that it was approved by
the treasury board, after submission to every bank not a
member of the association, and opportunity given such
banks to be heard with respect to the measure.
By way of acknowledging a tendency, long more or less
perceptible, toward the merger of the smaller, and in a
great degree local banks into the larger and more heavily
capitalized institutions of the system, parliament added
to the bank act in 1900 a set of general provisions permitting and regulating the merger of banks, upon agreement to that effect between the shareholders of the
selling and the management of the buying corporation
concerned. The need for special act of parliament to
complete the bargain thereafter disappeared. The main
preliminaries were now reduced to a proposal of purchase,
consent of the holders of two-thirds of the shares of the
selling bank, and the approval of the governor-in-council
given on recommendation of the treasury board. Strict
precautions were established for meeting the liabilities of
the vendors; but the purchasing bank might execute the
agreement of sale under its seal without special consultation of its shareholders, except in the case that the
merger involved an increase of the buying bank's capital
stock.
One other change made at this time suggested in some
ways the proposal for a shareholders' audit, which parliament had refused to accept two years before. No specific
mention of an audit occurred now, but it was provided,
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while safeguarding the privacy of personal accounts, that
the directors of a bank should submit at annual meetings
such further statements, other than those presenting the
details already stipulated in the act, as the shareholders
might require by by-law passed in any general meeting.
The specific prohibition, on heavy penalties, of note issue
during suspension has already been remarked. Better to
adjust that rate to the current market, the rate of interest borne by a suspended bank's notes such time as they
could not be redeemed, was reduced from 6 to 5 per cent.
To protect the Dominion treasury, amounts paid out of
the safety fund in excess of the contribution of a failed
bank were made to bear interest at 3 per cent until repaid
out of the estate to the minister of finance. The limit
within which a bank must dispose of real property, other
than bank premises, was extended from seven to twelve
years. Realty held for a term longer than twelve years
after it was acquired in complete or partial satisfaction
of a debt became liable to forfeiture to the Crown, but
only after six months' notice from the minister of finance
that the Crown proposed to claim the forfeiture. Within
that half year the bank could still give good title to the
property. Clauses dealing with loans upon special security were amended in favor of the import trade, so that the
banks might take warehouse receipts or bills of lading as
security for liabilities incurred on behalf of persons to
whom had been issued letters of credit. To the unpaid
balances and unpaid dividends which were already the
subject-matter of an annual return was added to the
category of drafts and bills of exchange issued and outstanding for more than five years. Finally, the form of
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the monthly statement of condition was so amended as
to distinguish between deposits in Canada and elsewhere,
to include the amount of bills rediscounted in the item, of
"loans from other banks in Canada, secured/' and to
show separately balances due to banks or agencies in
Canada, in the United Kingdom, and elsewhere. For
these changes upon the liabilities side of the form there
were corresponding changes upon the assets side.
Headings also were introduced to distinguish between
call and short loans in Canada and current loans in Canada, from similar investments elsewhere.
The Canadian Bankers' Association, acting under its
new charter, promptly prepared a set of by-laws for
carrying out the provisions of its incorporation and of
the bank act. As amended in April, 1901, they were
approved by the treasury board and came into effect
according to law. A copy of the by-laws, which include
a set of uniform clearing-house rules, substantially
Identical with those the preparation of which had been
begun in 1897, appears in Appendix VII. While the
document was largely formal in character, there were
embodied in it two groups of provisions in which the
procedure merely suggested by the bank act was more
fully developed. One such group was that which determined the fashion in which the association should exercise its supervision over the issue and circulation of notes.
In brief, a monthly return of circulation, properly verified, was required of each chartered bank doing business
in the Dominion, whether a member of the association or
not. The form of the return included separate headings
for the credit balance of bank-note accounts on the last
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day of the preceding month, inclusive of unsigned notes,
notes received from printers during the month, notes
destroyed during the month, balance of bank-note
accounts on the last day of the month, notes on hand,
whether signed or unsigned, and the notes in circulation
on the last day of the month. The form of certificate
setting forth the destruction of notes in the period covered by any return called for a statement of the amount
and denominations, and for the attest or signature of
three of the directors and of the general manager of the
reporting bank. Neglect to send in the report of circulation within the first fifteen days of the month succeeding was penalized by a fine of $50 for each day's delay.
Upon the executive council of the association was conferred the power by resolution at any time to direct an
inspection of the circulation account of any bank. Further * an annual inspection of the circulation account of
,
every bank of issue in Canada was provided for, and a
report of the results to the council, all officers of banks
under inspection being obligated to give the inspector of
circulation such information and assistance as he might
ask. It was also required that printed statements of the
circulation returns of all the chartered banks should be
forwarded each month to the chief executive of every
bank in the Dominion. In the practical conduct of this
scheme of inspection and verification, the returns of the
banks as to new notes received have been checked up
against returns of notes delivered which the bank-note
engravers have agreed to furnish.
Ill the clauses respecting curators the by-laws directed
that the remuneration of the curators for services, expenses,
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and disbursements should be fixed from time to time by
the executive council. They further directed that in
the case of suspension of payment by a bank and the
appointment of a curator to supervise its affairs, the
president of the association should also appoint a localadvisory board, selected, as far as possible, from the
higher officers of banks situate in the place of the suspended bank's head office. It became the duty of the
curator to advise with this board from time to time, and
to obtain the approval of the board before taking any
important step in connection with his duties.
Apart from the supervision of circulation accounts thus
established and the more exact determination of the
procedure in case of suspension, the Canadian Bankers'
Association does not appear to have made much effort
to develop the functions acquired or to extend the field
of activity opened by the legislation of 1900. The report
of proceedings of the annual meeting, which had previously been published in the Journal of the association
and the newspapers of the day with a degree of fulness
which made it practically complete, was condensed in
1903 to the baldest sketch. Reports of later meetings
were omitted from the journal altogether. The project
of competitive papers, discussions, lectures, and examinations seems, for some years, at any rate, to have been
abandoned. Already in 1903 a committee, appointed for
the purposes of inquiry, reported that they " h a d failed
in arousing sufficient interest to warrant proceeding for
the present with the formation of an institute."
While it was still a voluntary organization and not
yet, in a sense, a recognized organ of administration, the
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association's efforts were exerted as far as they might
be exerted properly, against careless or too liberal insolvency legislation, projects of provincial law injuriously
affecting the banks, and the incorporation of loan companies authorized to receive deposits on current account.
As an organization, also, the association sought to bring
about uniformity in the rate of interest paid upon deposits
payable after notice or in savings bank departments,
and the reduction of the rate of interest paid by the postoffice and government savings banks. A system of bank
money orders was devised and established in an effort
to meet the competition of the express companies in
remittance of minor sums. For some time, but in the
end to no purpose, the association opposed the establishment of a branch of the royal mint in the Dominion.
In response to a widespread demand, stimulated by the
Yukon gold production and by the growth of a national
self-consciousness, the government decided in 1901 to
appropriate $75,000 a year to the construction and
up-keep of a mint, and by so much to reduce the profit
by seigniorage upon silver coin, the average of which, in
the preceding decade, had been some $94,000 a year.
On the other hand, the association had been successful
in efforts to induce the government to prepare, at the
banks' expense, to be sure, quantities of Dominion notes
of large denomination, transferable only between the
banks and intended for use in settlements or for the
service of their reserves. It is a fair inference that notwithstanding the more informal procedure at meetings
and the measure of secrecy maintained as to the nature

S. Doc. 332, 61-2

ix

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of its activities, the efforts of the association since 1902
have been spent in much the same direction as before.
Whether taken year by year, or viewed as a whole, the
history of the banks acting under Dominion chairter
through the years 1889-1908 presents no more striking
feature than the extraordinary growth of the banks in
point of resources and strength. In capital alone the
expansion was from $60,289,910 in December, 1889, to
$96,457,573 in December, 1908; in rest (surplus) from
$20,371,332 to $74,427,630; in circulation from $33>577>7<x>
to $73,058,234; in total deposits, from $133,977,011 to
$722,769,156; and in discounts, loans, and advances,
from $170,250,693 to $546,079,996. The details of this
development, condensed from the monthly return to the
government to a form like that in which statistics of
banking elsewhere have been arranged, are presented
year by year in Appendix V. The explanation of the
growth, of course, is to be sought in the thousand and
one achievements of advance which have marked the
economic movement of Canada the past two decades—
the increase of product from farm and forest, fishery,
and mine, the systematic elaboration of the railway network, the rise of Canadian credit and the influx of foreign
and British funds, the powerful impulse given to industry
the past ten years, the swift extension of settlement and
cultivation over the virgin wheat fields of the Northwest,
the heavier immigration consequent upon the practical
exhaustion of the free lands of the United States, the
enormously larger trade stimulated by the growth of
buying power in agriculture, transportation, and com-

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merce, and the augmentation in every direction of the
activities of exchange. These were large movements*
not yet anywhere adequately described, except in existing
sources for some future historian, and not yet, perhaps*
sufficiently remote wholly to be understood. But so far
as can be judged now, the forward movement of the banks
was neither markedly greater nor conspicuously less than
the general progress in which they participated and
toward which they helped.
From 1889 to 1899 the number of banks remained
practically stationary at 38; in the ten years there was
scarcely more than $2,000,000 capital added to their
paid-up stock. Rest accounts, however, were augmented
by upward of $9,000,000, and the number of branches
within the Dominion from 402 to 663. The banks succeeded, moreover, in doing a considerably heavier business upon but slightly enlarged proprietors' funds. The
proportion of capital and rest to total liabilities, 46.98
per cent in 1889, fell to 27.84 at the end of 1899, although
the net distribution by way of dividends amounted to but
5.17 per cent upon these funds as against 5.65 per cent
ten years before.
In these figures are suggested two of the most conspicuous and closely related phases of the banking movement in all these later years—the fall in banking profits
measured by the unit of service, and the wide extension
of the territorial distribution of the banks. The explanation of both these phases, and to no inconsiderable extent ?
also, the cause of them, is undoubtedly to be found in a
single factor—competition. It might be, indeed it fre-

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quently is argued, that between a few large banks, managed from two or at most three centers, banks whose
executives are in easy reach of each other to arrange
such means to temper the strife for business as a monopolistic age might suggest, competition is a factor the
influence of which may safely be ignored. And it is
often pointed out that since all banks, or practically all
banks, allow but 3 per cent interest upon deposits,
and generally charge 6 per cent upon commercial and
industrial loans, even in the settled districts of the East,
there is additional reason for reckoning competition a
myth. The fact is, however, that instead of rate cutting
in respect of these particulars, the characteristic competition between Canadian banks has appeared in efforts to
outdo each other in the facilities offered, it may be the
waiver of collection and agency charges—thus sadly
impairing the minor profits of a bank—or it may be in
the amount of accommodation offered, the ease and convenience of access to the source of loans or office of deposit.
Otherwise, it could not be expected that from the provision of one office for every 11,770 of population, the
banks would reduce the ratio to one office for every
2,982, as they have reduced it between 1889 and 1908.
Otherwise, moreover, it would be unlikely that, with
combined capital and rest equal to but 20.82 per cent of
their total liabilities in 1908, as compared to 30.32 per
cent in 1898 and 46.98 per cent in 1889, they should be
dividing but 4.81 per cent upon proprietors , funds >now,
or more than eight-tenths per cent less than they were
dividing in 1889. To such lengths has competition for
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mon for the older and larger banks to establish new
branches for the sake of $250,000 to $400,000 in prospective deposits and the discount business incidental to
a community with such a store of savings, while the newer
and smaller banks have been known to open offices with
scarcely $150,000 of deposits and but precarious prospect of improvement in sight. Competition for deposits*
in the first instance, and, secondarily, competition for
good chances to lend such deposits, has been the main
cause for the five-fold multiplication of chartered bank
offices in less than twenty years. The same competition
has been of potent influence upon the movement of discount charges and interest rates. In all this time, the
difference in discount rates between communities of comparable population and borrowings, but of different distance from the financial centers, has not exceeded 1%
or 2 per cent. At the very frontier of settlement or
development, where difficulty of access, the cost of maintaining an office, or the small volume of business available make the cost of banking service high, interest is
naturally charged at a considerably higher rate than
where banking may be conducted at something like a
normal expense, though the advance of rate is seldom
in proportion to the enhancement of cost. More accurately to indicate the geographical distribution of banking facilities and the consequent advance toward a perfect diffusion of the country's loan fund, there is presented in Appendix IX a table showing the increase of
branches in the several provinces since 1889. The number in operation by the several chartered banks since

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confederation, at intervals of five years, is shown in the
table herewith:
1874.

1879.

1884.

1889.

1894.

1899.

1904.

100

148

188

174

231

263

321

28

39

45

50

60

102

113

549
196

1869.

Ontario
Quebec
New Brunswick
Nova Scotia
Prince Edward Island
British Columbia
Manitoba
Northwest Territories
Yukon.All Canada

1908.

918

6

11

13

30

32

29

34

49

58

13

27

34

51

47

58

74

IOI

104

6

10

55
95

16
103
162

0

0

8

10

0

4

4

3

6
9

12

0

1

3

15

13

24

9
41
5o

0

0

0

2

4

8

19

87

2<J2

2

3

3

663

1. 145

1,927

147

230

295

335

402

513

On December 31, 1908, the 1,927 offices were in 1,054
different places, as compared to 465 offices in 259 different places fifteen years before. Apart from their domestic establishments the banks had been steadily adding
to their offices and agencies abroad. At the end of 1908,
these outposts had reached the number of 50, 5 being in
Newfoundland; 3 in London, England; 1 in France; 1 in
Mexico; 16 in the United States; and 24, the establishments of 3 different banks, in Cuba, Jamaica, Porto Rico,
and Trinidad.
No clearing house was established in the Dominion until
1887, when the bankers of Halifax first organized to this
end. Prior to that time the daily exchanges and settlements were effected by the laborious and tedious method
of adjustments between bank and bank. The volume of
transactions for settlement, of course, had always been
smaller than what would be expected of a system of an
equal number of banking offices, each under independent
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control. The settlement between two or between all the
branches of the same bank, of course, would be effected
in the books of that bank, and is so still, independently
of the clearing house. The table of clearings presented
in Appendix VIII, therefore, furnishes no just basis for a
comparison of Canadian trade and finance, to the volume
of business in a community working with numerous local
banks. Too much is set off in Canada before the exchanges are ever sent to the clearing house, to permit
the actual magnitude of the business to appear.
Following the example of Halifax, similar arrangements
were established in Montreal in 1889 and in Toronto and
Hamilton in 1893. The clearing houses of Victoria and
Vancouver were established in 1898, that of St. John in
1896, those of Ottawa and Quebec in 1901, and of London
in 1902. From the year 1903, when the statistics for all
these cities first became complete, to 1908, the increase of
clearings was from $2,689,823,000 to $4,038,808,000.
For ten years, between May 16, 1890, and May 23,
1901, no charter passed the Canadian Parliament for the
incorporation of a new bank. The bill approved on the
earlier date, being the first charter since 1886, was never
used by those who obtained the grant. But with the more
rapid broadening of the opportunities, or what men believed were opportunities, for new ventures in the banking
field which appeared shortly after the turn of the century,
applications for charters and bills to grant them engaged
the attention of Parliament at practically every session.
Between 1901 and 1908 no less than twenty-one new bank
charters were passed, and authority given for $54,500,000
subscribed stock. Eight corporations out of the twenty163




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one succeeded in raising the capital required before they
might open a bank; the authorized capital for these eight
amounted to $16,000,000. The capital actually paid up
of the six banks started since 1901 and still doing business
was $6,000,277 on December 31, 1908. The paid-up
capital of $96,457,573, shown as the total in the report of
chartered banks on that date, included $3,000,000 of a
bank in liquidation.
To the extent of $23,432,848,
therefore, the increase of banking capital of practically
$30,000,000 effected in the ten years 1898-1908 consisted
of sums called up by the older banks, practically all of it
issued at premiums to correspond to the book values of
existing shares.
Small as were the sums collected for new ventures,
compared to the contributions to older banks, the mere
number of charter grants makes it difficult to believe that
anything in the way of a legal monopoly of chartered
rights is maintained by the government or parliament of
Canada in favor of the banks already in existence. Between 1868 and 1880, as has been seen, thirt)^ charters
were granted to new projects; between 1882 and 1888
thirteen; between 1890 and 1908, twenty-two. The
total is sixty-five; the number of Dominion bank charters
not forfeited for nonuser since 1867 is thirty-two. Entry
to the field of issue banking, it would appear, is free in
Canada to whomsoever cares to enter it, provided only
that his standing is not discreditable and that he or his
backers have the cash. If the newcomer, once chartered
and established, finds his way beset with difficulties, the
circumstance is to be explained, not by any monopoly
which his older competitors enjoy, but rather by their
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hold upon the confidence of their clientele, and their possession of a volume of business which enables them to
serve their customers at rates the profit in which, derived
from transactions of smaller bulk, would be consumed for
the most part by expense.
While new banks were being added, old names were
being stricken off the Canadian roll. One movement of
considerable significance has been the merger, mostly of
the smaller banks or corporations to whose activity rather
narrow geographical bounds had been set, into institutions which avowedly limit their operations to nothing
short of the Dominion, and the international banking
relations which may grow out of the country's foreign
trade. Three such banks, the Bank of British Columbia
(first established under royal charter), the Halifax Banking Company (the incorporated successors of the private
bank of issue founded in Nova Scotia in 1825), and the
Merchants' Bank of Prince Edward Island, were taken
over by the Canadian Bank of Commerce in 1900, 1903,
and 1906, respectively, in exchange for stock in the
buying bank. In 1903 the Bank of Montreal bought
the Exchange Bank of Yarmouth, in 1905 the People's
Bank of Halifax, and in 1906 the People's Bank of New
Brunswick. The Western Bank of Canada was taken
over by the Standard Bank in 1908. The Northern and
the Crown banks, chartered, the one in 1903 and the
other in 1902, joined forces under the new name of
the Northern Crown Bank in 1908. Another bank, first
chartered by the province of Prince Edward Island, the
Summerside Bank, was sold to the Bank of New Brunswick; the Commercial Bank of Windsor (Nova Scotia),
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to the Union Bank of Halifax (1902). What with an
earlier merger, that of the Union Bank of Prince Edward
Island with the Bank of Nova Scotia in 1883., failures,
and voluntary liquidation, the number of corporations
directed from head offices in the maritime provinces has
been reduced in twenty years from sixteen or more to
four. The St. Stephens Bank and the Bank of New
Brunswick are the only banks in the country, the history
of which runs further back than 1900, which report capitals of less than a million dollars each. The St. Stephens
Bank, with its paid-up stock of $200,000, remains the
only surviving example of the small local banks which
were more or less typical of the credit organization of
the maritime provinces for many years. Two of the
banks domiciled in Nova Scotia and one which formerly
had its head office in Halifax have added so much to
their resources and so many to their branches that in
these particulars they present no contrast to the banks
of widely extended operations characteristic of Ontario
or Quebec,
Six of the banks acting under Dominion charter have
failed since 1889; two others, now in process of winding
up, have been obliged by heavy losses to withdraw from
business, although, through the help of other banks, it
has been possible to conduct their liquidation with open
doors. The first of the failures, attributable to ill-advised
or incapable administration of the bank's lending resources, and first also in point of time, was that of the
Commercial Bank of Manitoba, with its head office in
Winnipeg, July 3, 1893. On the date of failure the
liabilities amounted to $1,344,269 and the nominal assets
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to $1,954,167. Its note circulation, partly as the result
of heavy withdrawals by depositors, preceding the failure, had run up to $419,485, the paid-up capital being
then but $552,650. Ultimately the depositors and other
creditors, as well as the note holders, were paid in full.
Better to realize upon certain assets through giving the
debtors more time than was originally agreed, the liquidator of the bank arranged with other banks, sometime
competitors of the Commercial, for a slight extension of
the period—sixty days after suspension—within which
redemption of all outstanding notes should have been
offered. Upon notes the redemption of which was
deferred the liquidator continued to pay at the rate of
6 per cent. All but two-fifths of the circulation outstanding had been redeemed by the end of September, and
all but a fifth by the end of November. The fact that
the other banks accepted the notes of the failed bank
freely at par relieved the public of both inconvenience
and concern. From the day of suspension on, the notes
of the Commercial Bank of Manitoba passed at the value
inscribed on their face. The efficacy of the bank circulation redemption fund as a guaranty not only of the
ultimate security, but also of the immediate convertibility of bank-note issues, thus established on the occasion of its first trial, has been demonstrated time and
again, and in respect of the circulation even of such
fraudulently looted concerns as the Banque Ville Marie or
the Banque de St. Jean.
Notwithstanding a history that ran back to 1835,
and an abundant experience of the mistakes by which
prudent bankers might well have been warned, the
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Banque du Peuple found itself obliged to suspend on July
16, 1895. At first it was hoped that resumption could
be undertaken within the statutory term. Inquiry developed the existence of overdrafts owing by directors
and others to more than 20 per cent in excess of the
bank's paid-up stock. The general shareholders in this
bank, it will be remembered, were liable only to the
amount of their subscriptions. From these, of course,
nothing further could be collected, and under the terms
of a compromise, the reasons for which are somewhat
obscure, but $300,000 were collected upon the joint, several,
and unlimited liability of the principal partners. Under
the prior lien the note holders—$787,000 in round numbers was the sum of their claim—obtained payment in
full. Other creditors for $6,713,000 received but 75X
per cent and thus lost, over and above interest and discounts accepted in anxious or precipitate realization,
some $1,660,000.
Worse yet, in point of the inadequacy of the assets
involved, was the failure of the Banque Ville Marie.
Criminal prosecutions were undertaken by the Crown
against officers of this bank, and in three of the suits the
court took the view that the management had committed
gross frauds, sending the general manager and cashier to
the penitentiary and releasing another officer on suspended sentence. The note holders were paid in full, but
the depositors realized only 17X per cent on their claims,
the total liabilities at suspension, July 25, 1899, being
$1,951,346. Another French bank, in the administration
of which corruption and criminal fraud were revealed by
judicial inquiry, the Banque de St. Jean, failed April 28,
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1908—the Ville Marie h a d a capital of $479,620 at suspension; this concern b u t $316,386. To t h e extent of
nearly $600,000 its resources had been squandered upon
most precarious and unpromising ventures, in great p a r t
to t h e personal speculations of t h e president. On April
30, 1908, its notes in circulation were $219,334.
No loss was suffered b y creditors on such claims, b u t
whether anything whatever is paid to creditors other t h a n
the government (the government claim was $43,016)
depends upon w h a t success m a y follow the efforts of the
liquidator to collect t h e double liability from holders of
t h e stock. A number of the shareholders are resisting
the liquidator in t h e courts. The deposits, other t h a n
government deposits, amounted a t the time of failure to
$296,988.
As a consequence of loans to one firm out of all proportion t o its own means, t h e Bank of Y a r m o u t h , one of the
more or less local banks domiciled in Nova Scotia, was
obliged to close its doors March 6, 1905. A considerable
recovery after their failure from the assets of t h e bank's
principal debtors made it possible to pay off depositors
as well as note holders in full. The sums involved were
not large a t t h e worst, t h e total assets of t h e b a n k at the
time of its failure, March 6, 1905, being $820,143, and its
liabilities on all scores, except capital stock ($300,000)
b u t $479,323.
I n t h e spring of 1908 the fact t h a t the Banque de St,
Hyacinthe was under large advances to the Southern
Counties Railway became generally known and, in t h e
form t h a t the information gained currency, raised doubts
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way was sold to t h e Delaware and Hudson Company, t h e
money for it paid into court. Pending t h e result of certain suits a considerable proportion of t h e b a n k ' s resources
was locked up. On J u n e 23 the b a n k was obliged to suspend payment. A p a r t from a capital stock of $331,235,
it had liabilities a t t h e time of suspension of $1,182,362;
its nominal assets were $1,580,097; t h e notes in circulation
were about $250,000. These, of course, were p r o m p t l y
redeemed; a dividend of 25 per cent has already been
paid depositors, and if the issue of t h e pending litigation is a t all favorable t o the bank, as there is ground to
believe it will be, it is likely t h a t the depositors will be
paid t h e whole sum of their claims.
The record of Canadian bank mortality for recent years,
t h u s far set forth, has been concerned with t h e troubles of
comparatively small and more or less insignificant members of t h e system. The reason for this is close a t h a n d —
none b u t small banks have failed. I n point of indebtedness involved or of probable loss t o t h e shareholders, however, two other b a n k disasters of this period, in neither of
which t h e threatened b a n k was permitted to go t o failure,
were more serious t h a n any yet detailed. One of these
was the collapse of t h e Ontario Bank, first organized in
1857, on October 13, 1906. A general manager, later sentenced t o t h e penitentiary, had been p u t in charge of t h e
bank some years earlier, in the hope t h a t he would be able
t o restore t o t h e institution t h e prestige and resources lost
through t h e ill-advised and injudicious administration of
the b a n k ' s assets under his predecessor. One way t h e new
man set about to compass this task was to speculate with
t h e b a n k ' s funds and on the b a n k ' s behalf in its own stock
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and in t h e shares and other securities handled on t h e New
York Stock Exchange. I n t h e course of transactions
amounting t o more t h a n $100,000,000, between 1898 and
1906, he incurred losses of $1,500,000. Over $230,000 was
lost in t h e effort t o support b y purchase the local m a r k e t
for t h e shares of t h e bank. Some $233,000 was subsequently lost in realizing upon securities bought in New
York. T h e certainty of t h e bank's going into b a n k r u p t c y ,
unless something were done, became clear on October 12,
1906. T h e executives of t h e larger and stronger institutions were unwilling t h a t an estate writh liabilities of
$15,229,685, and nominal assets of $17,432,177, should be
liquidated otherwise t h a n writh open doors. T h e Bank
of Montreal accordingly agreed to take over t h e assets
and assume t h e liabilities of t h e Ontario Bank, on conditions t h a t provided for other banks standing p a r t of the
loss should t h e assets finally appear t o be less t h a n the
debts. Nearly three years were spent in winding u p t h e
estate. T h e capital stock and rest of $2,200,000 were both
absorbed in spite of the realization of 92.58 per cent upon
loans and overdue debts amounting on October 12, 1906,
to $13,116,000. Note holders were paid in full, and
depositors either got t h e face of their claims or accepted
instead t h e obligations of t h e Bank of Montreal. The
shareholders, however, have been asked to contribute
$576,000 upon their liability, in case of insolvency, t o pay
additional sums equal to t h e p a r value of their subscribed
stock. W h e t h e r they do so p a y depends upon t h e issue of
suits now pending before t h e courts.
Established in 1901, and t h u s one of t h e first of t h e
new banks t o be organized in t h e latest period of marked
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prosperity, the Sovereign Bank of Canada shortly acquired
standing, or at any rate attention, as one of the most
aggressive, energetic, and seemingly successful of the
younger institutions in the field. As the result of systematic efforts on the part of its executive, efforts the
nature and ingenuity of which put them among the most
diverting minor episodes of Canadian bank promotion
a stately share of the bank's stock—a new issue of about
a million and a half—was sold, partly to one of the leading
financial houses of New York and partly to one of the
German securities banks. With this help the capital of
the Sovereign was raised to nearly $4,000,000; the rest, for
the stock was put out at a premium, to $1,250,000.
Thenceforward the game of expansion, both in volume
of business and in number of offices, proceeded even more
merrily than before. Events showed later on that much
of the borrowers' business attracted to the bank was of a
highly undesirable description; that in order to make an
extraordinary showing the management had time and
again accepted unjustifiable risks. Among the assets of
twenty-five millions odd reported at the end of April, 1907,
from some ninety branches there was paper so bad or so
well-nigh hopelessly doubtful as to put the future of the
bank and the property of the shareholders into the gravest
kind of peril. A careful valuation of these assets undertaken by experienced officers of another bank convinced
them, however, that by appropriating the whole of the
rest and a million of the capital, losses already or likely
to be incurred would be amply covered. Their recommendations were carried out.

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With a new president, general manager, and inspector,
and with a number of changes in the staffs of the branches,
the bank was embarked upon the effort to conduct its
business along saner and safer, if less enterprising, lines
than before. But although these changes gave the bank
a chance to effect a reduction of five millions in its total
liabilities between April and December, 1907, they were
yet insufl&cient either to restore confidence in the venture
or to keep the bank on its feet as a going concern. The
middle of January, 1908, bankers in Toronto and Montreal
were asked to consult upon the Sovereign's plight. Primarily to avoid a shock to credit, but also to prevent
embarrassment to numerous commercial depositors and
discount customers at places where the bank had offices,
twelve of the other banks undertook to supply ready cash
in the sum of $3,750,000 to meet the Sovereign's immediate needs. They also undertook to liquidate the bank's
assets and to assume its liabilities. Such loss as might
occur in the process was to be borne by the guaranteeing
banks in proportion to the amounts respectively pledged
by them to the fund of cash. Involved in this voluntary
liquidation were $18,594,357 of nominal assets and
$15,544,534 of liabilities other than capital stock. For
all purposes of the public the branches of the Sovereign
Bank became on January 18, 1908, the offices of that
particular one of the twelve guaranteeing banks by which
they had been assumed or to which they had been alloted
for the purpose of winding up. Somewhere between half
and three-quarters of a million deficiency is not unlikely
to appear in the final stages of the liquidation. Such a

S. Doc. 332, 61-2

12

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sum, and considerably more, could be collected upon the
double liability of solvent shareholders. So far as can be
judged now, therefore, there is small prospect of any losses
falling upon the guaranteeing banks.

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APPENDIX

I.

THE FIRST DOMINION BANK ACT.6

AN ACT Relating to banks and banking.
[34 Vict., chap, v.]

[Assented to 14th April, 1871.)
Whereas, it is desirable that the provisions relating to
the incorporation of banks, and the laws relating to banking, should be embraced, as far as practicable, in one
general act: Therefore, Her Majesty, by and with the
advice and consent of the Senate and House of Commons
of Canada, enacts as follows:
1. The charters or acts of incorporation of the several
banks enumerated in the schedule to this act (including
any amendments thereof now in force) are continued as
to their incorporation, the amount of capital stock, the
amount of each share of such stock, and the chief place
of business of each, respectively, until the first day of
July, in the year of our Lord one thousand eight hundred
and eighty-one, subject to the right of any such bank to
increase its capital stock in the manner hereinafter provided; and as to other particulars the said charters are
continued without being subject to any of the provisions
of this act, except those contained in sections four, thirtynine to fifty-four, both inclusive, and sixty to sixty-eightf
both inclusive, until the first day of July, in the present
year of our Lord one thousand eight hundred and seventyone; and from and after the day last mentioned, the said
charters are continued, subject to the provisions of this act s
< Acts of the Parliament of the Dominion of Canada, 1871. Ottawa*
*
1871. pp. 24-47
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until the end of the then next session of Parliament; and
from and after the end of such session this act shall form
and be the charters of the said banks, respectively, until
the first day of July, 1881, and the provisions thereof shall
apply to each of them, respectively, and their present
charters shall be repealed, except only as to the matters
for which the said charters are above continued until the
day last aforesaid.
2. The provisions of this act shall apply to any bank to
be hereafter incorporated (which expression in this act
includes any bank incorporated by any act passed in the
present session or in any future session of the Parliament
of Canada) whether this act is specially mentioned in its
act of incorporation or not, as well as to all banks whose
charters are hereby continued, but not to any other, unless
extended to it under the special provisions hereinafter
made.
3. The capital stock of any new bank, the amount of
each share, the name of the bank, and the place where its
chief office shall be situate, shall be declared in the act of
incorporation of any bank to be hereafter incorporated,
GENERAL REGULATIONS.

4. The bank may open branches or agencies and offices
of discount and deposit and transact business at any place
or places in the Dominion.
5. The capital stock of the bank may be increased, from
time to time, by the shareholders at any annual general
meeting, or any general meeting specially called for that
purpose; and such increase may be agreed on by such
proportions at a time as the shareholders shall determine,
and shall be decided by the majority of the votes of the
shareholders present at such meeting in person or by proxy.
6. Any of the original unsubscribed capital stock, or the
increased stock of a bank, shall, when the directors so
determine, be allotted to the then shareholders of the bank
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pro rata, and at such rate as shall be fixed by the directors,
provided always that no fraction of a share shall be so
allotted; and any of such allotted stock as shall not be
taken up by the shareholder to whom such allotment has
been made, within three months from the time when notice
of the allotment has been mailed to his address, may be
opened for subscription to the public, in such manner and
on such terms as the directors shall prescribe.
7. No bank to be hereafter incorporated, unless it be
otherwise provided by its charter, shall issue notes or commence the business of banking until five hundred thousand
dollars of capital have been bona fide subscribed and one
hundred thousand dollars have been bona fide paid up,
nor until it shall have obtained from the treasury board a
certificate to that effect, which certificate shall be granted
by the treasury board when it is proved to their satisfaction that such amounts of capital have been bona fide
subscribed and paid, respectively; and if at least two
hundred thousand dollars of the subscribed capital of such
bank has not been paid up before it shall have commenced
business, such further amount as shall be required to complete the said sum shall be called in and paid up within
two years thereafter, and it shall not be necessary that
more than two hundred thousand dollars of the stock of
any bank, whether incorporated before or after the passing
of this act, be paid up within any limited period from the
date of its incorporation.
8. The amount of notes intended for circulation, issued
by the bank and outstanding at any time, shall never
exceed the amount of its unimpaired paid-up capital. No
such note for a less sum than four dollars shall be issued or
reissued by the bank, and all notes for a less sum heretofore issued shall be called in and cancelled as soon as may
be practicable.
9. The bank shall always receive in payment its own
notes at par at any of its offices and whether they be made
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payable there or not; but shall not be bound to redeem
them in specie or Dominion notes at any place other than
where they are made payable. The place, or one of the
places, at which the notes of the bank shall be made payable shall always be its chief seat of business.
10. No dividend or bonus shall ever be made so as to
impair the paid-up capital, and if any dividend or bonus
be so made, the directors knowingly and willfully concurring therein, shall be jointly and severally liable for
the amount thereof, as a debt due by them to the bank;
and if any part of the paid-up capital be lost, the directors
shall, if all the subscribed stock be not paid up, forthwith
make calls upon the shareholders to an amount equivalent
to such loss, and such loss (and the calls, if any) shall be
mentioned in the return then next made by the bank to
the government; provided that in any case where the
capital has been impaired, as aforesaid, all net profits
shall be applied to make good such loss.
i i . No division of profits, either by way of dividends
or bonus, or both combined, or in any other way, exceeding the rate of eight per cent per annum, shall be paid by
the bank, unless, after paying the same, it shall have a
rest or reserved fund equal to at least twenty per cent of
its paid-up capital, deducting all bad and doubtful debts
before calculating the amount of such rest.
12. Certified lists of the shareholders (or of the principal partners, if the bank be en commandite), with their
additions and residences, and the number of shares they
respectively hold, shall be laid before Parliament every
year, within fifteen days after the opening of the session.
13. Monthly returns shall be made by the bank to the
government in the following form, and shall be made up
within the first ten days of each month, and shall exhibit
the condition of the bank on the last juridical day of the
month preceding; and such monthly returns shall be
signed by the president or vice-president, or the director
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(or, if the bank be en commandite, the principal partner)
then acting as president, and by the manager, cashier, or
other principal officer of the bank at its chief seat of
business:
Return of the amount of liabilities and assets of the
day of
, A. D. i 8 . _ ,
[CAPITAL AUTHORIZED, $ . . .

CAPITAL SUBSCRIBED, $..,

bank, on the

CAPITAL PAID U P , $ . . . ]

LIABILITIES.

$

cts,

$

i.
2.
3.
4.
5.
6.
7.
8.

CtS.

Notes in circulation
Government deposits payable on demand
.
Other deposits payable on demand
Government deposits payable after notice, or on a fixed d a y .
Other deposits payable after notice, or on a fixed day
Due to other banks in Canada
Due to other banks or agents not in Canada
Liabilities not included under the foregoing heads
ASSETS.

i.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

12.
13.
14.

Specie
Provincial or Dominion notes
Notes of and cheques on other banks
Balances due from other banks in Canada
Balances due from other banks or agents not in Canada
Government debentures or stock
Loans to the governments of the Dominion and of any of the
provinces, respectively
Loans, discounts, or advances on current account to corporations
Notes and bills discounted and current:
Notes and bills discounted, overdue, and not specially secured
Overdue debts secured by mortgage or other deed on real
estate, or by deposit of or lien on stock, or by other securities
Real estate the property of the bank (other than the bank
premises) and mortgages on real estate sold by the bank__
Bank premises
Other assets not included under the foregoing heads

We declare t h a t the foregoing return is made up from the books of
the bank, and t h a t it is correct to the best of our knowledge and belief.
(Place) this
day of
, i8__.
A. B., President, &c>
C. D., Cashier, &c.
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14. The bank shall always hold, as nearly as may be
practicable, one-half of its cash reserves in dominion
notes and the proportion of such reserves held in dominion notes shall never be less than one-third thereof.
15. Every bank to which this act applies shall be exempt from the tax now imposed on the average amount
of its notes in circulation, to which other banks will continue liable, and from the obligation to hold any portion
of its capital in government debentures or debentures of
any kind.
16. The receiver-general shall make such arrangements
as may be necessary for ensuring the delivery of dominion notes to any bank in exchange for an equivalent
amount of specie at the several offices at which dominion
notes will be redeemable, in the cities of Toronto, Montreal, Halifax, and St. John (N. B.), respectively.
INTERNAL REGULATIONS.

Shares and

shareholders.

17. Books of subscription may be opened, and shares
of the capital stock of the bank may be made transferable, and the dividends accruing thereon may be made
payable, in the United Kingdom of Great Britain and
Ireland, in like manner as such shares and dividends are
respectively made transferable and payable at the head
office of the bank; and to that end the directors may
from time to time determine the proportion of the shares
which shall be so transferable in the United Kingdom and
make such rules and regulations and prescribe such forms
and appoint such agent or agents as they may deem
necessary.
18. The shares of the capital stock shall be paid in by
such installments and at such times and places as the
directors shall appoint, and executors, administrators, and
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ceased shareholders shall be and are respectively indemnified for paying the same: Provided always, That no
share or shares shall be held to be lawfully subscribed for
unless a sum equal to at least ten per centum on the
amount subscribed for be actually paid at the time or
within thirty days after the time of subscribing.
19. The shares of the capital stock of the bank shall be
held and adjudged to be personal estate, and shall be
assignable and transferable at the chief place of business
of the bank, or at any of its branches which the directors
shall appoint for that purpose, and according to such form
as the directors shall prescribe; but no assignment or
transfer shall be valid unless it be made and registered and
accepted by the party to whom the transfer is made, in a
book or books to be kept by the directors for that purpose,
nor until the person or persons making the same shall, if
required by the bank, previously discharge all debts or
liabilities due by him, her, or them to the bank which
may exceed in amount the remaining stock, if any, belonging to such person or persons, and no fractional part or
parts of a share, or less than a whole share, shall be assignable or transferable; and when any share or shares of the
said capital stock shall have been sold under a writ of
execution, the sheriff by whom the writ shall have been
executed shall, within thirty days after the sale, leave
with the cashier, manager, or other officer of the bank, an
attested copy of the writ, with the certificate of such
sheriff endorsed thereon, certifying to whom the sale has
been made, and thereupon (but not until after all debts
or liabilities due by the holder or holders of the shares to
the bank shall have been discharged as aforesaid), the
president or vice-president, manager, or cashier of the
bank, shall execute the transfer of the share or shares so
sold to the purchaser; and such transfer being duly
accepted, shall be to all intents and purposes as valid and
effectual in law as if it had been executed by the holder or
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holders of the said share or shares, any law or usage to
the contrary notwithstanding.
20. A list of all transfers of shares registered each day
in the books of the bank, showing the parties to such
transfers and the number of shares transferred in each
case, shall be made up at the end of each day and kept at
the chief office of the bank for the inspection of its shareholders.
21. If the interest in any share or shares in the capital
stock becomes transmitted in consequence of the death or
bankruptcy or insolvency of any shareholder, or in consequence of the marriage of a female shareholder, or by any
other lawful means than by a transfer according to the
provisions of this act, such transmission shall be authenticated by a declaration in writing, as hereinafter mentioned, or in such other manner as the directors of the
bank shall require, and every such declaration shall distinctly state the manner in which, and the party to whom,
such shares shall have been transmitted, and shall be by
such party made and signed; and every such declaration
shall be by the party making and signing the same
acknowledged before a judge of a court of record, or before
the mayor, provost, or chief magistrate of a city, town,
borough, or other place, or before a public notary, where
the same shall be made and signed; and every declaration
so signed and acknowledged shall be left with the cashier,
manager, or other officer, or agent of the bank, who shall
thereupon enter the name of the party entitled under such
transmission in the registry of shareholders; and until such
transmission shall have been so authenticated no party or
person claiming by virtue of any such transmission shall
be entitled to receive any share of the profits of the bank,
or to vote in respect of any such share or shares: Provided
always, That every such declaration and instrument as by
this and the following section of this act is required to
perfect the transmission of a share or shares in the bank
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which shall be made in any other country than Canada,
or some other of the British colonies in North America, or
in the United Kingdom of Great Britain and Ireland, shall
be further authenticated by the British consul or viceconsul, or other the accredited representative of the
British Government in the country where the declaration
shall be made, or shall be made directly before such British
consul or vice-consul or other accredited representative:
And provided also, That nothing in this act contained
shall be held to debar the directors, cashier, or other officer
or agent of the bank from requiring corroborative evidence of any fact or facts alleged in any such declaration.
22. If the transmission of any share of the capital stock
be by virtue of the marriage of a female shareholder, the
declaration shall be accompanied by a copy of the register
of such marriage, or other particulars of the celebration
thereof, and shall declare the identity of the wife with
the holder of such share, and shall be made and signed
by such female shareholder and her husband; and it shall
be competent to them to include therein a declaration to
the effect that the share transmitted is the sole property,
and under the sole control of the wife, that she may receive
and grant receipts for the dividends and profits accruing
in respect thereof, and dispose of and transfer the share
itself, without requiring the consent or authority of her
husband; and such declaration shall be binding upon the
bank and the parties making the same, until the said
parties shall see fit to revoke it by a written notice to that
effect to the bank; and further, the omission of a statement
in any such declaration, that the wife making the same is
duly authorized by her husband to make the same, shall
not cause the declaration to be deemed either illegal or
informal; any law or usage to the contrary notwithstanding.
23. If the transmissions have taken place by virtue of
any testamentary instrument, or by intestacy, the probate
of the will, or any letters of administration, or act of
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curatorship, or an official extract therefrom, shall,
together with such declaration, be produced and left with
the cashier, or other officer or agent of the bank, who shall,
thereupon, enter the name of the party entitled under
such transmission, in the register of shareholders.
24. If the transmission of any share or shares of the
capital stock of the bank be by the decease of any shareholder, the production to the directors and the deposit
with them of any authenticated copy of the probate of
the will of the deceased shareholder, or of letters of administration of his estate granted by any court in the Dominion
having power to grant such probate or letters of administration, or by any prerogative, diocesan, or peculiar court
or authority in England, Wales, Ireland, or any British
colony, or of any testament testamentary or testament
dative, expede in Scotland, or, if the deceased shareholder
shall have died out of Her Majesty's dominions, the production to and deposit with the directors of any authenticated copy of the probate of his or her will or letters of
administration of his or her property, or other documents
of like import granted by any court or authority having
the requisite power in such matters, shall be sufficient
justification and authority to the directors for paying any
dividend, or transferring, or authorizing the transfer, of
any share or shares, in pursuance of and in conformity to
such probate, letters of administration, or other such
document as aforesaid.
25. Whenever the interest in any share or shares of the
capital stock of the bank shall be transmitted by the
death of any shareholder or otherwise, or whenever the
ownership of or legal right of possession in any such share
or shares shall change by any lawful means other than by
transfer, according to the provisions of this act, and the
directors of the bank shall entertain reasonable doubts as
to the legality of any claim to and upon such share or
shares of stock, then, and in such case, it shall be lawful
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for the bank to make and file in one of the superior courts
of law or equity in the province in which the head office
of the bank is situated, a declaration and petition in writing, addressed to the justices of the court, setting forth
the facts and the number of shares previously belonging
to the party in whose name such shares stand in the books
of the bank, and praying for an order or judgment adjudicating and awarding the said shares to the party or parties legally entitled to the same, and by which order or
judgment the bank shall be guided and held fully harmless and indemnified and released from all and every other
claim for the said shares or arising therefrom: Provided
always, That notice of such petition shall be given to the
party claiming such share or shares, or to the attorney of
such party duly authorized for the purpose, who shall,
upon the filing of such petition, establish his right to the
several shares referred to in such petition; and the delays
to plead and all other proceedings in such cases shall be the
same as those observed in analogous cases before the said
superior courts: Provided also, That the costs and expenses of procuring such order and adjudication shall be
paid by the party or parties to whom the said shares shall
be declared lawfully to belong, and such shares shall not be
transferred until such costs and expenses be paid, saving
the recourse of such party against any party contesting his
right.
26. The bank shall ndt be bound to see to the execution
of any trust, whether expressed, implied, or constructive,
to which any of the shares of its stock shall be subject,
and the receipt of the party in whose name any such share
shall stand in the books of the bank, or, if it stands in the
name of more parties than one, the receipt of one of the
parties, shall be a sufficient discharge to the bank for any
dividend or any other sum of money payable in respect
of such share, unless express notice to the contrary has
been given to the bank; and the bank shall not be bound
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to see to the application of the money paid upon such receipt, whether given by one of such parties or all of them.
27. Each shareholder in the bank shall, on all occasions
on which the votes of the shareholders are to be taken,
have one vote for each share held by him for at least thirty
days before the time of meeting. Shareholders may vote
by proxy, but no person but a shareholder shall be permitted to vote or act as such proxy; and no manager,
cashier, bank clerk, or other subordinate officer of the
bank shall vote either in person or by proxy, or hold a
proxy for that purpose. All questions proposed for the
consideration of the said shareholders shall be determined
by the majority of their votes; the chairman elected to
preside at any such meeting of the said shareholders shall
vote as a shareholder only, unless there be a tie, in which
case (except as to the election of a director) he shall have
a casting vote; and where two or more persons are joint
holders of shares, it shall be lawful that one only of such
joint holders be empowered by letter of attorney from
the other joint holder or holders, or a majority of them,
to represent the said shares, and vote accordingly; and
in all cases when the votes of the shareholders are taken
the voting shall be by ballot.
28. The shareholders in the bank shall have power to
regulate by by-law the following matters incident to the
management and administration of the affairs of the
bank, viz: The qualification, and number of the directors,
which shall not be less than five nor more than ten, and
the quorum thereof; the method of filling up vacancies in
the board of directors whenever the same may occur
during each year; and the time and proceedings for the
election of directors, in case of a failure of any election on
the day appointed for it—the remuneration of the president, vice-president and other directors; and the closing
of the transfer book during a certain time not exceeding
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dend: Provided, That no director shall hold less than
three thousand dollars of the stock of the bank, when the
paid-up capital thereof is one million dollars or less, nor
less than four thousand dollars of stock when the paid-up
capital thereof is over one million and does not exceed
three millions, nor less than five thousand dollars of stock
when the paid-up capital thereof exceeds three millions;
the directors shall be elected annually by the shareholders
and shall be eligible for re-election: Provided, That the
foregoing provisions, touching directors, shall not apply to
a bank en commandite, which shall in these matters be
governed by the provisions of its charter. The shareholders (or if the bank be en commandite, the principal
partners), may also regulate by by-law the amount of
discounts or loans which may be made to directors (or if
the bank be en commandite to the principal partners),
either jointly or severally or to any one firm or person,
or to any shareholder or to corporations: Provided, That
until it is otherwise ordered by by-law under this section,
the by-laws of the bank on any matter which can be regulated by by-law under this section shall remain in force,
except as to the qualification of directors as to which they
shall remain in force until the next annual general meeting
of the shareholders, after the first day of July, 1871, after
which no person shall be a director unless he possesses the
number of shares hereby required or such greater number
as may be required by any by-law in that behalf.
29. Any number not less than twenty-five of the shareholders of the bank who together may be proprietors of at
least one-tenth of the paid up capital stock of the bank
by themselves or by their proxies, or the directors of the
bank or any four of them, shall have power at any time
to call a special general meeting of the shareholders of the
bank to be held at their usual place of meeting upon giving
six weeks previous public notice, specifying in such notice
the object or objects of such meeting; and if the object of
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any such special general meeting be to consider of the proposed removal of the president, or vice-president, or of a
director or directors of the said bank for maladministration or other specified and apparently just cause, then if
a majority of the votes of the shareholders of such rneetting
be given for such removal, a director or directors to replace
him or them shall be elected or appointed in the manner
provided in the by-laws of the bank, or if there be no bylaws providing therefor then by the shareholders at such
meeting; and if it be the president or vice-president who
shall be removed, his office shall be filled up by the directors (in the manner provided in case of a vacancy occurring in the office of president or vice-president) who shall
choose or elect a director to serve as such president.
President and directors.
30. The stock, property, affairs, and concerns of the
bank shall be managed by a board of directors, the number
to be fixed as herein provided, who shall choose from
among themselves a president and vice-president; the directors shall be natural born or naturalized subjects of
Her Majesty, and shall be elected on such day in each
year as may be or may have been appointed by the charter
or by any by-law of the bank, and at such time of the day
and at such place where the head office of the bank is situate, as a majority of directors for the time being shall appoint; and public notice shall be given by the directors,
by publishing the same at least four weeks in a newspaper
of the place where the said head office is situate, previous
to the time of holding such election; and the election shall
be held and made by such of the shareholders of the bank
as have paid all calls made by the directors and as shall
attend for the purpose in their own proper persons or by
proxy, and all elections for directors shall be by ballot,
and the said proxies shall only be capable of being held
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sons, to the number fixed by by-law, as hereinbefore provided, who have the greatest number of votes at any
election, shall be directors: Provided, That if it should happen at any election that two or more persons have an equal
number of votes, and the election or nonelection of one or
more of such persons as a director or directors depends on
such equality, then the directors who shall have had a
greater number, or the majority of them, shall determine
which of the said persons so having an equal number of
votes shall be the director or directors, so as to complete
the full number; and in case of a vacancy occurring in the
number of directors, such vacancy shall be filled in the
manner provided by the by-laws, but the non-filling of
the vacancy shall not vitiate the acts of a quorum of the
remaining directors; and if the vacancy so created shall
be that of a president or vice-president, the directors at
the first meeting, after completion of their number, shall,
from among themselves, elect a president or vice-president,
who shall continue in office for the remainder of the year.
And the said directors, as soon as may be after the said
election, shall proceed in like manner to elect by ballot
two of their number to be president and vice president:
Provided always, That no person shall be eligible to be or
continue a director unless he shall hold, in his name and
for his own use, stock in the said bank to the amount
hereinbefore provided.
31. In case it should happen that an election of directors
should not be made on any day when it ought to have been
made, the corporation shall not for that cause be deemed
to be dissolved, but it shall be lawful on any other day to
hold and make an election of directors in such manner as
shall have been provided by the by-laws made by the
shareholders in that behalf; and the directors then in office
shall remain so until a new election shall be made.
32. At all meetings of the directors of the bank not less
than three of them shall constitute a board or quorum for
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the transaction of business; and at the said meetings the
president, or in his absence the vice-president, or in their
absence one of the directors present, to be chosen pro tempore, shall preside; and the president, vice-president, or
president pro tempore so presiding shall vote as a director,
and if there be an equal division on any question shall have
a casting vote.
33. The directors for the time being, or a majority of
them, shall have power to make such by-laws and regulations (not repugnant to the provisions of this act or the
laws of the Dominion of Canada) as to them shall appear
needful and proper touching the management and disposition of the stock, property, estate, and effects of the
bank, and touching the duties and conduct of the officers,
clerks, and servants employed therein, and all such other
matters as appertain to the business of a bank, and shall
also have power to appoint as many officers, clerks, and
servants for carrying on the said business, and with such
salaries and allowances as to them may seem meet; and
they may also appoint a director or directors for any
branch of the bank: Provided always. That before permitting any cashier, officer, clerk, or servant of the bank to
enter upon the duties of his office, the directors shall require him to give bond or other security to the satisfaction
of the directors for the due and faithful performance of
his duties: Provided also, That all by-laws of the bank
lawfully made before the passing of this act as to any
matter respecting which the directors can make by-laws
under this section (including any by-laws for establishing
a guarantee fund for the employees of the bank) shall remain in force until they are repealed or altered by others
made under this act.
34. The directors shall have power to make such calls
of money from the several shareholders for the time being
upon the shares subscribed for in the bank by them
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porate name of the bank to sue for, recover, and get in
all such calls, or to cause and declare such shares to be
forfeited to the bank in case of non-payment of any such
call; and an action may be brought to recover any
money due on any such call, and it shall not be necessary
to set forth the special matter in the declaration, but it
shall be sufficient to allege that the defendant is holder
of one share or more, as the case may be, in the capital
stock of the bank, and is indebted to the bank for a call
or calls upon such share or shares in the sum to which
the call or calls amount, as the case may be, stating the
amount and number of such calls whereby an action
hath accrued to the bank to recover the same from such
defendant by virtue of this act; and it shall be sufficient
to maintain such action, to prove by any one witness (a
shareholder being competent), that the defendant, at
the time of making any such call, was a shareholder in
the number of shares alleged, and to produce the by-law
or resolution of the directors making and prescribing such
call, and to prove notice thereof, given in conformity
with such by-law or resolution; and it shall not be necessary to prove the appointment of the directors or any
other matter whatsoever, provided that such calls shall
be made at intervals of not less than thirty days, and
upon notice to be given at least thirty days prior to the
day on which such call shall be payable; and no such
call shall exceed ten per cent of each share subscribed.
35. Provided also, that if any shareholder or shareholders refuse or neglect to pay any or either of the instalments upon his, her, or their shares of the said capital
stock at the time or times appointed by such call, as
aforesaid, such shareholder or shareholders shall incur a
forfeiture to the use of the bank of a sum of money equal
to ten per centum on the amount of such shares; and,
moreover, it shall be lawful for the directors of the bank
(without any previous formality other than thirty days5
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public notice of their intention), to sell at public auction
the said shares, or so many of the said shares as shall,
after deducting the reasonable expenses of the sale,
yield a sum of money sufficient to pay the unpaid instalments due on the remainder of the said shares and the
amount of forfeitures incurred upon the whole; and
the president or vice-president, manager or cashier, of
the bank shall execute the transfer to the purchaser of
the shares of stock so sold; and such transfer being
accepted, shall be as valid and effectual in law as if the
same had been executed by the original holder or holders
of the shares of stock thereby transferred: Provided
always, That nothing in this section contained shall be
held to debar the directors, or the shareholders at a
general meeting, from remitting either in whole or in
part, and conditionally or unconditionally, any forfeiture
incurred by the nonpayment of instalments as aforesaid,
or to prevent the bank from enforcing the payment of
any call or calls by suit in lieu of forfeiting the same.
36. At every annual meeting of the shareholders for
the election of directors, the outgoing directors shall
submit a clear and full statement of the affairs of the
bank, containing on the one part the amount of the capital
stock paid in, the amount of notes of the bank in circulation and net profits made, the balances due to other
banks and institutions, and the cash deposited in the
bank, distinguishing deposits bearing interest from those
not bearing interest—and on the other part, the amount
of the current coin, the gold and silver bullion, and the
amount of Dominion notes in the vaults of the bank,
the balances due to the bank from other banks and institutions, the value of the real and other property of the
bank, and the amount of debts owing to the bank, including and particularizing the amounts so owing upon bills
of exchange, discounted notes, mortgages, and other
securities—thus exhibiting on the one hand the liabilities
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of, or the debts due by the bank, and on the other hand
the assets and resources thereof; and the said statement
shall also exhibit the rate and amount of the last dividend declared by the directors, the amount of reserved
profits at the time of declaring the said dividend, and the
amount of debts due to the bank, over due and not paid,
with an estimate of the loss which will probably accrue
thereon.
37. The books, correspondence and funds of the bank
shall at all times be subject to the inspection of the
directors; but no shareholder not being a director shall
be allowed to inspect the account of any person dealing
with the bank.
38. It shall be the duty of the directors of the bank
to make half-yearly dividends of so much of the profits
of the bank as to the majority of them may seem advisable and not inconsistent with the provisions of sections
ten and eleven of this act; and to give public notice of
the payment of such dividends at least thirty days
previously.
POWERS AND OBLIGATIONS OF THE BANK.

Loans, interest, advances on warehouse receipts, &c.
39. The bank shall have the power to acquire and hold
real and immovable estate for its actual use and occupation and the management of its business, and to sell or dispose of the same, and to acquire other property in its
stead, for the same purposes.
40. The bank shall not, either directly or indirectly, lend
money or make advances upon the security, mortgage, or
hypothecation of any lands or tenements, or of any ships
or other vessels, nor upon the security or pledge of any
share or shares of the capital stock of the bank, or of any
goods, wares, or merchandize, except as authorized in this
act; nor shall the bank, either directly or indirectly, deal
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in the buying and selling or bartering of goods, wares, or
merchandize, or engage or be engaged in any trade whatever, except as a dealer in gold and silver bullion, bills of
exchange, discounting of promissory notes and negotiable
securities, and in such trade generally as appertains to
the business of banking.
41. The bank may take, hold, and dispose of mortgages
and hypotheques upon personal as well as real property,
by way of additional security for debts contracted to the
bank in the course of its business; and the rights, powers,
and privileges which the bank is hereby declared to have
or to have had in respect of real estate mortgaged to it
shall be held and possessed by it, in respect of any personal
estate which may be mortgaged or hypothecated to it.
42. The bank may purchase any lands or real estate
offered for sale under execution at the suit of the bank, or
exposed to sale by the bank under a power of sale given to
it for that purpose, in cases where, under similar circumstances, an individual could so purchase, without any
restriction as to the value of the lands which it may so
purchase, and may acquire a title thereto as any individual
purchasing at sheriff's sale or under a power of sale, in like
circumstances, could do, and may take, have, hold, and
dispose of the same at pleasure.
43. The bank may acquire and hold an absolute title in
or to land mortgaged to it as security for a debt due or
owing to it, either by obtaining a release of the equity of
redemption in the mortgaged property, or by procuring a
foreclosure in any court of chancery or of equity, or by
other means whereby, as between individuals, an equity
of redemption can by law be barred, and may purchase
and acquire any prior mortgage or charge on such land.
44. Nothing in any charter, act, or law shall be construed as ever having prevented or as preventing the bank
from acquiring and holding an absolute title to and in any
such mortgaged lands, whatever the value thereof may be,
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or from exercising or acting upon any power of sale contained in any mortgage given to it or held by it, authorizing
or enabling it to sell or convey away any lands so mortgaged.
45. The words "goods, wares, and merchandize" when
used in the six next following sections of this act, shall be
held to comprise in addition to the things usually understood thereby, timber, boards, deals, staves, and other
lumber, and also all agricultural produce.
46. The bank may acquire and hold any cove receipt or
any receipt by a cove keeper, or by the keeper of any
wharf, yard, harbor, or other place, any bill of lading, any
specification of timber, or any receipt given for cereal
grains, goods, wares, or merchandize stored or deposited
in any cove, wharf, yard, harbor, warehouse, mill, or other
place in Canada, or shipped in any vessel or delivered to
any carrier for carriage from any place whatever to any
part of this Dominion, or through the same or on the
waters bordering thereon, or from the same to any other
place whatsoever, and whether such cereal grains are to be
delivered upon such receipt in species or converted into
flour, as collateral security for the due payment of any bill
of exchange or note discounted by such bank in the regular
course of its banking business, or for any debt which may
become due to the bank under any credit opened or
liability incurred by the bank for or on behalf of the holder
or owner of such bill of lading, specification, or receipt, or
for any other debt to become due to the bank; and such
bill of lading, specification, or receipt, being so acquired,
shall vest in the bank from the date of the acquisition
thereof all the right and title of the last previous holder
thereof, and if such holder be the agent of the owner,
within the meaning of the fifty-ninth chapter of the consolidated statutes of the late Province of Canada, then all
the right and title of the owner thereof to or in such
cereal grains, goods, wares, or merchandize, subject to his
right to have the same re-transferred to him, if such bill,
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note, or debt be paid when due; and in the event of the
non-payment of such bill or note or debt when due, such
bank may sell the said cereal grains, goods, wares, or
merchandize and retain the net proceeds, or so much
thereof as will be equal to the amount due to the bank
upon such bill or debt or note, with interest and costs,
returning the overplus, if any, to the person from whom
such instrument was acquired by the bank.
47. No transfer of any such bill of lading, specification
of timber, or receipt shall be made under this act to secure
the payment of any bill, note, or debt, unless such bill,
note, or debt be negotiated or contracted at the time of the
acquisition thereof by the bank, or upon the understanding that such bill of lading, specification of timber, or
receipt would be transferred to the bank, but such bill,
note, or debt may be renewed, or the time for the payment
thereof extended, without affecting such security.
48. Where any person engaged in the calling of cove
keeper, keeper of a wharf, yard, harbor, or other place,
warehouseman, miller, wharfinger, master of a vessel or
carrier, curer and packer of pork, or dealer in wool, by
whom a receipt or bill of lading may be given in such capacity, as hereinbefore mentioned, for cereal grains, goods,
wares, or merchandize, is the same time the owner of or
entitled himself (otherwise than in his capacity of warehouseman, miller, wharfinger, master of a vessel or carrier,
cove keeper, keeper of a wharf, yard, harbor, or other place,
curer and packer of pork, or dealer in wool) to receive such
cereal grains, goods, wares, or merchandize, any such receipt or bill of lading or any acknowledgment or certificate
intended to answer the purpose of such receipt or bill of
lading, made by such person, shall be as valid and effectual
for the purposes of this act as if the person making such
receipt, acknowledgment, or certificate or bill of lading, and
the owner or person entitled to receive such cereal grains,
goods, wares, or merchandize were not one and the same
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person, and in the case of the curing and packing of pork
a receipt for hogs shall apply to the pork made from such
hogs.
49. All advances made on the security of any bill of
lading, specification, receipt, acknowledgment, or certificate shall give and be held to give to the bank making
such advances a claim for the repayment of such advances
on the grain, goods", wares, or merchandise therein mentioned, prior to and by preference over the claim of any
unpaid vendor, any law, usage, or custom to the contrary
notwithstanding.
50. But no timber, boards, deals, staves, or other lumber shall be held in pledge by the bank for any period exceeding twelve calendar months, except by the consent in
writing of the person pledging the same, and no sale of any
timber, boards, deals, staves, or other lumber shall be
made under this act until nor unless notice of the time
and place of such sale shall have been given by letter
mailed in the post office to the last known address of the
pledger thereof at least thirty days prior to the sale
thereof, and every such sale shall be made by public auction after notice thereof by advertisement, stating the
time and place thereof, in at least two newspapers published
in or nearest to the place where such sale is to be made,
and in every issue of such newspapers during eight days,
which newspapers shall be those whose issue is most frequent at or nearest the place where the sale is to be made,
and if such place be in the Province of Quebec, then at
least one of such newspapers shall be a newspaper published in the English language, and at least one other of
such newspapers shall be a newspaper published in the
French language; and no cereal grains or goods, wares or
merchandise, other than timber, boards, deals, staves, and
other lumber, shall be held in pledge by the bank for a period
exceeding six months (except by consent of the person
pledging the same), and no sale thereof shall be made by
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the bank under this act until or unless notice has been given
by letter mailed in the post office to the last known address of the pledger thereof at least ten days prior to such
sale.
51. The bank shall not make loans or grant discounts on
the security of its own stock, but shall have a privileged
lien for any overdue debt on the shares and unpaid dividends of the debtor thereof, and may decline to allow any
transfer of the shares of such debtor until such debt is
paid, and if such debt is not paid when due the bank may
sell such shares, after notice has been given to the holder
thereof of the intention of the bank to sell the same, by
mailing such notice in the post office to the last known
address of such holder at least thirty days prior to such
sale; and upon such sale being made, the president, vicepresident, manager, or cashier shall execute a transfer of
such shares to the purchaser thereof in the usual transfer
book of the bank, which transfer shall vest in such purchaser all the rights in or to such shares which were possessed by the holder thereof, with the same obligation of
warranty on his part as if he were the vendor thereof,
but without any warranty from the bank or by the officer
of the bank executing such transfer.
And nothing in this act contained shall prevent the bank
from acquiring and holding as collateral security for any
advance by or debt to the bank, or for any credit or liability incurred by the bank to or on behalf of any person
(and either at the time of such advance by or the contracting of such debt to the bank, or the opening of such credit,
or the incurring of such liability by the bank), the shares
of the capital stock of any other bank, the bonds or debentures of municipal or other corporations, or dominion,
provincial, British, or foreign public securities; and such
stock, bonds, debentures, or securities may, in case of
default to pay the debt for securing which they were so
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acquired and held, be dealt with, sold, and conveyed in like
manner and subject to the same restrictions as are herein
provided in respect of stock of the bank on which it has
acquired a lien under this act.
52. The bank shall not be liable to incur any penalty or
forfeiture for usury; and may stipulate for, take, reserve, or
exact any rate of interest or discount not exceeding seven
per centum per annum, and may receive and take in advance any such rate, but no higher rate of interest shall be
recoverable by the bank. Any rate of interest whatever
may be allowed by the bank upon money deposited with it.
53. The bank may, in discounting at any of its places of
business, branches, agencies, or offices of discount and deposit, any note, bill, or other negotiable security or paper
payable at any other of its own places or seats of business,
branches, agencies, or offices of discount and deposit in
Canada, receive or retain in addition to the discount any
amount not exceeding the following rates per centum,
according to the time it has to run, on the amount of such
note, bill, or other negotiable security or paper, to defray
the expenses attending the collection thereof; that is to
say, under thirty days, one-eighth of one per cent; thirty
days or over, but under sixty days, one-fourth of one per
cent; sixty days and over, but under ninety days, threeeighths of one per cent; ninety days and over, one-half of
one per cent.
54. The bank may, in discounting any note, bill, or other
negotiable security or paper, bona fide payable at any
place in Canada different from that at which it is discounted, and other than one of its own places or seats of
business, branches, agencies, or offices of discount and deposit in Canada, receive and retain in addition to the discount thereon, a sum not exceeding one-half of one per
centum on the amount thereof, to defray the expenses of
agency and charges in collecting the same.
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Bank notes, bonds, &c.
55. The bonds, obligations, and bills obligatory or of
credit of the bank under its corporate seal and signed by
the president or vice-president and countersigned by a
chashier or assistant cashier, which shall be made payable
to any person or persons, shall be assignable by endorsement thereon; and bills or notes of the bank signed by
the president, vice-president, cashier, or other officer appointed by the directors of the bank to sign the same,
promising the payment of money to any person or persons,
his, her, or their order, or to the bearer, though not under
the corporate seal of the bank, shall be binding and obligatory on it in like manner and with the like force and effect
as they would be upon any private person, if issued by
him in his private or natural capacity, and shall be assignable in like manner as if they were so issued by a private
person in his natural capacity: Provided always, That
nothing in this act shall be held to debar the directors of
the bank from authorizing or deputing from time to time
any cashier, assistant cashier, or officer of the bank, or any
director other than the president or vice-president, or any
cashier, manager, or local director of any branch or office
of discount and deposit of the bank, to sign the bills of
the bank intended for general circulation, and payable to
order or to bearer on demand.
56. All bank notes and bills of the bank whereon the
name or names of any person or persons entrusted or authorized to sign such notes or bills on behalf of the bank,
shall or may become impressed by machinery provided
for that purpose by or with the authority of the bank,
shall be and shall be taken to be good and valid to all
intents and purposes, as if such notes and bills had been
subscribed in the proper handwriting of the person or persons entrusted or authorized by the bank to sign the same,
respectively, and shall be and be deemed and taken to be
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bank notes and bills within t h e meaning of all laws and
statutes whatever, and shall and m a y be described as b a n k
bills or notes in all indictments and civil or criminal proceedings whatsoever, any law, statute, or usage t o the cont r a r y notwithstanding.
INSOLVENCY.

57. Any suspension by t h e b a n k of p a y m e n t of any of
its liabilities as they accrue, in specie or Dominion notes,
shall, if it continues for ninety days, constitute the b a n k
insolvent and operate a forfeiture of its charter, so far as
regards t h e issue or reissue of notes and other banking
operations; and the charter shall remain in force only for
the purpose of enabling t h e directors or t h e assignee or
assignees, or other legal authority (if any be appointed
in such manner as m a y by law be provided) t o make the
calls mentioned in the next following section of this act
and to wind u p its business; and any such assignee or
assignees or other legal authority shall, for such purposes,
have all the powers of t h e directors.
58. I n the event of the property and assets of t h e bank
becoming insufficient to pay its debts and liabilities, the
shareholders of the b a n k shall be liable for t h e deficiency
so far as t h a t each shareholder shall be so liable to an
a m o u n t (over and above any amount not paid u p on their
respective shares) equal to the amount of their shares,
respectively; and if any suspension of p a y m e n t in full in
specie or Dominion notes, of all or any of t h e notes or other
liabilities of the bank shall continue for six months, the
directors m a y and shall make calls on such shareholders,
t o t h e a m o u n t they m a y deem necessary t o pay all the
debts and liabilities of the bank, without waiting for the
collection of any debts due to it or t h e sale of any of its
assets or property; such calls shall be made a t intervals
of t h i r t y days and upon notice to be given thirty days
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at least prior to the day on which such call shall be payable; and any such call shall not exceed twenty per cent
on each share, and payment thereof may be enforced in
like manner as for calls on unpaid stock, and the first of
such calls shall be made within ten days after the expiration of the said six months; and any failure on the part
of any shareholder liable to such call to pay the same
when due, shall operate a forfeiture by such shareholder
of all claim in or to any part of the assets of the bank, such
call and any further call thereafter being nevertheless recoverable from him as if no such forfeiture had been incurred. Provided always, That nothing in this section
contained shall be construed to alter or diminish the additional liabilities of the directors hereinbefore mentioned
and declared: Provided also, That if the bank be en commandite and the principal partners are personally liable,
then, in case of any such suspension such liability shall
at once accrue and may be enforced against such principal
partners, without waiting for any sale or discussion of the
property or assets of the bank, or other preliminary proceedings whatever, and the provision respecting calls
shall not apply to such bank.
59. Persons who, having been shareholders in the bank,
have only transferred their shares or any of them to others
or registered the transfer thereof within one month before
the commencement of the suspension of payment by the
bank, shall be liable to calls on such shares under the next
preceding section, as if they had not transferred them,
saving their recourse against those to whom they were
transferred; and any assignee or other officer or person
appointed to wind up the affairs of the bank, in case of
its insolvency, shall have the powers of the directors with
respect to such calls: Provided, That if the bank be en commandite, the liability of the principal partners and of the
commanditaires shall continue for such time after their
ceasing to be such as may be provided in the charter of
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the bank, and the foregoing provisions with respect to the
transfer of shares or calls shall not apply to such bank.
OFFENCES AND PENALTIES.

60. If any cashier, assistant cashier, manager, clerk, or
servant of the bank secretes, embezzles, or absconds with
any bond, obligation, bill obligatory or of credit or other
bill or note, or any security for money, or any money or
effects entrusted to him as such cashier, assistant cashier,
manager, clerk, or servant, whether the same belong to
the said bank or belong to any person or persons, body or
bodies, politic or corporate, or institution or institutions
and be lodged with the said bank, the said cashier, assistant cashier, manager, clerk, or servant so offending and
being thereof convicted in due form of law, shall be deemed
guilty of felony, and shall be punished by imprisonment
at hard labor in the penitentiary for any term not less than
two years, or by imprisonment in any gaol or place of
confinement for any term less than two years, in the discretion of the court.
61. If any president, vice-president, director, principal
partner en commandite, manager, cashier, or other officer
of the bank wilfully gives or concurs in giving any creditor of the bank any fraudulent, undue, or unfair preference over other creditors, by giving security to such creditor or by changing the nature of his claim or otherwise
howsoever, he shall be guilty of misdemeanor, and shall
further be responsible for all damages sustained by any
party by such preference.
62. The making of any wilfully false or deceptive statement in any account, statement, return, report, or other
document respecting the affairs of the bank, shall unless
it amounts to a higher offence, be a misdemeanor, and
any and every president, vice-president, director, principal partner en commandite, auditor, manager, cashier, or
other officer of the bank preparing, signing, approving, or
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concurring in such statement, return, report, or document
or using the same with intent to deceive or mislead any
party, shall be held to have wilfully made such false statement, and shall further be responsible for all damages sustained by such party in consequence thereof.
63. Any director refusing to make or enforce, or to concur in making or enforcing any call under the fifty-eighth
section of this act, shall be deemed guilty of a misdemeanor
and shall be personally responsible for any damages suffered by such default.
64. If any miller, warehouseman, master of a vessel,
forwarder, carrier, wharfinger, keeper of a cove, yard, harbor, or other place for storing timber, deals, staves, boards,
or other lumber, curer or packer of pork, or dealer in wool,
factor, agent, or other person, or any clerk or person in his
employ, knowingly and wilfully gives to any person any
writing purporting to be a receipt for, or an acknowledgement of any cereal grain, timber, deals, staves, boards, or
other lumber, or other goods, wares, merchandize, or property, as having been received in his warehouse, vessel,
cove, wharf, or other place, or in any such place about
which he is employed, or as having been in any other manner received by him or the person in or about whose business he is employed, before the goods or property named
in such receipt, acknowledgment, or writing have been actually so received by or delivered to him or his employer,
with the intent to mislead, deceive, injure, or defraud any
person or persons whomsoever, although such person or
persons may be then to him unknown; or if any person
knowingly and wilfully accepts or transmits or uses any
such false receipt, acknowledgment, or writing, the person
giving and the person accepting, transmitting, or using
such false receipt, acknowledgment, or writing, shall severally be guilty of a misdemeanor.
65. The wilfully making any false statement in any
such receipt, acknowledgment, or certificate as in the forty204




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sixth section of this act mentioned, or the wilfully alienating or parting with, or not delivering to the holder or
indorsee any cereal grain, goods, wares, or merchandize
mentioned in such receipt, acknowledgment, or certificate,
contrary to the undertaking therein expressed or implied,
shall be a misdemeanor.
66. If any offence in either of the two next preceding
sections mentioned be committed by the doing of anything in the name of any firm, company, or copartnership
of persons, the person by whom such thing is actually
done, and any person who connives at the doing thereof,
shall be deemed guilty of the offence, and not any other
person.
67. Any person convicted of a misdemeanor under this
act shall, on conviction, be liable to be imprisoned in any
gaol or place of confinement for any term not exceeding
two years, in the discretion of the court before which the
conviction shall be had.
68. No private person or party, except a chartered bank,
shall issue or re-issue, make, draw, or indorse, any bill,
bond, note, check or other instrument, intended to circulate as money, or to be used as a substitute for money, for
any amount whatever, under a penalty of four hundred
dollars, to be recovered, with costs, in any court having
civil jurisdiction to the amount, by any party who will
sue for the same; and one half of such sum shall belong
to the party suing for the same, and the other half to Her
Majesty, for the public uses of the Dominion:
The intention to pass any such instrument as money
shall be presumed, if it be made for the payment of a less
sum than twenty dollars, and be payable either in form or
in fact to the bearer thereof, or at sight or on demand,
or at less than thirty days thereafter, or be overdue, or be
in any way calculated or designed for circulation, or as a
substitute for money; unless such instrument be a check
on some chartered bank, paid by the maker directly to
S. Doc. 332, 61-2

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his immediate creditor, or a promissory note, bill of
exchange, bond or other undertaking, for the payment
of money paid or delivered by the maker thereof to his
immediate creditor, and be not designed to circulate as a
substitute for money:
Provided always, That the Halifax Banking Company
may, until the end of the year 1874, continue to re-issue
their notes now in circulation, but the whole of such notes
shall, as far as practicable, be called in and withdrawn by
the end of the said year.
NOTICES.

69. The several public notices by this act required to be
given shall be given by advertisement in one or more of
the newspapers published at the place where the head
office of the bank is situate, and in the Canada Gazette or
such other Gazette as shall be generally known and
described as the Official Gazette for the publication of
official documents and notices emanating from the civil
government of this Dominion.
FUTURE LEGISLATION.

70. The bank shall be subject to such provisions of any
general or special winding up act to be passed by Parliament as may be declared to apply to banks; and no special
act which Parliament may deem it right to pass for
winding up the affairs of the bank in case of its insolvency
shall be deemed an infringement of its rights or of the
privileges conferred by its charter.
71. The bank shall always be subject to any general
provisions respecting banks which Parliament may deem
necessary for the public interest.
SPECIAL PROVISIONS AS TO CERTAIN BANKS.

72. The Bank of British North America, which, by the
terms of its present charter, is to be subject to the general
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laws of the Dominion, with respect to banks and banking,
shall not issue or re-issue in Canada any note for a less
sum than four dollars, and any such note of the said bank
outstanding shall be called in and redeemed as soon as
practicable; and the provisions contained in the ninth,
twelfth, thirteenth, fourteenth, sixteenth, forty-fifth, fortysixth, forty-seventh, forth-eighth, forty-ninth, fiftieth,
fifty-first, fifty-second, fifty-third, fifty-fourth, sixtieth,
sixty-first, sixty-second, sixty-fourth, sixty-fifth, sixtysixth, sixty-seventh, sixty-ninth, and seventy-first sections of this act, shall apply to the said bank; those contained in the other sections shall not apply to it.
73. This act shall not apply to any now existing bank
not mentioned in the schedule thereunto annexed (except
the Bank of British North America to the extent aforesaid
and La Banque du Peuple to the extent hereinafter mentioned) unless the directors of such bank shall, by special
resolution, apply to the treasury board, that the provisions
of this act may be extended to such bank, nor unless the
treasury board allows such application, and upon publication in the Official Gazette of such resolution, and of the
minute of the treasury board thereon, allowing such
application, such bank shall come under the provisions of
this act.
74. In pursuance of the application made by the Bank
of Nova Scotia in that behalf, it shall be lawful for the
shareholders of the said bank, at any special general
meeting called for the purpose, and by a by-law to be
passed thereat, to reduce the capital and shares of the
said bank by an amount not exceeding thirteen per cent
thereof respectively, and the shares and capital shall
thereafter be reckoned at the amount to which they shall
be so reduced.
75. Sections four, thirty-nine to fifty-four, both inclusive, sixty, sixty-one and sixty-two, and sixty-four to
sixty-eight, both inclusive, shall apply to La Banque du
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Peuple from and after the passing of this act and all the
other provisions of this act (except those contained in
sections one, two, three, five, six, seven, twenty-seven,
twenty-nine, thirty, thirty-one, thirty-two, thirty-three,
thirty-five, thirty-six, thirty-seven,
fifty-seven,
fiftyeight,
fifty-nine,
sixty-three, seventy, seventy-two,
seventy-three, and seventy-four, and so much of section
twenty-eight as is declared not t o apply to banks en commandite) shall apply from and after the first d a y of July
n e x t t o L a Banque du Peuple, provided t h a t wherever the
word " d i r e c t o r s " is used in any of t h e sections which
apply t o t h e said b a n k it shall be read and construed as
meaning t h e principal partners or members of t h e corporation of t h e said b a n k ; and so m u c h of t h e act incorporating
t h e said b a n k or of any act amending or continuing it as
m a y be inconsistent with any section of this act applying
t o the said b a n k or which makes any provision in any
m a t t e r provided for by the said sections other t h a n such
as is hereby made, is hereby repealed.
REPEALING AND SAVING CLAUSES.

76. T h e act passed in t h e thirty-third year of Her Majesty's reign, chaptered eleven, and intituled " A n act
respecting banks and banking," is hereby repealed; and
t h e act passed in t h e thirty-first year of Her Majesty's
reign, and intituled " A n act respecting b a n k s , " is hereby
repealed in so far as respects banks t o which this act
applies, including t h e Bank of British North America and
La Banque du Peuple, and shall cease t o apply t o t h e m
after t h e passing of this act (or after they respectively
come under its provisions, if they are now existing b a n k s
a n d not mentioned in t h e schedule), except as to rights
theretofore acquired under or offences committed against
it, b u t shall remain in force as regards other banks until
the end of the session of Parliament commencing next
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after the first day of January, in the year of our Lord one
thousand eight hundred and seventy-two.
77. Nothing in this act contained shall affect any case
pending when it shall come into force, but such case shall
be decided as if this act had not been passed.
SCHEDULE.

Banks whose charters are continued by this act.
The Bank of Montreal.
The Quebec Bank.
The City Bank.
The Niagara District Bank.
Molson's Bank.
The Bank of Toronto.
The Ontario Bank.
The Eastern Townships Bank.
La Banque Nationale.
La Banque Jacques Cartier.
The Merchants' Bank of Canada.
The Royal Canadian Bank.
The Union Bank of Lower Canada.
The Canadian Bank of Commerce.
The Mechanics, Bank.
The Dominion Bank.
The Merchants' Bank of Halifax.
The Bank of Nova Scotia.
The Bank of Yarmouth.

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APPENDIX

II.

THE CONSOLIDATED CANADIAN BANK ACT.
REVISED STATUTES OF CANADA, 1906.
CHAP. 29.—An Act Respecting banks and banking.
SHORT TITLE.
1. This act m a y be cited as the b a n k act.
S. I.)
INTERPRETATION.

(53 V, c. 3 1 ,

2. I n this act, unless the context otherwise requires, (a)
" b a n k " means any b a n k to which this act applies; (b)
" m i n i s t e r " means t h e minister of finance and receiver
general; (c) " a s s o c i a t i o n " means t h e Canadian Bankers'
Association, incorporated b y t h e act passed in the session
held in t h e sixty-third and sixty-fourth years of Her late
Majesty's reign, chapter ninety-three, intituled " A n act
t o incorporate t h e Canadian Bankers' Association;" (d)
" c u r a t o r " means any person appointed under t h e authority of this act b y t h e Canadian Bankers' Association t o
supervise t h e affairs of any b a n k which has suspended paym e n t in specie or Dominion notes of any of its liabilities as
they accrue; (e) "circulation f u n d " means t h e fund heretofore established and continued b y t h e authority of this
act under t h e n a m e of the " b a n k circulation redemption
fund;" (/) "goods, wares, and m e r c h a n d i s e " includes, in
addition t o t h e things usually understood thereby, timber,
deals, boards, staves, saw logs, and other lumber, petroleum, crude oil, and all agricultural produce and other
articles of commerce; (g) "warehouse receipt" (i) means
any receipt given b y any person for any goods, wares, or
merchandise in his actual visible and continued possession
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as bailee thereof in good faith and not as of his own property, and (ii) includes receipts, given by any person who is
the owner or keeper of a harbour, cove, pond, wharf, yard,
warehouse, shed, storehouse, or other place for the storage
of goods, wares, or merchandise, for goods, wares, and merchandise delivered to him as bailee, and actually in the
place or in one or more of the places owned or kept by him,
whether such person is engaged in other business or not,
and (iii) includes also receipts given by any person in
charge of logs or timber in transit from timber limits or
other lands to the place of destination of such logs or timber; (ft)"bill of lading'' includes all receipts for goods,
wares, or merchandise, accompanied by an undertaking to
transport the same from the place where they were received to some other place, by any mode of carriage whatever, whether by land or water, or partly by land and
partly by water; (i) "manufacturer" includes manufacturers of logs, timber or lumber, maltsters, distillers,
brewers, refiners and producers of petroleum, tanners,
curers, packers, canners of meat, pork, fish, fruit, or vegetables, and any person who produces by hand, art, process,
or mechanical means any goods, wares, or merchandise;
(/) "president" does not include an honorary president.
2. Where by this act any public notice is required to be
given the notice shall, unless otherwise specified, be given
by advertisement (a) in one or more newspapers published at the place where the head office of the bank is
situate and (b) in the Canada Gazette. (53 V, c. 31,
ss. 2, 54, and 102; 63-64 V, c. 26, ss. 3 and 24; 4-5 E.
VII, c. 4, s. 4.)
APPLICATION.

General.
3. The provisions of this act apply to the several banks
enumerated in Schedule A to this act, and to every bank
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nine hundred and five, whether this act is specially mentioned in its act of incorporation or not, but not to any
other bank, except as hereinafter specially provided. (53
V, c. 31, s. 3.)
4. The charters or acts of incorporation, and any acts in
amendment thereof, of the several banks enumerated in
Schedule A to this act are continued in force until the first
day of July, one thousand nine hundred and eleven, so far
as regards, as to each of such banks, (a) the incorporation
and corporate name; (b) the amount of the authorized
capital stock; (c) the amount of each share of such stock ;
and (d) the chief place of business; subject to the right of
each of such banks to increase or reduce its authorized
capital stock in the manner hereinafter provided.
2. As to all other particulars this act shall form and be
the charter of each of the said banks until the first day of
July, one thousand nine hundred and eleven.
3. Nothing in this section shall be deemed to continue in
force any charter or act of incorporation, if, or in so far as it
is, under the terms thereof, or under the terms of this act
ot of any other act passed or to be passed, forfeited or
rendered void by reason of the nonperformance of the conditions of such charter or act of incorporation, or by reason
of insolvency, or for any other reason. (63-64 V, c. 26,
s. 6.)
Banks in course of winding up.
5. The provisions of this act shall continue to apply to
the banks named in Schedule A to the bank act, passed
in the fifty-third year of Her late Majesty's reign, chapter
thirty-one, and not named in Schedule A to this act, but
only in so far as may be necessary to wind up the business
of the said banks respectively; and the charters or acts
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in force, shall respectively continue in force for t h e purposes of winding up, and for such purposes only.
2. The sections of this act enumerated in t h e next following section shall continue t o apply to t h e Bank of British Columbia, b u t only in so far as m a y be necessary t o
wind u p t h e business of the bank. (63-64 V, c. 26, s. 5.)
The Bank

of British

North

America.

6. The sections of this act which apply t o t h e Bank of
British North America are sections one, two, six, seven,
thirty-nine, forty-five, fifty-seven to sixty-one, b o t h inclusive, sixty-three to one hundred and twenty-four, b o t h
inclusive, one hundred and thirty, one hundred and
thirty-two t o one hundred and fifty-two, b o t h inclusive,
and one hundred and fifty-four to one hundred and fiftyseven, b o t h inclusive.
2. The other sections of this act do not apply t o t h e
Bank of British North America. (53 V, c. 31, s. 6; 63-64
V, c. 26, s. 7.)
7. For the purposes of t h e several sections of this act
m a d e applicable to the Bank of British North America
t h e chief office of t h e Bank of British North America shall
be t h e office of t h e b a n k a t Montreal in t h e Province of
Quebec. (53 V, c. 31, s. 7.)
INCORPORATION AND ORGANIZATION OF BANKS.

8. The capital stock of every bank hereafter incorporated, t h e n a m e of t h e bank, t h e place where its chief
office is t o be situated, and t h e n a m e of t h e provisional
directors, shall be declared in t h e act of incorporation of
every such b a n k respectively. (53 V, c. 3 1 , s. 9.)
9. An act of incorporation of a b a n k in t h e form set
forth in Schedule B to this act shall be construed to confer upon t h e b a n k thereby incorporated all the powers,
privileges, and immunities, and to subject it t o all t h e
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liabilities and provisions set forth in this act. (53 V, c.
31, s. 9.)
10. The capital stock of any bank hereafter incorporated shall be not less than five hundred thousand dollars,
and shall be divided into shares of one hundred dollars
each. (53 V, c. 31, s. 10.)
11. The number of provisional directors shall be not less
than five.
2. The provisional directors shall hold office until directors are elected by the subscribers to the stock, as hereinafter provided. (53 V, c. 31, s. 11; 4-5 E. VII, c. 4, s. 1.)
12. For the purpose of organizing the bank, the provisional directors may, after giving public notice thereof,
cause stock books to be opened, in which shall be recorded
the subscriptions of such persons as desire to become
shareholders in the bank.
2. Such books shall be opened at the place where the
chief office of the bank is to be situate, and elsewhere, in
the discretion of the provisional directors.
3. Such stock books may be kept open for such time as
the provisional directors deem necessary. (53 V, c. 31,
s. 12.)

13. So soon as a sum not less than five hundred thousand dollars of the capital stock of the bank has been bona
fide subscribed, and a sum not less than two hundred and
fifty thousand dollars thereof has been paid to the minister,
the provisional directors may, by public notice, published
for at least four weeks, call a meeting of the subscribers
to the said stock, to be held in the place named in the act
of incorporation as the chief place of business of the bank,
at such time and at such place therein as set forth in the
said notice.
2. The subscribers shall at such meeting (a) determine
the day upon which the annual general meeting of the
bank is to be held and (b) elect such number of directors,
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duly qualified under this act, not less than five, as they
think necessary.
3. Such directors shall hold office until the annual general meeting in the year next succeeding their election.
4. Upon the election of directors as aforesaid the
functions of the provisional directors shall case. (53 V.,
c. 31, s. 13; 4-5 E. VII., c. 4, s. 2.)
14. The bank shall not issue notes or commence the
business of banking until it has obtained from the treasury board a certificate permitting it to do so.
2. No application for such certificate shall be made
until directors have been elected by the subscribers to
the stock in the manner hereinbefore provided. (53 V.,
c. 31, s. 14.)
15. No certificate shall be given by the treasury board
until it has been shown to the satisfaction of the board,
by affidavit or otherwise, that all the requirements of
this act and of the special act of incorpration of the
bank, as to the payment required to be made to the
minister, the election of directors, deposit for security
for note issue, or other preliminaries, have been complied
with, and that the sum so paid is then held by the minister.
2. No such certificate shall be given except within
one year from the passing of the act of incorporation of
the bank applying for the said certificate. (53 V., c. 31,
s. 15.)
16. If the bank does not obtain a certificate from the
treasury board within one year from the time of the
passing of its act of incorporation, all the rights, powers,
and privileges conferred on the bank by its act of incorporation shall thereupon cease and determine, and be of
no force or effect whatever. (53 V., c. 31, s. 16.)
17. Upon the issue of the certificate in manner hereinbefore provided, the minister shall forthwith pay to the
bank the amount of money so deposited with him as
aforesaid, without interest, after deducting therefrom
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the sum of five thousand dollars required to be deposited
under the provisions of this act for the securing of the
notes issued by the bank.
2. In case no certificate is issued by the treasury
board within the time limited for the issue thereof, the
amount so deposited shall be returned to the person
depositing the same.
3. In no case shall the minister be under any obligation
to see to the proper application in any way of the amount
so returned. (53 V., c. 31, s. 17.)
INTERNAL REGULATIONS.

18. The shareholders of the bank may regulate, by
by-law, the following matters incident to the management and administration of the affairs of the bank, that
is to say: (a) The day upon which the annual general
meeting of the shareholders for the election of directors
shall be held; (6) the record to be kept of proxies, and
the time, not exceeding thirty days, within which proxies
must be produced and recorded prior to a meeting in
order to entitle the holder to vote thereon; (c) the number of the directors, which shall be not less than five, and
the quorum thereof, which shall be not less than three;
(d) subject to the provisions hereinafter contained, the
qualifications of directors; (e) the method of filling vacancies in the board of directors, whenever the same
occur during each year; (/) the time and proceedings for
the election of directors, in case of a failure of any election on the day appointed for it; (g) the remuneration
of the president, vice-president and other directors;
and (h) the amount of discounts or loans which may
be made to directors, either jointly or severally, or
to any one firm or person, or to any shareholder, or to
corporations.
2. The shareholders may authorize the directors to
establish guarantee and pension funds for the officers
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and employees of the bank and their families, and to contribute thereto out of the funds of the bank.
3. Until it is otherwise prescribed by by-law under
this section, the by-laws of the bank on any matter
which may be regulated by by-law under this section
shall remain in force, except as to any provision fixing
the qualification of directors at an amount less than that
prescribed by this act. (53 V., c. 31, s. 18; 4-5 E. VII.,
c. 4, s. 3-)
19. The stock, property, affairs, and concerns of the
bank shall be managed by a board of directors, who shall
be elected annually in manner hereinafter provided, and
shall be eligible for reelection. (53 V., c. 31, s. 19.)
20. Each director shall (a) when the paid-up capital
stock of the bank is one million dollars or less, hold stock
of the bank on which not less than three thousand dollars
have been paid up; (b) when the paid-up capital stock
of the bank is over one million dollars and does not
exceed three million dollars, hold stock of the bank on
which not less than four thousand dollars have been
paid up; and (c) when the paid-up capital stock of the
bank exceeds three million dollars, hold stock of the bank
on which not less than five thousand dollars have been
paid up.
2. No person shall be elected or continue to be a
director unless he holds stock paid up to the amount
required by this act, or such greater amount as is required
by any by-law in that behalf.
3. A majority of the directors shall be natural born or
naturalized subjects of His Majesty. (53 V., c. 31, ss. 18
and 19.)
21. The directors shall be elected by the shareholders
on such day in each year as is appointed by the charter
or by any by-law of the bank and at such time of the day
as the directors appoint.
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2. The election shall take place at the head office of
the bank.
3. Public notice of the election shall be given by the
directors by publishing such notice, for at least four weeks
previously to the time of holding the election, in a newspaper published at the place where the head office of the
bank is situate. (53 V., c. 31, s. 19.)
22. The persons, to the number authorized to be elected,
who have the greatest number of votes at any election
shall be directors. (53 V., c. 31, s. 19.)
23. If it happens at any election that two or more
persons have an equal number of votes, and the election
or nonelection of one or more of such persons as a
director or directors depends on such equality, then
the directors who have a greater number of votes,
or the majority of them, shall, in order to complete the
full number of directors, determine which of the said
persons so having an equal number of votes shall be a
director or directors. (53 V., c. 31, s. 19.)
24. The directors, as soon as may be after their election, shall proceed to elect, by ballot, two of their number to be president and vice-president, respectively.
2. The directors may also elect by ballot one of their
number to be honorary president. (53 V., c. 31, s. 19;
4-5 E. VII., c. 4, s. 4.)
25. If a vacancy occurs in the board of directors the
vacancy shall be filled in the manner provided by the
by-laws: Provided, That if the vacancy is not filled the
acts of a quorum of the remaining directors shall not be
thereby invalidated. (53 V., c. 31, s. 19.)
26. If a vacancy occurs in the office of the president or
vice-president, the directors shall, from among themselves, elect a president or vice-president, who shall continue in office for the remainder of the year. (53 V., c.
31, s. 19.)
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27. If an election of directors is not made on the day
appointed for that purpose, such election may take place
on any other day, according to the by-laws made by the
shareholders in that behalf.
2. The directors in office on the day appointed for the
election of directors shall remain in office until a new election is made. (53 V., c. 31, s. 20.)
28. The president, or in his absence the vice-president,
shall preside at all meetings of the directors.
2. If at any meeting of the directors both president
and vice-president are absent, one of the directors present, chosen to act pro tempore, shall preside.
3. The president, vice-president, or president pro tempore so presiding shall vote as a director, and shall, if
there is an equal division on any question, also have a
casting vote. (53 V., c. 31, s. 21.)
29. The directors may make by-laws and regulations
not repugnant to the provisions of this act or to the laws
of Canada with respect to (a) the management and disposition of the stock, property, affairs, and concerns of the
bank; (6) the duties and conduct of the officers, clerks,
and servants employed therein; and (c) all such other
matters as appertain to the business of a bank.
2. All by-laws of the bank heretofore lawfully made and
now in force with regard to any matter respecting which
the directors may make by-laws under this section, ineluding any by-laws for the establishing of guarantee and
pension funds for the employees of the bank, shall remain
in force until they are repealed or altered by other bylaws made under this act. (53 V., c. 31, s. 22.)
30. The directors may appoint as many officers, clerks,
and servants as they consider necessary for the carrying
on of the business of the bank.
2. The directors may also appoint a director or directors for any branch of the bank.
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3. Such officers, clerks, and servants may be paid such
salaries and allowances as the directors consider necessary.
4. The directors shall, before permitting any cashier,
officer, clerk, or servant of the bank to enter upon the
duties of his office, require him to give a bond, guarantee,
or other security to the satisfaction of the directors foi
the due and faithful performance of his duties. (53 V.,
c. 31, s. 23.)

31. A special general meeting of the shareholders of the
bank may be called at any time by (a) the directors of the
bank or any four of them; or (b) any number not less
than twenty-five of the shareholders, acting by themselves or by their proxies, who are together proprietors of
at least one-tenth of the paid-up capital stock of the bank.
2. Such directors or shareholders shall give six weeks'
previous public notice, specifying therein the object of
such meeting.
3. Such meeting shall be held at the usual place of
meeting of the shareholders.
4. If the object of the special general meeting is to consider the proposed removal, for maladministration or
other specified and apparently just cause, of the president
or vice-president, or of a director of the bank, and if a
majority of the votes of the shareholders at the meeting
is given for such removal, a director to replace him shall
be elected or appointed in the manner provided by the
by-laws of the bank, or, if there are no by-laws providing
therefor, by the shareholders at the meeting.
5. If it is the president or vice-president who is removed,
his office shall be filled by the directors in the manner pro
vided in case of a vacancy occurring in the office of president or vice-president. (53 V., c. 31, s. 24.)
32. Every shareholder shall, on all occasions on which
the votes of the shareholders are taken, have one vote for
each share held by him for at least thirty days before the
time of meeting.
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2. I n all cases when t h e votes of t h e shareholders are
taken, the voting shall be by ballot.
3. All questions proposed for t h e consideration of the
shareholders shall be determined b y a majority of the
votes of t h e shareholders present in person or represented
by proxy.
4. The chairman elected to preside a t any meeting of
the shareholders shall vote as a shareholder only, unless
there is a tie, in which case he shall, except as t o t h e election of a director, have a casting vote.
5. If two or more persons are joint holders of shares,
any one of t h e joint holders m a y be empowered, b y letter
of attorney from t h e other joint holder or holders, or a
majority of them, t o represent t h e said shares, a n d to vote
accordingly.
6. Shareholders m a y vote b y proxy, b u t no person other
t h a n a shareholder eligible to vote shall be permitted t o
vote or act as proxy.
7. No manager, cashier, clerk or other subordinate officer of t h e b a n k shall vote either in person or b y proxy, or
hold a proxy for the purpose of voting.
8. No appointment of a proxy t o vote a t any meeting of
t h e shareholders of t h e bank shall be valid for t h a t purpose, unless it has been made or renewed in writing within
t h e two years last preceding t h e time of such meeting.
9. No shareholder shall vote, either in person or b y
proxy, on any question proposed for the consideration of
t h e shareholders of the bank a t any meeting of t h e shareholders, or in any case in which the votes of t h e shareholders of t h e bank are taken, unless he has paid all calls
made b y the directors which are then due and payable.
(53 V., c. 31, s. 25.)

S. Doc. 332, 61-2

is

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CAPITAL STOCK.

33. The capital stock of the bank may be increased,
from time to time, by such percentage, or by such amount,
as is determined upon by by-law passed by the shareholders, at the annual general meeting, or at any special
general meeting called for the purpose.
2. No such by-law shall come into operation, or be of
any force or effect, unless and until a certificate approving
thereof has been issued by the treasury board.
3. No such certificate shall be issued by the treasury
board unless application therefor is made within three
months from the time of the passing of the by-law, nor
unless it appears to the satisfaction of the treasury board
that a copy of the by-law, together with notice of intention
to apply for the certificate, has been published for at least
four weeks in the Canada Gazette and in one or more
newspapers published in the place where the chief office
or place of business of the bank is situate.
4. Nothing herein contained shall be construed to prevent the treasury board from refusing to issue such certificate if it thinks best so to do. (53 V., c. 31, s. 26.)
34. Any of the original unsubscribed capital stock, or of
the increased stock of the bank, shall, when the directors
so determine, be allotted to the then shareholders of the
bank pro rata, and at such rate as is fixed by the directors:
Provided, That (a) no fraction of a share shall be so allotted,
and (b) in no case shall a rate be fixed by the directors,
which will make the premium, if any, paid or payable on
the stock so allotted, exceed the percentage which the reserve fund of the bank then bears to the paid-up capital
stock thereof.
2. Any of such allotted stock which is not taken up by
the shareholder to whom the allotment has been made
within six months from the time when notice of the allotment was mailed to his address, or which he declines to
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accept, may be offered for subscription to the public, in
such manner and on such terms as the directors prescribe.
(53 V., c. 31, s. 27.)
35. The capital stock of the bank may be reduced by
by-law passed by the shareholders at the annual general
meeting, or at a special general meeting called for the purpose.
2. No such by-law shall come into operation or be of
force or effect until a certificate approving thereof has
been issued by the treasury board.
3. No such certificate shall be issued by the treasury
board unless application therefor is made within three
months from the time of the passing of the by-law, nor
unless it appears to the satisfaction of the board that
(a) the shareholders voting for the by-law represent a
majority in value of all the shares then issued by the bank;
and (Jb) a copy of the by-law, together with notice of intention to apply to the treasury board for the issue of a certificate approving thereof, has been published for at least
four weeks in the Canada Gazette and in one or more
newspapers published in the place where the chief office
or place of business of the bank is situate.
4. Nothing herein contained shall be construed to prevent the treasury board from refusing to issue the certificate if it thinks best so to do.
5. In addition to evidence of the passing of the by-law,
and of the publication thereof in the manner in this
section provided, statements showing (a) the amount of
stock issued, (6) the number of shareholders represented
at the meeting at which the by-law passed, (c) the amount
of stock held by each such shareholder, (d) the number of
shareholders who voted for the by-law, (e) the amount of
stock held by each of suc'i last-mentioned shareholders,
(/) the assets and liabilities of the bank in full, and (g) the
reasons and causes why the reduction is sought shall be
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laid before t h e treasury board a t t h e time of t h e application for t h e issue of a certificate approving t h e by-law..
6. T h e passing of t h e by-law, and any reduction of t h e
capital stock of t h e b a n k thereunder shall not in any way
diminish or interfere with t h e liability of t h e shareholders
of t h e b a n k t o t h e creditors thereof a t t h e time of t h e issue
of t h e certificate approving t h e by-law.
7. If in any case legislation is sought t o sanction a n y
reduction of t h e capital stock of any bank, a copy of the
by-law or resolution passed b y t h e shareholders in regard
thereto, together with statements similar t o those b y this
section required t o be laid before t h e treasury board, shall,
a t least one m o n t h prior to t h e introduction into Parliam e n t of t h e bill relating to such reduction, be filed with
t h e minister.
8. The capital shall not be reduced below t h e a m o u n t
of two hundred and fifty thousand dollars of paid-up stock.
(53 V . , c . 3 i , s . 28.)
SHARES AND CAIXS.

36. The shares of t h e capital stock of t h e bank shall be
personal property.
2. Books of subscription m a y be opened at the chief
place of business of the bank, or a t such of its branches, or
a t such place or places in t h e United Kingdom or in any
of the British colonies or possessions as t h e directors
prescribe.
3. T h e shares shall be assignable and transferable a t
any of t h e places aforesaid, according t o such forms and
subject to such rules and regulations as t h e directors
prescribe.
4. T h e dividends accruing upon any shares of t h e
capital stock of t h e b a n k m a y be m a d e payable a t any of
t h e places aforesaid.
5. T h e directors m a y appoint such agents in t h e United
Kingdom, or in any of t h e British colonies or possessions,
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for the purposes of this section as they deem necessary.
(53 V., c. 31, s. 29.)
37. The shares of the capital stock shall be paid in by
such installments and at such times and places as the
directors appoint.
2. The directors may cancel any subscription for any
share unless a sum equal to ten per centum at least on the
amount subscribed for is actually paid at or within thirty
days after the time of subscribing.
3. Such cancellation shall not, in the event of insolvency,
relieve the subscriber as hereinafter provided from his
liability to creditors. (53 V., c. 31, s. 30.)
38. The directors may make such calls of money from
the several shareholders for the time being upon the shares
subscribed for by them, respectively, as they find necessary.
2. Such calls shall be made at intervals of not less than
thirty days.
3. Notice of any such call shall be given at least thirty
days prior to the day on which the call is payable.
4. No such call shall exceed ten per centum of each
share subscribed. (53 V., c. 31, s. 31.)
39. If any part of the paid-up capital is lost the directors
shall, if all the subscribed stock is not paid up, forthwith
make calls upon the shareholders to an amount equivalent
to the loss: Provided, That all net profits shall be applied
to make good such loss.
2. Any such loss of capital and the calls, if any made in
respect thereof, shall be mentioned in the next return
made by the bank to the minister. (53 V., c. 31, s. 48.)
40. In case of the nonpayment of any call, the directors
may, in the corporate name of the bank, sue for, recover,
collect, and get in any such call, or may cause and declare
the shares in respect of which any such call is made to be
forfeited to the bank. (53 V., c. 31, s. 32.)
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41. If any shareholder refuses or neglects to pay any
installment upon his shares of the capital stock at the time
appointed therefor, such shareholder shall incur a penalty,
to the use of the bank, of a sum of money equal to ten
per centum of the amount of such shares
2. If the directors declare any shares to be forfeited to
the bank they shall, within six months thereafter, without
any previous formality, other than thirty days' public notice of their intention so to do, sell at public auction the
said shares, or so many of the said shares as shall, after
deducting the reasonable expenses of the sale, yield a sum
of money sufficient to pay the unpaid instalments due on
the remainder of the said shares, and the amount of penalties incurred upon the whole.
3. The president or vice-president, manager, or cashier
of the bank shall execute the transfer to the purchaser of
the shares so sold; and such transfer shall be as valid and
effectual in law as if it had been executed by the original
holder of the shares thereby transferred.
4. The directors, or the shareholders, at a general meeting, may, notwithstanding anything in this section contained, remit, either in whole or in part, and conditionally
or unconditionally, any forfeiture or penalty incurred by
the nonpayment of instalments as aforesaid. (53 V., c.
3*> s - 33-)
42. In any action brought to recover any money due on
any call it shall not be necessary to set forth the special
matter in the declaration or statement of claim, but it
shall be sufficient to allege that the defendant is the holder
of one share or more, as the case may be, in the capital
stock of the bank, and that he is indebted to the bank for
a call or calls upon such share or shares, in the sum to
which the call or calls amount, as the case may be, stating
the amount and number of the calls.

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2. It shall not be necessary, in any such action, to
prove the appointment of the directors. (53 V., c. 31,
s. 34-)
TRANSFER AND TRANSMISSION OF SHARES.

43. No assignment or transfer of the shares of the capital stock of the bank shall be valid unless (a) made, registered, and accepted by the person to whom the transfer
is made in a book or books kept for that purpose; and,
(6) the person making the assignment or transfer has, if
required by the bank, previously discharged all his debts
or liabilities to the bank which exceed in amount the remaining stock, if any, belonging to such person, valued at
the then current rate.
2. No fractional part of a share, or less than a whole
share, shall be assignable or transferable. (53 V., c. 31,
s. 35-)
44. A list of all transfers of shares registered each day
in the books of the bank, showing, in each case, the parties
to such transfers and the number of shares transferred,
shall be made up at the end of each day.
2. Such lists shall be kept at the chief place of business
of the bank, for the inspection of its shareholders. (53
V., c. 31, s. 36.)
45. All sales or transfers of shares, and all contracts and
agreements in respect thereof, hereafter made or purporting to be made, shall be null and void, unless the person
making the sale or transfer, or the person in whose name
or behalf the sale or transfer is made, at the time of the
sale or transfer (a) is the registered owner in the books of
the bank of the share or shares so sold or transferred, or
intended or purporting to be so sold or transferred; or,
(b) has the registered owner's assent to the sale.
2. The distinguishing number or numbers, if any, of
such share or shares shall be designated in the contract of
agreement of sale or transfer.
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3. Notwithstanding anything in this section contained,
the rights and remedies under any contract of sale, which
does not comply with the conditions and requirements in
this section mentioned, of any purchaser who has no
knowledge of such non-compliance, are hereby saved.
(53 V., c. 31, s. 37.)
46. When any share of the capital stock has been sold
under a writ of execution, the officer by whom the writ
was executed shall, within thirty days after the sale, leave
with the bank an attested copy of the writ, with the certificate of such officer endorsed thereon, certifying to
whom the sale has been made.
2. The president, vice-president, manager, or cashier of
the bank shall execute the transfer of the share so sold to
the purchaser, but not until after all debts and liabilities
to the bank of the holder of the share, and all liens in
favour of the bank existing thereon, have been discharged
as by this act provided.
3. Such transfer shall be to all intents and purposes as
valid and effectual in law as if it had been executed by
the holder of the said share. (53 V., c. 31, s. 38.)
47. If the interest in any share in the capital stock of
any bank is transmitted by or in consequence of (a) the
death, bankruptcy, or insolvency of any shareholder; or,
(6) the marriage of a female shareholder; or, (c) any lawful means, other than a transfer according to the provisions of this act; the transmission shall be authenticated
by a declaration in writing, as hereinafter mentioned, or
in such other manner as the directors of the bank require.
2. Every such declaration shall distinctly state the
manner in which and the person to whom the share has
been transmitted, and shall be made and signed by such
person.
3. The person making and signing the declaration shall
acknowledge the same before a judge of a court of record,
or before the mayor, provost or chief magistrate of a city,
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.town, borough, or other place, or before a notary public,
where the same is made and signed.
4. Every declaration so signed and acknowledged shall
be left with the cashier, manager, or other officer or agent
of the bank, who shall thereupon enter the name of the
person entitled under the transmission in the register of
shareholders.
5. Until the transmission has been so authenticated, no
person claiming by virtue thereof shall be entitled to participate in the profits of the bank, or to vote in respect of
any such share of the capital stock. (53 V., c. 31, s. 39.)
48. If the transmission of any share of the capital
stock has taken place by virtue of the marriage of a female
shareholder, the declaration shall be accompanied by a
copy of the register of such marriage, or other particulars
of the celebration thereof, and shall declare the identity
of the wife with the holder of such share, and shall be
made and signed by such female shareholder and her
husband.
2. The declaration may include a statement to the effect
that the share transmitted is the separate property and
under the sole control of the wife, and that she may,
without requiring the consent or authority of her husband,
receive and grant receipts for the dividends and profits
accruing in respect thereof, and dispose of and transfer the
share itself.
3. The declaration shall be binding upon the bank and
persons making the same, until the said persons see fit to
revoke it by a written notice to the bank to that effect.
4. The omission of a statement in any such declaration
that the wife making the declaration is duly authorized by
her husband to make the same shall not invalidate the
declaration. (53 V., c. 31, s. 40.)
49. Every such declaration and instrument as are by
the last two preceding sections required to perfect the
transmission of a share in the bank shall, if made in any
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country other than Canada, the United Kingdom, or a.
British colony (a) be further authenticated by the clerk of a
court of record under the seal of the court, or by the British
consul or vice-consul, or other accredited representative
of His Majesty's Government in the country where the
declaration or instrument is made; or (h) be made directly
before such British consul, vice-consul, or other accredited
representative.
2. The directors, cashier, or other officer or agent of the
bank may require corroborative evidence of any fact
alleged in any such declaration. (53 V., c. 31, s. 39.)
50. If the transmission has taken place by virtue of any
testamentary instrument, or by intestacy, the probate of
the will, or the letters of administration, or act of curatorship or tutorship, or an official extract therefrom, shall,
together with the declaration, be produced and left with
the cashier or other officer or agent of the bank.
2. The cashier or other officer or agent shall thereupon
enter in the register of shareholders the name of the person
entitled under the transmission. (53 V., c. 31, s. 41.)
51. If the transmission of any share of the capital stock
has taken place by virtue of the decease of any shareholder, the production to the directors and the deposit
with them of (a) any authenticated copy of the probate of
the will of the deceased shareholder, or of letters of adminstration of his estate, or of letters of verification of heirship, or of the act of curatorship or tutorship, granted by
any court in Canada having power to grant the same, or by
any court or authority in England, Wales, Ireland, or any
British colony, or of any testament, testamentary or testament dative expede in Scotland; or (b) an authentic
notarial copy of the will of the deceased shareholder, if
such will is in notarial form according to the law of the
province of Quebec; or (c) if the deceased shareholder
died out of His Majesty's dominions, any authenticated
copy of the probate of his will or letters of administration
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of his property, or other document of like import, granted
by any court or authority having the requisite power in
such matters; shall be sufficient justification and authority
to the directors for paying any dividend, or for transferring
or authorizing the transfer of any share, in pursuance of
and in conformity to the probate, letters of administration,
or other such document as aforesaid. (53 V., c. 31, s. 42.)
SHARKS SUBJECT TO TRUSTS.

52. The bank shall not be bound to see to the execution
of any trust, whether expressed, implied, or constructive,
to which any share of its stock is subject.
2. The receipt of the person in whose name any such
share stands in the books of the bank, or, if it stands in
the names of more persons than one, the receipt of one of
such persons, shall be a sufficient discharge to the bank
for any dividend or any other sum of money payable in
respect of such share, unless, previously to such payment,
express notice to the contrary has been given to the bank.
3. The bank shall not be bound to see to the application
of the money paid upon such receipt, whether given by one
of such persons or all of them. (53 V., c. 31, s. 43.)
53. No person holding stock in the bank as executor,
administrator, guardian, trustee, tutor, or curator of or for
any estate, trust, or person named in the books of the bank
as being so represented by him, shall be personally subject
to any liability as a shareholder; but the estate and funds
in his hands shall be liable in like manner and to the same
extent as the testator, intestate, ward, or person interested
in such estate and funds would be, if living and competent
to hold the stock in his own name.
2. If the trust is for a living person, such person shall
also himself be liable as a shareholder.
3. If the estate, trust, or person so represented is not so
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tor, guardian, trustee, tutor, or curator shall be personally
liable in respect of the stock as if he held it in his own
name as owner thereof. (63-64 V., c. 26, s. 8.)
ANNUAL STATEMENT AND INSPECTION,

54. At every annual meeting of the shareholders for the
election of directors, the outgoing directors shall submit a
clear and full statement of the affairs of the bank, exhibiting, on the one hand, the liabilities of or the debts due by
the bank, and, on the other hand, the assets and resources
thereof.
2. The statement shall show, on the one part, (a) the
amount of the capital stock paid in; (6) the amount of the
notes of the bank in circulation; (c) the net profits made;
(d) the balances due to other banks; and (e) the cash deposited in the bank, distinguishing deposits bearing interest from those not bearing interest.
3. The statement shall show, on the other part, (a) the
amount of the current coin, the gold and silver bullion, and
the dominion notes held by the bank; (6) the balances due
to the bank from other banks; (c) the value of the real
and other property of the bank; and (d) the amount of
debts owing to the bank, including and particularizing the
amounts so owing upon bills of exchange, discounted notes,
mortgages, and other securities.
4. The statement shall also exhibit (a) the rate and
amount of the last dividend declared by the directors; (b)
the amount of reserved profits at the date of such statement; and (c) the amount of debts due to the bank, overdue and not paid, with an estimate of the loss which will
probably accrue thereon. (53 V., c. 31, s. 45.)
55. The directors shall also submit to the shareholders
such further statements of the affairs of the bank other
than statements with reference to the account of any person dealing with the bank as the shareholders require by
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by-law passed at the annual general meeting or at any
special general meeting of the shareholders called for the
purpose.
2. The statements so required shall be submitted at the
annual general meeting, or at any special general meeting
called for the purpose, or.at such time and in such manner
as is set forth in the by-law of the shareholders requiring
such statements. (63-64 V., c. 26, s. 9.)
56. The books, correspondence, and funds of the
bank shall, at all times, be subject to the inspection of
the directors.
2. No person who is not a director shall be allowed to
inspect the account of any person dealing with the bank.
(53 V., c. 31, s. 46.)
DIVIDENDS.

57. The directors of the bank shall, subject to the provisions of this act, declare quarterly or half-yearly dividends of so much of the profits of the bank as to the majority of them seems advisable.
2. The directors shall give at least thirty days' public
notice of the payment of such dividends previously to the
date fixed for such payment.
3. The directors may close the transfer books during a
certain time, not exceeding fifteen days, before the payment of each dvidend. (53 V., c. 31, s. 47.)
58. No dividend or bonus shall ever be declared so as to
impair the paid-up capital of the bank.
2. The directors who knowingly and wilfully concur in
the declaration or making payable of any dividend or
bonus whereby the paid-up capital of the bank is impaired shall be jointly and severally liable for the amount
of such dividend or bonus as a debt due by them to the
bank. (53 V., c. 31, s. 48.)
59. No division of profits, either by way of dividends or
bonus, or both combined, or in any other way, exceeding
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the rate of eight per centum per annum, shall be made by
the bank unless after making the same the bank has a
rest or reserve fund equal to at least thirty per cent of its
paid-up capital after deducting all bad and doubtful debts.
(53 V., c. 31, s. 49.)
CASH R E S E R V E S .

60. The bank shall hold not less than forty per centum
of its cash reserves in dominion notes.
2. The minister shall make such arrangements as are
necessary for ensuring the delivery of dominion notes to
any bank in exchange for an equivalent amount of specie
at the several offices at which dominion notes are redeemable in the cities of Toronto, Montreal, Halifax, St. John,
Winnipeg, Victoria, and Charlottetown, respectively.
3. Such notes shall be redeemable at the office for redemption of dominion notes in the place where the specie
is given in exchange. (53 V., c. 31, s. 50.)
T H E ISSUE AND CIRCULATION OF NOTES.

•61. The bank may issue and reissue notes payable to
bearer on demand and intended for circulation: Provided,
That (a) the bank shall not, during any period of suspension of payment of its liabilities issue or reissue any such
notes; and (b) if, after any such suspension, the bank
resumes business without the consent in writing of the
curator, hereinafter provided for, it shall not issue or
reissue any of such notes until authorized by the treasury
board so to do.
2. No such note shall be for a sum less than five dollars
or for any sum which is not a multiple of live dollars.
3. The total amount of such notes in circulation at any
time shall not exceed the amount of the unimpaired
paid-up capital of the bank.
4. Notwithstanding anything in this section contained,
the total amount of such notes of the Bank of British
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North America in circulation at any time shall not exceed seventy-five per centum of the unimpaired paid-up
capital of the bank: Provided, That (a) the bank may
issue such notes in excess of the said seventy-five per
centum upon depositing with the minister, in respect of
the excess, in cash or bends of the Dominion of Canada,
an amount equal to the excess; and the cash or bonds so
deposited shall, in the event of the suspension of the bank,
be available by the minister for the redemption of the
notes issued in excess as aforesaid; and (h) the total
amount of such notes of the bank in circulation at any
time shall in no case exceed its unimpaired paid-up
capital.
5. All notes heretofore issued or reissued by any bank
and now in circulation, which are for a sum less than five
dollars or for a sum which is not a multiple of five dollars,
shall be called in and canceled as soon as practicable. (53
V.,c. 31, s. 51; 63-64 V., c. 26, s. 10.)
62. Notwithstanding the provisions of the last preceding section, any bank may issue and reissue, at any office
or agency of the bank in any British colony or possession
other than Canada, notes of the bank payable to bearer
on demand and intended for circulation in such colony or
possession, for the sum of one pound sterling each, or for
any multiple of such sum, or for the sum of five dollars
each, or for any multiple of such sum, of the dollars in
commercial use in such colony or possession, if the issue
or reissue of such notes is not forbidden by the laws of
such colony or possession.
2. No issue of notes of the denomination of five such
dollars, or any multiple thereof, shall be made in any such
British colony or possession unless nor until the governor
in council on the report of the treasury board determines
the rate in Canadian currency at which such notes shall
be circulated as forming part of the total amount of the
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notes in circulation within the meaning of the last preceding section.
3. The notes so issued shall be redeemable at par at
any office or agency of the bank in the colony or possession in which they are issued for circulation and not elsewhere, except as in this section specially provided; and
the place of redemption of such notes shall be legibly
printed or stamped across the face of each note so issued.
4. In the event of the bank ceasing to have an office or
agency in any such British colony or possession, all notes
issued in such colony or possession under the provisions
of this section shall become payable and redeemable at
the rate of four dollars and eighty-six and two-thirds
cents per pound sterling, or, in the case of the issue of
notes of the denomination of five dollars or any multiple
thereof, of the dollars in commercial use in such colony
or possession, at the rate established by the governor in
council as required by this section, in the same manner
as notes of the bank issued in Canada are payable and
redeemable.
5. The amount of the notes at any time in circulation
in any such colony or possession, issued under the provisions of this section, shall, at the rate mentioned in the
last preceding subsection, form part of the total amount
of the notes in circulation within the meaning of the last
preceding section, and, except as herein otherwise specially provided, shall be subject to all the provisions of
this act.
6. No notes issued for circulation in a British colony or
possession other than Canada shall be reissued in Canada.
7. Nothing in this section contained shall be construed
to authorize any bank (a) to increase the total amount of
its notes in circulation in Canada and elsewhere beyond
the limit fixed by the last preceding section, or (b) to
issue or reissue in Canada notes payable to bearer on
demand and intended for circulation for a sum less than
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five dollars or for a sum which is not a multiple of five
dollars. (4 E. VII., c. 3, ss. 1, 2, 3, and 4.)
63. The bank shall not pledge, assign, or hypothecate its
notes; and no advance or loan made on the security of the
notes of a bank shall be recoverable from the bank or its
assets. (53 V., c. 31, s. 52.)
64. The moneys heretofore paid to and now deposited
with the minister by the banks to which this act applies,
constituting the fund known as the bank circulation
redemption fund, shall continue to be held by the minister
for the purposes and subject to the provisions in this section mentioned and contained.
2. The minister shall, upon the issue of a certificate under this act authorizing a bank to issue notes and commence the business of banking, retain, out of any moneys
of such bank then in his possession, the sum of five thousand dollars, which sum shall be held for the purposes of
this section until the annual adjustment hereinafter provided for takes place in the year then next following.
3. The amount at the credit of such bank shall, at such
next annual adjustment, be adjusted by payment to or
by the bank of such sum as is necessary to make the
amount of money at the credit of the bank equal to five
per centum of the average amount of its notes in circulation from the time it commenced business to the time of
such adjustment, and such sum shall thereafter be adjusted
annually as hereinafter provided.
4. The amounts heretofore and from time to time hereafter paid, to be retained and held by the minister as by
this section provided, shall continue to form and shall form
the circulation fund.
5. The circulation fund shall continue to be held as
heretofore for the sole purpose of payment, in the event of
the suspension by a bank of payment in specie or Domitiion
notes of any of its liabilities as they accrue, of the notes
S. Doc. 332, 6 1 - 2 -

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then issued or reissued by such bank, intended for circulation, and then in circulation, and interest thereon.
6. The circulation fund shall bear interest at the rate of
three per centum per annum.
7. The circulation fund shall be adjusted, as soon as
possible after the thirtieth day of June in each year, in
such a way as to make the amount at the credit of each
bank contributing thereto, unless herein otherwise specially provided, equal to five per centum of the average
note circulation of such bank during the then last preceding
twrelve months.
8. The average note circulation of a bank during any
period shall be determined from the average of the amount
of its notes in circulation, as shown by the monthly returns
for such period made by the bank to the minister; and
where, in any return, the greatest amount of notes in circulation at any time during the month is given, such
amount shall, for the purposes of this section, be taken
to be the amount of the notes of the bank in circulation
during the month to which such return relates.
9. The minister shall with respect to all notes paid out
of the circulation fund have the same rights as any other
holder of the notes of the bank: Provided, That all such
notes, and all interest thereon, so paid by the minister,
after the amount at the credit of such bank in the circulation fund, and all interest due or accruing due thereon,
has been exhausted, shall bear interest, at the rate of
three per centum per annum, from the time such notes and
interest are paid until such notes and interest are repaid
to the minister by or out of the assets of such bank. (53
V., c. 31, s. 54; 63-64 V., c. 26, s. 13.)
65. In the event of the suspension by a bank of payment in specie or Dominion notes of any of its liabilities as
they accrue, the notes of the bank, issued or reissued,
intended for circulation, and then in circulation, shall
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from the day of the suspension to such day as is named
by the directors, or by the liquidator, receiver, assignee, or
other proper official, for the payment thereof.
2. Notice of such day shall be given by advertising for
at least three days in a newspaper published in the place
in which the head office of the bank is situate.
3. If any notes presented for payment on or after any
day named for payment thereof are not paid, all notes
then unpaid and in circulation shall continue to bear
interest until such further day as is named for payment
thereof, of which day notice shall be given in manner
hereinbefore provided.
4. If the directors of the bank or the liquidator, receiver,
assignee, or other proper official fails to make arrangements,
within two months from the day of the suspension of payment by the bank, for the payment of all of its notes and
interest thereon, the minister may make arrangements for
the payment, out of the circulation fund, of the notes
remaining unpaid and all interest thereon, and the minister shall give such notice of the payment as he thinks
expedient.
5. Notwithstanding anything herein contained all interest upon such notes shall cease upon and from the date
named by the minister for such payment.
6. Nothing herein contained shall be construed to impose any liability upon the government of Canada, or upon
the minister, beyond the: amount available from time to
time out of the circulation fund. (53 V., c. 31, s. 54; 63-64
V., c. 26, s. 11.)

66. All payments made from the circulation fund shall
be without regard to the amount contributed thereto by
the bank in respect of whose notes the payments are made,
2. If the payments from the circulation fund exceed the
amount contributed to the circulation fund by the bank
so suspending payment, and all interest due or accruing
due to such bank thereon, the other batiks to which this
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act applies shall, on demand, made good to the circulation
fund the amount of the excess, proportionately to the
amount which each such other bank had or should have
contributed to the circulation fund, at the time of the
suspension of the bank in respect of whose notes the payments are made: Provided, That (a) each of such other
banks shall only be called upon to make good to the circulation fund its share of the excess in payments not exceeding, in any one year, one per centum of the average
amount of its notes in circulation; (b) such circulation
shall be ascertained in such manner as the minister
decides; and (c) the minister's decision shall be final.
3. All amounts recovered and received by the minister
from the bank on account of which such payments were
made shall, after the amount of such excess has been made
good as aforesaid, be distributed among the banks contributing to make good such excess, proportionately to
the amount contributed by each. (53 V., c. 31, s. 54;
63-64 V., c. 26, s. 12.)

67. In the event of the winding up of the business of a
bank by reason of insolvency or otherwise, the treasury
board may, on the application of the directors, or of the
liquidator, receiver, assignee, or other proper official, and
on being satisfied that proper arrangements have been made
for the payment of the notes of the bank and any interest
thereon, pay over to the directors, liquidator, receiver,
assignee, or other proper official, the amount of the circulation fund at the credit of the bank, or such portion thereof
as it thinks expedient. (53 V., c. 31, s. 54.)
68. The treasury board may make all such rules and
regulations as it thinks expedient with reference to (a) the
payment of any moneys out of the circulation fund, and
the manner, place, and time of such payments; (6) the
collection of all amounts due to the circulation fund;
(c) all accounts to be kept in connection therewith; and
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(d) generally the management of the circulation fund and
all matters relating thereto. (53 V., c. 31, s. 54.)
69. The minister may, in his official name, by action
in the exchequer court of Canada, enforce * payment,
with cost of action, of any sum due and payable by any
bank which should form part of the circulation fund.
(53 V., c. 31, s. 54.)
70. The bank shall make such arrangements as are necessary to insure the circulation at par, in any and every part
of Canada, of all notes issued or reissued by it and intended
for circulation; and towards this purpose the bank shall
establish agencies for the redemption and payment of its
notes at the cities of Toronto, Montreal, Halifax, St. John,
Winnipeg, Victoria, and Charlottetown, and at such other
places as are from time to time designated by the treasury
board. (53 V., c. 31,8. 55.)
71. The bank shall always receive in payment its own
notes at par at any of its offices, and whether they are
made payable there or not.
2. The chief place of business of the bank shall always
be one of the places at which its notes are made payable.
(53 V., c. 31, s. 56.)
72. The bank, when making any payment, shall, on the
request of the person to whom the payment is to be made,
pay the same, or such part thereof, not exceeding one hundred dollars, as such person requests, in Dominion notes
for one, two, or four dollars each, at the option of such
person.
2. No payment, whether in Dominion notes or bank
notes, shall be made in bills that are torn or partially
defaced by excessive handling. (53 V., c. 31, s. 57.)
73. The bonds, obligations, and bills, obligatory or of
credit, of the bank under its corporate seal, signed by the
president or vice-president, and countersigned by a cashier
or assistant cashier, which are made payable to any person, shall be assignable by indorsement thereon.
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2. The bills or notes of the bank signed by the president,
vice-president, cashier, or other officer appointed by the
directors of the bank to sign the same, promising the payment of money to any person, or to his order, or to the
bearer, though not under the corporate seal of the bank,
shall be binding and obligatory on the bank, in like manner
and with the like force and effect as they would be upon
any private person, if issued by him in his private or natural capacity, and shall be assignable in like manner as if
they were so issued by a private person in his natural
capacity.
3. The directors of the bank may, from time to time,
authorize or depute any cashier, assistant cashier, or officer
of the bank, or any director other than the president or
vice-president, or any cashier, manager, or local director
of any branch or office of discount and deposit of the bank,
to sign the notes of the bank intended for circulation.
(53 V., c. 31, s. 58.)
74. All bank notes and bills whereon the name of any
person intrusted or authorized to sign such notes or bills
on behalf of the bank is impressed by machinery provided
for that purpose, by or with the authority of the bank,
shall be good and valid to all intents and purposes, as if
such notes and bills had been subscribed in the proper
handwriting of the person intrusted or authorized by the
bank to sign the same respectively, and shall be bank notes
and bills within the meaning of all laws and statutes whatever, and may be described as bank notes or bills in all
indictments and civil or criminal proceedings whatever:
Provided, That at least one signature to each note or bill
must be in the actual handwriting of a person authorized
to sign such note or bill. (53 V., c. 31, s. 59.)
75. Every officer charged with the receipt or disbursement of public moneys, and every officer of any bank, and
every person acting as or employed by any banker, shall
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stamp or write in plain letters, upon every counterfeit or
fraudulent note issued in the form of a Dominion or bank
note, and intended to circulate as money, which is presented to him at his place of business, the word, "Counterfeit," "Altered," or "Worthless."
2. If such officer or person wrongfully stamps any genuine note he shall, upon presentation, redeem it at the face
value thereof. (53 V., c. 31, s. 62.)
T H E BUSINESS AND POWERS OF A BANK.

76. The bank may (a) open branches, agencies and offices ;
(b) engage in and carry on business as a dealer in gold
and silver coin and bullion; (c) deal in, discount and lend
money and make advances upon the security of, and take
as collateral security for any loan made by it, bills of exchange, promissory notes, and other negotiable securities,
or the stock, bonds, debentures, and obligations of municipal and other corporations, whether secured by mortgage
or otherwise, or Dominion, provincial, British, foreign and
other public securities; and, (d) engage in and carry on
such business generally as appertains to the business of
banking.
2. Except as authorized by this act, the bank shall not,
either directly or indirectly, (a) deal in the buying or selling, or bartering of goods, wares, and merchandise, or
engage or be engaged in any trade or business whatsoever;
(b) purchase, or deal in, or lend money, or make advances
upon the security or pledge of any share of its own capital
stock, or of the capital stock of any bank; or, (c) lend
money or make advances upon the security, mortgage or
hypothecation of any lands, tenements, or immovable
property, or of any ships or other vessels, or upon the
security of any goods, wares, and merchandise. (53 V.,
c. 31, s. 64.)

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77. The bank shall have a privileged lien, for any debt
or liability for any debt to the bank, on the shares of its
own capital stock, and on any unpaid dividends of the
debtor or person liable, and may decline to allow any transfer of the shares of such debtor or person until the debt
is paid.
2. The bank shall, within twelve months after the debt
has accrued and become payable, sell such shares: Provided, That notice shall be given to the holder of the shares
of the intention of the bank to sell the same, by mailing
the notice, in the post office, post paid, to the last known
address of the holder, at least thirty days prior to the sale.
3. Upon the sale being made the president, vice-president, manager or cashier shall execute a transfer of the
shares to the purchaser thereof in the usual transfer book
of the bank.
4. Such transfers shall vest in the purchaser all the rights
in or to the said shares which were possessed by the holder
thereof, with the same obligation of warranty on his part
as if he were the vendor thereof, but without any warranty
from the bank or by the officer of the bank executing the
transfer. (53 V., c. 31, s. 65.)
78. The stock, bonds, debentures or securities, acquired
and held by the bank as collateral security, may, in case
of default in the payment of the debt, for the securing of
which they were so acquired and held, be dealt with, sold
and conveyed, either in like manner and subject to the
same restrictions as are herein provided in respect of stock
of the bank on which it has acquired a lien under this act,
or in like manner as and subject to the restrictions under
which a private individual might in like circumstances
deal with, sell and convey the same: Provided, That the
bank shall not be obliged to sell within twelve months.
2. The right so to deal with and dispose of such stock,
bonds, debentures or securities in manner aforesaid may
be waived or varied by any agreement between the bank
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and the owner of the stock, bonds, debentures or securities, made at the time at which such debt was incurred,
or, if the time of payment of the debt has been extended,
then by an agreement made at the time of the extension.
(53 V., c. 31, s. 66.)
79. The bank may acquire and hold real and immovable
property for its actual use and occupation and the manage
ment of its business, and may sell or dispose of the same
and acquire other property in its stead for the same purpose. (53 V., c. 31, s. 67.)
80. The bank may take, hold and dispose of mortgages
and hypoth&ques upon real or personal, immovable or
movable property, by way of additional security for debts
contracted to the bank in the course of its business.
2. The rights, powers, and privileges which the bank is
by this act declared to have, or to have had, in respect of
real or immovable property mortgaged to it, shall be held
and possessed by it in respect of any personal or movable
property which is mortgaged or hypothecated to the bank.
(53 V., c. 31, s. 68.)
81. The bank may purchase any lands or real or immovable property offered for sale (a) under execution, or
in insolvency, or under the order or decree of a court, as
belonging to any debtor to the bank; or (b) by a mortgagee or other encumbrancer, having priority over a
mortgage or other encumbrance held by the bank; or (c)
by the bank under a power of sale given to it for that
purpose; in cases in which, under similar circumstances, an
individual could so purchase, without any restriction as
to the value of the property which it may so purchase,
and may acquire a title thereto as any individual, purchasing at sheriff's sale, or under a power of sale, in like circumstances could do, and may take, have, hold, and dispose of the same at pleasure. (53 V., c. 31, s. 69.)
82. The bank may acquire and hold an absolute title in
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ity for a debt due or owing to it, either by the obtaining
of a release of the equity of redemption in the mortgaged
property, or by procuring a foreclosure, or by other
means whereby, as between individuals, an equity of
redemption can, by law, be barred, and may purchase
and acquire any prior mortgage or charge on such property.
2. Nothing in any charter, act or law shall be construed
as ever having been intended to prevent or as preventing
the bank from acquiring and holding an absolute title to
and in any such mortgaged real or immovable property,
whatever the value thereof, or from exercising or acting
upon any power of sale contained in any mortgage given
to or held by the bank, authorizing or enabling it to sell
or convey away any property so mortgaged. (53 V., c. 31,
s. 71; 63-64 V., c. 26, s. 14.)
83. No bank shall hold any real or immovable property,
howsoever acquired, except such as is required for its
own use, for any period exceeding seven years from the
date of the acquisition thereof, or any extension of such
period as in this secton provided, and such property
shall be absolutely sold or disposed of, within such period
or extended period, as the case may be, so that the bank
shall no longer retain any interest therein unless by way
of security.
2. The treasury board may direct that the time for the
sale or disposal of any such real or immovable property
shall be extended for a further period or periods, not to
exceed five years.
3. The whole period during which the bank may so
hold such property under the foregoing provisions of this
section shall not exceed twelve years from the date of
the acquisition thereof.
4. Any real or immovable property, not required by
the bank for its own use, held by the bank for a longer
period than authorized by the foregoing provisions of
this section shall be liable to be forfeited to His Majesty
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for the use of the Dominion of Canada: Provided, That
(a) no such forfeiture shall take effect until the expiration
of at least six calendar months after notice in writing to
the bank by the minister of the intention of His Majesty
to claim the forfeiture; and, (6) the bank may, notwithstanding such notice, before the forfeiture is effected
sell or dispose of the property free from liability to
forfeiture.
5. The provisions of this section shall apply to any
real or immovable property heretofore acquired by the
bank and held by it at the time of the coming into force
of this act. (63-64 V., c. 26, s. 14.)
84. The bank may lend money upon the security of
standing timber, and the rights or licenses held by persons to cut or remove such timber. (63-64 V., c. 26, s. 16.)
85. Every bank advancing money in aid of the building
of any ship or vessel shall have the same right of acquiring
and holding security upon such ship or vessel, while
building and when completed, either by way of mortgage,
hypothfeque, hypothecation, privilege or lien thereon, or
purchase or transfer thereof, as individuals have in the
province wherein the ship or vessel is being built.
2. The bank may, for the purpose of obtaining and
enforcing such security, avail itself of all such rights and
means, and shall be subject to all such obligations, limitations, and conditions, as are, by the law of such province, conferred or imposed upon individuals making such
advances. (53 V., c. 31, s. 72.)
86. The bank may acquire and hold any warehouse
receipt or bill of lading as collateral security for the payment of any debt incurred in its favour, or as security
for any liability incurred by it for any person, in the course
of its banking business.
2. Any warehouse receipt or bill of lading so acquired
shall vest in the bank, from the date of the acquisition
thereof, (a) all the right and title to such warehouse
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receipt or bill of lading and t o t h e goods covered thereby
of t h e previous holder or owner thereof; or, (6) all t h e
right and title t o t h e goods, wares, and merchandise mentioned therein of t h e person from whom t h e same were
received or acquired b y t h e b a n k , if t h e warehouse receipt
or bill of lading is m a d e directly in favour of t h e bank,
instead of t o t h e previous holder or owner of such goods,
wares and merchandise. (53 V., c. 31, s. 73; 63-64 V.,
c. 26, s. 15.)
87. If the previous holder of such warehouse receipt or
bill of lading is any person, (a) entrusted with t h e possession of t h e goods, wares and merchandise mentioned
therein, b y or b y t h e authority of the owner thereof; or,
(b) t o whom such goods, wares and merchandise are, by
or b y t h e authority of t h e owner thereof, consigned; or, (c)
who, b y or by t h e authority of t h e owner of such g;oods,
wares and merchandise, is possessed of any bill of lading,
receipt, order or other document covering the same, such
as is used in t h e course of business as proof of t h e possession or control of goods, wares and merchandise, or as
authorizing or purporting t o authorize, either b y endorsem e n t or b y delivery, t h e possessor of such a document t o
transfer or receive t h e goods, wares and merchandise
thereby represented; t h e b a n k shall be, upon t h e acquisition of such warehouse receipt or bill of lading, vested with
all t h e right and title of t h e owner of such goods, wares and
merchandise, subject to the right of t h e owner t o have the
same retransferred to him if t h e debt or liability, as security
for which such warehouse receipt or bill of lading is held
b y t h e bank, is paid.
2. Any person shall be deemed to be the possessor of
such goods, wares and merchandise, bill of lading, receipt,
order or other document as aforesaid, (a) who is in actual
possession thereof; or, (b) for whom, or subject t o whose
control, the same are held b y any person. (53 V., c. 3 1 ,
s. 73; 63-64 V., c. 26, s. 15.)
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88. The bank may lend money to any wholesale purchaser or shipper of or dealer in products of agriculture,
the forest, quarry and mine, or the sea, lakes and rivers, or
to any wholesale purchaser or shipper of or dealer in live
stock or dead stock and the products thereof, upon the security of such products, or of such live stock or dead stock
and the products thereof.
2. The bank may allow the goods, wares and merchandise covered by such security to be removed and other
goods, wares and merchandise, such as mentioned in the
last preceding subsection, to be substituted therefor, if the
goods, wares and merchandise so substituted are of substantially the same character, and of substantially the
same value as, or of less value than, those for which they
have been so substituted; and the goods, wares and merchandise so substituted shall be covered by such security
as if originally covered thereby.
3. The bank may lend money to any person engaged in
business as a wholesale manufacturer of any goods, wares
and merchandise, upon the security of the goods, wares
and merchandise manufactured by him, or procured for
such manufacture.
4. Any such security, as mentioned in the foregoing provisions of this section, may be given by the owner of said
goods, wares and merchandise, stock or products.
5. The security may be taken in the form set forth in
Schedule C to this act, or to the like effect.
6. The bank shall, by virtue of such security, acquire
the same rights and powers in respect to the goods, wares
and merchandise, stock or products covered thereby, as if
it had acquired the same by virtue of a warehouse receipt.
(53 V., c. 31, s. 74; 63-64 V., c. 26, s. 17.)
89. If goods, wares and merchandise are manufactured
or produced from the goods, wares and merchandise, or any
of them, included in or covered by any warehouse receipt,
or included in or covered by any security given under the
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last preceding section, while so covered, the bank holding
such warehouse receipt or security shall hold or continue to
hold such goods, wares and merchandise, during the process and after the completion of such manufacture or production, with the same right and title, and for the same
purposes and upon the same conditions, as it held or could
have held the original goods, wares and merchandise.
2. All advances made on the security of any bill of lading
or warehouse receipt, or of any security given under the
last preceding section, shall give to the bank making the
advances a claim for the repayment of the advances on the
goods, wares and merchandise therein mentioned, or into
which they have been converted, prior to and by preference over the claim of any unpaid vendor: Provided, That
such preference shall not be given over the claim of any unpaid vendor who had a lien upon the goods, wares and merchandise at the time of the acquisition by the bank of such
warehouse receipt, bill of lading, or security, unless the
same was acquired without knowledge on the part of the
bank of such lien.
3. In the event of the non-payment at maturity of any
debt or liability secured by a warehouse receipt or bill of
lading, or secured by any security given under the last preceding section, the bank may sell the goods, wares and
merchandise mentioned therein, or so much thereof as will
suffice to pay such debt or liability with interest and expenses, returning the surplus, if any, to the person from
whom the warehouse receipt, bill of lading, or security, or
the goods, wares and merchandise mentioned therein, as
the case may be, were acquired: Provided, That such power
of sale shall be exercised subject to the following provisions,
namely: (a) No sale, without the consent in writing of the
owner of any timber, boards, deals, staves, saw-logs or
other lumber, shall be made under this act until notice of
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tered letter, mailed in the post office, post paid, to the last
known address of the pledger thereof, at least thirty days
prior to the sale thereof; (6) no goods, wares and merchandise, other than timber, boards, deals, staves, saw-logs or
other lumber, shall be sold by the bank under this act without the consent of the owner until notice of the time and
place of sale has been given by a registered letter, mailed
in the post-office, post paid, to the last known address of
the pledger thereof, at least ten days prior to the sale thereof ; (c) every sale under such power of sale without the
consent of the owner shall be made by public auction, after
notice thereof by advertisement in at least two newspapers
published in or nearest to the place where the sale is to be
made, stating the time and place thereof; and, if the sale
is in the province of Quebec, then at least one of such newspapers shall be a newspaper published in the English language, and one other such newspaper shall be a newspaper
published in the French language. (53 V., c. 31, ss. 76, 77
and 78; 63-64 V., c. 26, s. 19.)
90. The bank shall not acquire or hold any warehouse
receipt or bill of lading, or any such security as aforesaid,
to secure the payment of any bill, note, debt, or liability,
unless such bill, note, debt, or liability is negotiated or
contracted (a) at the time of the acquisition thereof by
the bank, or (b) upon the written promise or agreement
that such warehouse receipt or bill of lading or security
would be given to the bank: Provided, That such bill, note,
debt, or liability may be renewed, or the time for the payment thereof extended, without affecting any such security.
2. The bank may (a) on shipment of any goods, wares
and merchandise for which it holds a warehouse receipt,
or any such security as aforesaid, surrender such receipt
or security and receive a bill of lading in exchange therefor or (b) on the receipt of any goods, wares and merchandise for which it holds a bill of lading, or any such
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rity, store the goods, wares and merchandise, and take
a warehouse receipt therefor, or ship the goods, wares and
merchandise, or part of them, and take another bill of lading therefor. (53 V., c. 31, s. 75; 63-64 V., c. 26, s. 18.)
91. The bank may stipulate for, take, reserve or exact
any rate of interest or discount, not exceeding seven per
centum per annum, and may receive and take in advance
any such rate, but no higher rate of interest shall be recoverable by the bank. (53 V., c. 31, s. 80.)
92. The bank may allow any rate of interest whatever
upon money deposited with it. (53 V., c. 31, s. 80.)
93. When any note, bill, or other negotiable security or
paper, payable at any of the bank's places or seats of
business, branches, agencies or offices of discount and deposit in Canada, is discounted at any other of the bank's
places or seats of business, branches, agencies or offices of
discount and deposit, the bank may, in order to defray
the expenses attending the collection thereof, receive or
retain, in addition to the discount thereon, a percentage
calculated upon the amount of such note, bill, or other negotiable security or paper, not exceeding, if the note, bill,
or other negotiable security or paper is to run (a) for less
than thirty days, one-eighth of one per centum; (6) for
thirty days or over but less than sixty days, one-fourth of
one per centum; (c) for sixty days or over but less than
ninety days, three-eighths of one per centum; and (d) for
ninety days or over, one-half of one per centum. (53 V.,
c. 31, s. 82.)

94. The bank may, in discounting any note, bill, or
other negotiable security or paper, bona fide payable
at any place in Canada other than that at which it is
discounted, and other than one of its own places or seats
of business, branches, agencies, or offices of discount and
deposit in Canada, receive and retain, in addition to the
discount thereon, a sum not exceeding one-half of one
per centum on the amount thereof to defray the expenses
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of agency and charges in collecting the same. (53 V., c.
3i, s. 83.)
95. The bank may, subject to the provisions of this section, without the authority, aid, assistance, or intervention
of any other person or official being required (a) receive
deposits from any person whomsoever, whatever his age,
status, or condition in life, and whether such person is
qualified by law to enter into ordinary contracts or not,
and (b) from time to time repay any or all of the principal
thereof, and pay the whole or any part of the interest
thereon to such person, unless before such repayment the
money so deposited in the bank is lawfully claimed as the
property of some other person.
2. In the case of any such lawful claim the money so
deposited may be paid to the depositor with the consent
of the claimant, or to the claimant with the consent of
the depositor.
3. If the person making any such deposit could not,
under the law of the province where the deposit is made,
deposit and withdraw money in and from a bank without
this section, the total amount to be received from such
person on deposit shall not at any time exceed the sum of
five hundred dollars. (53 V., c. 31, s. 84.)
96. The bank shall not be bound to see to the execution of any trust, whether expressed, implied, or constructive, to which any deposit made under the authority of
this act is subject.
2. Except only in the case of a lawful claim, by some
other person before repayment, the receipt of the person
in whose name any such deposit stands, or, if it stands in
the names of two persons, the receipt of one, or, if it stands
in the names of more than two persons, the receipt of a
majority of such persons, shall, notwithstanding any trust
to which such deposit is then subject, and whether or
not the bank sought to be charged with such trust, and
with which the deposit has been made, had notice thereof,
S. D o c , 332

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be a sufficient discharge to all concerned for the payment
of any money payable in respect of such deposit.
3. The bank shall not be bound to see to the application of the money paid upon such receipt. (53 V., c.
31, s. 84.)
97. If a person dies, having a deposit with the bank not
exceeding the sum of five hundred dollars, the production
to the bank and deposit with it of (a) any authenticated
copy of the probate of the will of the deceased depositor,
or of letters of administration of his estate, or of letters
of verification of heirship, or of the act of curatorship or
tutorship, granted by any court in Canada having power
to grant the same, or by any court or authority in England,
Wales, Ireland, or any British colony, or of any testament,
testamentary or testament dative expede in Scotland; or,
(6) an authentic notarial copy of the will of the deceased
depositor, if such will is in notarial form, according to the
law of the Province of Quebec; or, (c) if the deceased
depositor died out of His Majesty's dominions, any authenticated copy of the probate of his will, or letters of administration of his property, or other document of like import,
granted by any court or authority having the requisite
power in such matters, shall be sufficient justification and
authority to the directors for paying such deposit, in
pursuance of and in conformity to such probate, letters of
administration, or other document as aforesaid. (63-64
V., c. 26, s. 20.)
DOMINION GOVERNMENT CHEQUES.

98. The bank shall not charge any discount or commission for the cashing of any official cheque of the government of Canada or of any department thereof, whether
drawn on the bank cashing the cheque or on any other
bank. (53 V., c. 31, s. 103.)

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THE PURCHASE OF THE ASSETS OF A BANK.

99. Any bank m a y sell the whole or any portion of its
assets to any other bank which may purchase such assets;
and the selling and purchasing banks may, for such purposes, enter into an agreement of sale and purchase, which
agreement shall contain all the terms and conditions connected with the sale and purchase of such assets. (63-64
V., c. 26, s. 33.)
100. The consideration for any such sale and purchase
m a y be as agreed upon between the selling and purchasing banks.
2. If t h e consideration, or any portion thereof, is shares
of t h e capital stock of the purchasing bank, the agreement
shall provide for t h e amount of the shares of the purchasing
bank to be paid to the selling bank.
3. Until such shares so paid to the selling bank have been
sold b y such bank, or have been distributed among and
accepted by t h e shareholders of such bank, they shall
not be considered issued shares of the purchasing bank
for t h e purposes of its note circulation. (63-64 V., c.
26, s. 34.)
101. The agreement of sale and purchase shall be submitted t o t h e shareholders of the selling bank, either at the
annual general meeting of such bank or at a special general
meeting thereof called for the purpose,
2. A copy of t h e agreement shall be mailed, postpaid, to
each shareholder of such bank to his last known address,
at least four weeks previously to the date of the meeting
at which the agreement is to be submitted, together with
a notice of the time and place of the holding of such meeting. (63-64 V., c. 26, s. 35.)
102. If at such meeting the agreement is approved by
resolution carried b y the votes of shareholders, present
in person or represented by proxy, representing not less
t h a n two-thirds of the amount of the subscribed capital
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stock of t h e bank, t h e agreement m a y be executed under
t h e seals of t h e banks, parties thereto, and application maybe made to t h e governor in council, through t h e minister,
for approval thereof.
2. Until t h e agreement is approved by t h e governor in
council it shall not be of any force or effect. (63-64 V.,
c. 26, s. 36.)
103. If t h e agreement provides for the p a y m e n t of t h e
consideration for such sale and purchase, in whole or in
part, in shares of t h e capital stock of the purchasing bank,
and for such purpose it is necessary to increase t h e capital
stock of such bank, t h e agreement shall not be executed
on behalf of t h e purchasing bank, unless nor until it is
approved by the shareholders thereof at t h e annual general meeting, or at a special general meeting of such shareholders. (63-64 V., c. 26, s. 37.)
104. The governor in council may, on t h e application for
his approval of t h e agreement, approve of the increase of
t h e capital stock of t h e purchasing bank, which is necessary
t o provide for t h e payment of t h e shares of such b a n k to
t h e selling bank, as provided in t h e said agreement. ( 6 3 64 V., c. 26, s. 38.)
105. The provisions of this act with regard to (a) t h e
increase of the capital stock of the bank by by-law of the
shareholders approved by the treasury board; and (b) the
allotment and sale of such increased stock shall not apply
t o any increase of stock made or provided for under t h e
authority of the last two preceding sections, (63-64 V.,
c. 26, s. 38.)
106. The approval of the governor in council shall not
be given to the agreement unless (a) the approval thereof
is recommended b y t h e treasury board; (b) t h e application for approval thereof is made, by or on behalf of t h e
b a n k executing it, within three months from t h e d a t e of
execution of the agreement; and (c) it appears to t h e
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ments of this act in connection with the approval of the
agreement by the shareholders of the selling and purchasing banks have been complied with, and that notice of
the intention of the banks to apply to the governor in
council for the approval of the agreement has been published for at least four weeks in the Canada Gazette, and
in one or more newspapers published in places where the
chief offices or places of business of the banks are situate.
2. Such banks shall afford all information that the
minister requires.
3. Nothing herein contained shall be construed to prevent the governor in council or the treasury board from
refusing to approve of the agreement or to recommend its
approval. (63-64 V., c. 26, s. 39.)
107. The agreement shall not be approved of unless it
appears that (a) proper provisions have been made for the
payment of the liabilities of the selling bank; (b) the
agreement provides for the assumption and payment by
the purchasing bank of the notes of the selling bank issued
and intended for circulation, outstanding and in circulation; and, (c) the amounts of the notes of both the purchasing and selling banks, issued for circulation, outstanding and in circulation, as showrn by the then last monthly
returns of the banks, do not together exceed the then
paid-up capital of the purchasing bank; or, if the amount
of such notes does exceed such paid-up capital, an amount
in cash, equal to the excess of such notes over such paid-up
capital, has been deposited by the purchasing bank with
the minister.
2. The amount so deposited as aforesaid shall be held
by the minister as security for the redemption of the said
excess of notes; and, wdien such excess, or any portion
thereof, has been redeemed and cancelled, the amount so
deposited, or an amount equal to the amount of excess
so redeemed and cancelled, shall, from time to time, be
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o u t interest, on the application of such bank, and on t h e
production of such evidence as the minister m a y require
t o show t h a t the notes in regard t o which such repayment
is asked have been redeemed and cancelled. (63-64 V.,
c. 27, s. 1.)
108. The notes of the selling bank so assumed and t o
be paid b y the purchasing b a n k shall, on the approval of
t h e agreement, be deemed to be, for all intents and purposes, notes of the purchasing b a n k issued for circulation;
and the purchasing b a n k shall be liable in the same manner and to the same extent as if it had issued t h e m for
circulation.
2. The a m o u n t at the credit of the selling b a n k in t h e
circulation fund shall, on the approval of the agreement,
be transferred to the credit of the purchasing bank.
3. The notes of the selling b a n k shall not be reissued,
b u t shall be called in, redeemed, and cancelled as quickly
as possible. (63-64 V., c. 26, s. 41.)
109. The approval by the governor in council of the
agreement shall be evidenced b y a certified copy of the
order in council approving thereof.
2. Such certified copy shall be conclusive evidence of
the approval of the agreement therein referred to, and of
the regularity of all proceedings in connection therewith.
(63-64 V., c. 26, s. 42.)
n o . On the agreement being approved of by the governor in council, the assets therein referred to as sold and
purchased shall, in accordance with and subject to the
terms thereof, and without any further conveyance, become vested in the purchasing bank.
2. The selling b a n k shall, from time to time, subject to
the terms of the agreement, execute such formal and
separate conveyances, assignments, and assurances, for
registration purposes or otherwise, as are reasonably
required to confirm or evidence the vesting in t h e pur-

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chasing b a n k of the full title or ownership of t h e assets
referred to in the agreement (63-64 V., c. 26, s. 43.)
i n . As soon as the agreement is approved of b y the
governor in council, the selling bank shall cease t o issue or
reissue notes for circulation, and shall cease to transact
a n y business, except such as is necessary to enable it t o
carry out the agreement, to realize upon any assets not
included in t h e agreement, to pay and discharge its liabilities, and generally to wind up its business; and the charter
or act of incorporation of such bank, and any acts in
a m e n d m e n t thereof then in force, shall continue in force
only for the purposes in this section specified. (63-64 V.,
c. 26, s. 44.)
RETURNS.
112. Monthly returns shall be made by the b a n k to the
minister in t h e form set forth in Schedule D to this act.
2. Such returns shall be made u p and sent in within the
first fifteen days of each month, and shall exhibit t h e condition of t h e b a n k on the last juridical day of t h e m o n t h
last preceding.
3. Such returns shall be signed by the chief accountant
and b y t h e president, or vice-president, or the director
then acting as president, and b y t h e manager, cashier, or
other principal officer of the bank at its chief place of
business. (53 V., c. 31, s. 85.)
113. The minister m a y also call for special returns from
any bank, whenever, in his judgment, they are necessary
t o afford a full and complete knowledge of its condition.
2. Such special returns shall be made and signed in the
manner and b y the persons specified in the last preceding
section.
3. Such special returns shall be made and sent in within
t h i r t y days from the date of the demand therefor by the
minister: Provided, T h a t t h e minister m a y extend t h e
time for sending in such special returns for such further
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period, not exceeding thirty days, as he thinks expedient.
(53 V., c. 31, s. 86.)
114. The bank shall, within twenty days after the close
of each calendar year, transmit or deliver to the minister a
return (a) of all dividends which have remained unpaid
for more t h a n five years; and (b) of all amounts or b a h
ances in respect of which no transactions have taken place,
or upon which no interest has been paid, during the five
years prior to t h e date of such return: Provided, T h a t , in
the case of moneys deposited for a fixed period, the said
t e r m of five years shall be reckoned from t h e date of the
termination of such fixed period.
2. T h e return mentioned in t h e last preceding subsection shall set forth (a) the name of each shareholder or
creditor to whom such dividends, amounts, or balances are,
according to t h e books of the bank, payable; (6) t h e last
known address of each such shareholder or creditor; (c)
t h e amount due to each such shareholder or creditor; (<:/)
the agency of the bank at which the last transaction took
place; (e) the d a t e of such last transaction; and, (/) if
such shareholder or creditor is known to the b a n k to be
dead, the names and addresses of his legal representatives,
so far as known t o t h e bank.
3. The b a n k shall likewise, within twenty days after t h e
close of each calendar year, transmit or deliver t o t h e minister a return of all drafts or bills of exchange issued by
t h e bank t o any person and remaining unpaid for more
t h a n five years prior to the date of such return, setting
forth, so far as known, (a) the names of t h e persons t o
whom or at whose request such drafts or bills of exchange
were issued; (h) the addresses of such persons; (c) t h e
names of the payees of such drafts or bills of exchange;
(d) t h e amounts and dates of such drafts or bills of exchange; (e) t h e names of the places where such drafts or
bills of exchange were payable; and (/) the agencies of t h e
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bank, respectively, from which such drafts or bills of exchange were issued.
4. The returns required b y the foregoing provisions of
this section shall be signed by the chief accountant, and
b y the president or vice-president or the director then
acting as president, and by the manager, cashier, or other
principal officer of the bank, at its chief place of business.
5. The b a n k shall also, within t w e n t y days after the
close of each calendar year, transmit or deliver to the minister a certified list showing (a) the names of the shareholders of t h e bank on the last day of such calendar year,
with their additions and residences; (6) t h e number of
shares then held by them, respectively; and (c) the value
at par of such shares.
6. The minister shall lay such returns and lists before
Parliament at t h e next session thereof. (53 V., c. 31, ss.
87 and 88; 63-64 V., c. 26, s. 21.)
PAYMENTS TO THE MINISTER UPON WINDING UP.
115. If, in the event of the winding up of the business
of the b a n k in insolvency, or under any general windingup act, or otherwise, any moneys payable by the liquidator, either to shareholders or depositors, remain unclaimed (a) for the period of three years from the date
of suspension of p a y m e n t by the b a n k ; or (b) for a like
period from the commencement of t h e winding up of
such business; or (c) until the final winding up of such
business, if t h e business is finally wound up before the
expiration of t h e said three years; such moneys and all
interest thereon shall, notwithstanding any s t a t u t e of
limitations or other act relating to prescription, be paid
to t h e minister, to be held by him subject to all rightful
claims on behalf of any person other t h a n t h e bank.
2. If a claim to any moneys so paid is thereafter established to t h e satisfaction of the treasury board, the governor in council shall, on the report of the treasury board,
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direct p a y m e n t thereof to be made to the person entitled
thereto, together with interest on the principal sum
thereof, a t t h e r a t e of three per centum per a n n u m , for
a period not exceeding six years from t h e date of paym e n t thereof to the minister as aforesaid: Provided, That
no such interest shall be paid or payable on such principal
sum unless interest thereon was payable by the bank
paying t h e same to t h e minister.
3. Upon p a y m e n t to the minister as herein provided,
the bank and its assets shall be held t o be discharged from
further liability for t h e amounts so paid. (53 V., c. 31,
s. 88.)
116. Upon the winding up of a b a n k in insolvency or
under any general winding-up act, or otherwise, the
assignees, liquidators, directors, or other officials in charge
of such winding up, shall, before t h e final distribution of
the assets, or within three years from t h e commencement
of t h e suspension of p a y m e n t b y the bank, whichever
shall first happen, pay over to the minister a sum, out of
the assets of the bank, equal to the a m o u n t then outstanding of the notes intended for circulation issued by
the bank,
2. Upon such payment being made, the bank and its
assets shall be relieved from all further liability in respect
of such outstanding notes.
3. The sum so paid shall be held b y the minister and
applied for the purpose of redeeming, whenever presented,
such outstanding notes, without interest. (53 V.> c. 31,
s. 88.)
THE) CURATOR.

117. The association shall, if a bank suspends paym e n t in specie or Dominion notes of any of its liabilities
as t h e y accrue, forthwith appoint a curator to supervise
the affairs of such bank.
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2. The association may at any time remove the curator,
and m a y appoint another person to act in his stead.
(63-64 V., c. 26, s. 24.)
118. The appointment of the curator shall be m a d e in
the manner provided for in t h e by-law of t h e association
made in t h a t behalf as hereinafter provided.
2. If there is no such by-law the appointment shall be
m a d e in writing b y the president of t h e association, or by
the person acting as president. (63-64 V., c. 26, s. 25.)
119. The curator shall assume supervision of the affairs
of the bank, and of all necessary arrangements for the
p a y m e n t of t h e notes of t h e bank issued for circulation,
and, a t t h e time of his appointment, outstanding and in
circulation.
2. The curator shall generally have all powers and
shall t a k e all steps and do all things necessary or expedient
to protect the rights and interests of the creditors and
shareholders of t h e bank, and to conserve and ensure
the proper disposition, according to law, of the assets of
the b a n k ; and, for the purposes of this section, he shall
have free and full access to all books, accounts, documents, and papers of t h e bank.
3. The curator shall continue to supervise the affairs
of t h e b a n k until he is removed from office, or until the
b a n k resumes business, or until a liquidator is duly
appointed to wind up t h e business of t h e bank. (63-64
V., c. 26, s. 26.)
120. The president, vice-president, directors, general
manager, managers, clerks, and officers of t h e b a n k shall
give and afford to the curator all such information and
assistance as he requires in the discharge of his duties.
(63-64 V., c. 26, s. 27.)
121. No by-law, regulation, resolution, or act, touching t h e affairs or management of the bank, passed, made,
or done b y t h e directors during the time the curator is in
charge of the bank, shall be of any force or effect until
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approved in writing by the curator. (63-64 V., c. 26,
s. 27.)
122. The curator shall make all returns and reports,
and shall give all information to the minister, touching
t h e affairs of the bank, t h a t the minister requires of him.
(63-64 V., c. 26, s. 28.)
123. The remuneration of the curator for his services,
a n d his expenses and disbursements in connection with
t h e discharge of his duties, shall be fixed and determined
b y t h e association, and shall be paid out of the assets of
t h e bank, and, in case of the winding up of the bank,
shall r a n k on the estate equally with the remuneration
of t h e liquidator. (63-64 V., c. 26, s. 29.)
BY-LAWS OF THE CANADIAN B A N K E R S '

ASSOCIATION.

124. The association may, at any meeting thereof, with
the approval of two-thirds in number of the banks represented at such meeting, if the banks so approving have at
least two-thirds in par value of the paid-up capital of the
banks so represented, make by-laws, rules and regulations
respecting, (a) all matters relating to the appointment
or removal of the curator, and his powers and duties;
(b) t h e supervision of the making of the notes of the
banks which are intended for circulation, and t h e delivery
thereof to t h e b a n k s ; (c) the inspection of the disposition
m a d e by the banks of such notes; (d) the destruction of
notes of t h e b a n k s ; and (e) the imposition of penalties for
t h e breach or nonobservance of any by-law, rule or regulation made by virtue of this section.
2. No such by-law, rule or regulation, and no amendm e n t or repeal thereof, shall be of any force or effect
until approved by the treasury board.
3. Before any such by-law, rule or regulation, or any
a m e n d m e n t or repeal thereof is so approved, t h e treasury
board shall submit it to every bank which is not a member
of t h e association, and give to each such bank an oppor264




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tunity of being heard before the treasury board with
respect thereto.
4. The association shall have all powers necessary to
carry out, or to enforce the carrying out, of any by-law,
rule or regulation, or any amendment thereof, so approved
by the treasury board. (63-64 V., c. 26, ss. 30 and 31.)
INSOLVENCY.

125. In the event of the property and assets of the
bank being insufficient to pay its debts and liabilities, each
shareholder of the bank shall be liable for the deficiency,
to an amount equal to the par value of the shares held
by him, in addition to any amount not paid up on such
shares. (53 V., c. 31, s. 89.)
126. The liability of the bank, under any law, custom
or agreement to repay moneys deposited with it and
interest, if any, and to pay dividends declared and payable on its capital stock, shall continue, notwithstanding
any statute of limitations, or any enactment or law
relating to prescription.
2. This section applies to moneys heretofore or hereafter
deposited, and to dividends heretofore or hereafter
declared. (53 V., c. 31, s. 90.)
127. Any suspension by the bank of payment of any
of its liabilities as they accrue, in sp.ecie or Dominion
notes, shall, if it continues for ninety days consecutively,
or at intervals within twelve consecutive months, constitute the bank insolvent, and wTork a forfeiture of its
charter or act of incorporation, so far as regards all further
banking operations.
2. The charter or act of incorporation of the bank shall,
in such case, remain in force only for the purpose of
enabling the directors, or other lawful authority, to make
and enforce the calls mentioned in the next following
section of this act, and to wind up the business of the
bank. (53 V., c. 31, s. 91.)
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128. If any suspension of payment in full, in specie or
Dominion notes, of all or any of the notes or other liabilities of the bank, continues for three months after the
expiration of the time which, under the last preceding
section, would constitute the bank insolvent, and if no
proceedings are taken under any act for the winding up
of the bank, the directors shall make calls on the shareholders thereof, to the amount they deem necessary to
pay all the debts and liabilities of the bank, without
waiting for the collection of any debts due to the bank or
the sale of any of its assets or property.
2. Such calls shall be made at intervals of thirty days.
3. Such calls vshall be made upon notice to be given at
least thirty days prior to the day on which any such call
shall be payable.
4. Any number of such calls may be made by one
resolution.
5. No such call shall exceed twenty per centum on each
share.
6. Payment of such calls may be enforced in like manner as payment of calls on unpaid stock may be enforced.
7. The first of such calls may be made within ten days
after the expiration of the said three months.
8. In the event of proceedings being taken, under any
act, for the winding up of the bank in consequence of the
insolvency of the bank, the said calls shall be made in
the manner prescribed for the making of such calls in
such act.
9. Any failure on the part of any shareholder liable to
any such call to pay the same when due, shall work a
forfeiture by such shareholder of all claim in or to any
part of the assets of the bank: Provided, That such call,
and any further call thereafter, shall nevertheless be
recoverable from him as if no such forfeiture had been
incurred. (53 V., c. 31, ss. 92, 93, and 94.)
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129. Nothing contained in t h e four sections last preceding shall be construed t o alter or diminish t h e additional liabilities of t h e directors as herein mentioned and
declared. (53 V., c. 31, s. 95.)
130. (a) Persons who, having been shareholders of t h e
bank, have only transferred their shares, or any of them,
to others, or registered the transfer thereof, within sixty
days before t h e commencement of the suspension of paym e n t b y t h e b a n k ; and, (h) Persons whose subscriptions
to t h e stock of t h e bank have been cancelled, in manner
hereinbefore provided, within t h e said period of sixty
days before t h e commencement of the suspension of payment b y t h e b a n k ; shall be liable to all calls on t h e shares
held or subscribed for by them, as if they held such
shares a t t h e time of such suspension of payment, saving
their recourse against those by whom such shares were
then actually held. (53 V., c. 31, s. 96.)
131. In the case of the insolvency of any bank, (a) the
payment of t h e notes issued or re-issued by such bank,
intended for circulation, and then in circulation, together
with any interest paid or payable thereon as hereinbefore
provided, shall be t h e first charge upon the assets of the
b a n k ; (b) the p a y m e n t of any a m o u n t due t o the government of Canada, intrust or otherwise, shall be t h e second
charge upon such assets; (c) t h e payment of any amount
due to t h e government of any of the provinces, in trust or
otherwise, shall be the third charge upon such assets; and,
(d) the amount of any penalties for which t h e bank is
liable shall not form a charge upon the assets of the bank,
until all other liabilities are paid. (53 V., c. 31, s. 53.)
OFFENCES AND PENALTIES.

The commencement of business.
132. Every director or provisional director of any bank
and every other person, who, before the obtaining of the
certificate from the treasury board, by this act required,
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permitting the bank to issue notes or commence business,
issues or authorizes t h e issue of any note of such bank,
or transacts or authorizes the transaction of any business
in connection with such bank, except such as is by this
act authorized to be transacted before the obtaining of
such certificate, is guilty of an offence against this act.
(53 VM c. 31, s. 14.)
The sale and transfer of shares.
133. Any person, whether principal, broker or agent,
who wilfully sells or transfers or a t t e m p t s to sell or transfer (a) any share or shares of t h e capital stock of any bank
by a false number; or, (b) any share or shares of which
the person making such sale or transfer, or in whose name
or on whose behalf t h e same is made, is not at t h e time of
such sale, or a t t e m p t e d sale, the registered owner; or,
(c) any share or shares, without t h e assent to such sale of
t h e registered owner thereof; is guilty of an offence against
this act. (53 V., c. 3.1, s. 37.)
The cash reserves.
134. Every bank which at any time holds less t h a n
forty per centum of its cash reserves in Dominion notes
shall incur a penalty of live hundred dollars for each such
offence. (53 V., c. 31, s. 50,)
The issue and circulation of notes.
135. If t h e total amount of the notes of the bank in
circulation at any time exceeds t h e amount authorized
b y this act t h e bank shall, (a) if t h e a m o u n t of such excess
is not over one thousand dollars, incur a penalty equal t o
t h e a m o u n t of such excess; or, (6) if t h e amount of such
excess is over one thousand dollars, and not over twenty
thousand dollars, incur a penalty of one thousand dollars;
or, (c) if the amount of such excess is over twenty thou26s




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sand dollars, and not over one hundred thousand dollars,
incur a penalty of ten thousand dollars; or, (d) if the
amount of such excess is over one hundred thousand dollars, and not over two hundred thousand dollars, incur a
penalty of fifty thousand dollars; or, (e) if the amount of
such excess is over two hundred thousand dollars, incur
a penalty of one hundred thousand dollars. (53 V., c. 31,
s. 51.)

136. Every person, except a bank to which this act
applies, who issues or reissues, makes, draws, or endorses
any bill, bond, note, cheque or other instrument, intended
to circulate as money, or to be used as a substitute for
money, for any amount whatsoever, shall incur a penalty
of four hundred dollars.
2. Such penalty shall be recoverable with costs, in any
court of competent jurisdiction, by any person who sues
for the same.
3. A moiety of such penalty shall belong to the person
suing for the same, and the other moiety to His Majesty
for the public uses of Canada.
4. If any such instrument is made for the payment of
a less sum than twenty dollars, and is payable either
in form or in fact to the bearer thereof, or at sight, or on
demand, or at less than thirty days thereafter, or is overdue, or is in any way calculated or designed for circulation, or as a substitute for money, the intention to pass
the same as money shall be presumed, unless such instrument is, (a) a cheque on some chartered bank paid by the
maker directly to his immediate creditor; or, (b) a promissory note, bill of exchange, bond, or other undertaking
for the payment of money made or delivered by the maker
thereof to his immediate creditor, and, (c) not designed
to circulate as money or as a substitute for money. (53
V., c. 31, s. 60.)
137. Every person who in any way defaces any Dominion or provincial note, or bank note, whether by writing,
S. Doc. 332. 61-2

18

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printing, drawing, or stamping thereon, or by attaching
or affixing thereto, anything in the nature or form of an
advertisement, shall be liable to a penalty not exceeding
twenty dollars. (53 V., c. 31, s. 61.)
138. (a) Every person who, being president, vice-president, director, general manager, manager, clerk, or other
officer of the bank, issues or reissues, during any period of
suspension of payment by the bank of its liabilities, any
notes of the bank payable to bearer on demand, and intended for circulation, or authorizes or is concerned in any
such issue or reissue; and (6) if, after any such suspension,
the bank resumes business without the consent in writing
of the curator, hereinbefore provided for, every person who
being president, vice-president, director, general manager,
manager, clerk, or other officer of the bank issues or reissues, or authorizes or is concerned in the issue or reissue
of any such notes before being thereunto authorized by
the treasury board; and (c) every person who accepts,
receives, or takes, or authorizes or is concerned in, the acceptance, receipt, or taking of any such notes, knowing the
same to have been so issued or reissued, from the bank,
or from such president, vice-president, director, general
manager, manager, clerk, or other officer of the bank, in
payment or part payment, or as security for the payment
of any amount due or owing to such person by the bank,
is guilty of an indictable offence, and liable to imprisonment for a term not exceeding seven years, or to a fine not
exceeding two thousand dollars, or to both. (63-64 V.,
c. 26, s. 10.)

139. (a) Every person who, being the president, vicepresident, director, general manager, manager, cashier, or
other officer of the bank, pledges, assigns, or hypothecates,
or authorizes or is concerned in the pledge, assignment, or
hypothecation of the notes of the bank; and (b) even/ person who accepts, receives or takes, or authorizes, or is concerned in the acceptance or receipt or taking of such notes
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as a pledge, assignment, or hypothecation, shall be liable
to a fine of not less t h a n four hundred dollars and not
more t h a n two thousand dollars, or to imprisonment for
not more t h a n two years, or to both. (53 V., c. 31, s. 52.)
140. (a) Every person who, being the president, vicepresident, director, general manager, manager, cashier, or
other officer of a bank, with intent to defraud, issues or
delivers, or authorizes or is concerned in the issue or delivery of notes of the bank intended for circulation and
not then in circulation; and (6) every person wrho, with
knowledge of such intent, accepts, receives, or takes, or
authorizes, or is concerned in the acceptance, receipt, or
taking of such notes, shall be guilty of an indictable offence
and liable to imprisonment for a t e r m not exceeding seven
years, or to a fine not exceeding two thousand dollars, or
to both. (53 V., c. 31, s. 52.)
Warehouse receipts, bills 0} lading, and other securities.
141. If any bank, to secure t h e payment of any bill,
note, debt, or liability acquires or holds (a) any warehouse receipt or bill of lading; or (b) any instrument such
as is by this act authorized to be taken by t h e b a n k t o
secure money lent (i) t o any wholesale purchaser or shipper of or dealer in products of agriculture, the forest, quarry
and mine, or the sea, lakes, and rivers, or to any wholesale purchaser or shipper of or dealer in live or dead stock,
and the products thereof, upon the security of such products, or of such live or dead stock, or the products thereof;
or (ii) to any person engaged in business as a wholesale
manufacturer of any goods, wares, and merchandise, upon
the security of the goods, wares, and merchandise manufactured by such person, or procured for such manufacture,
such bank shall, unless (a) such bill, note, debt, or liability
is negotiated or contracted a t t h e time of t h e acquisition
b y the bank of such warehouse receipt, bill of lading, or
security; or (b) such bill, note, debt, or liability is nego271




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tiated or contracted upon the written promise or agreement t h a t such warehouse receipt, bill of lading, or security would be given to the b a n k ; or (c) the acquisition
or holding by the bank of such warehouse receipt, bill of
lading, or security is otherwise authorized b y this act,
incur a penalty not exceeding five hundred dollars, (53
V., c. 31, s. 79.)
142. If any debt or liability to the b a n k is secured by
(a) any warehouse receipt or bill of lading; or (6) any
other security such as is mentioned in the last preceding
section, and is not paid a t m a t u r i t y , such bank shall, if it
sells the goods, wares, and merchandise or products covered by such warehouse receipt, bill of lading, or security,
under the power of sale conferred upon it by this act,
without complying with the provisions to which t h e exercise of such power of sale is, by this act, m a d e subject,
incur a penalty not exceeding five hundred dollars. (53
V. r c. 31, s. 79; 63-64 V., c. 26, s. 18.)
143. Every person is guilty of an indictable offence and
liable to imprisonment for a term not exceeding two years
who wilfully makes any false statement, (a) in any warehouse receipt or bill of lading given under the authority of
this act to any b a n k ; or (b) in any instrument given to any
bank under t h e authority of this act, as security for any
loan of money made by the bank to any wholesale purchaser or shipper of or dealer in products of agriculture, the
forest, quarry, and mine, or the sea, lakes, and rivers, or to
any wholesale purchaser, or shipper of or dealer in live or
dead stock and the products thereof, whereby any such
products or stock is assigned or transferred to the bank as
security for t h e p a y m e n t of such loan; or (c) in any instrum e n t given t o any bank under t h e authority of this act, as
security for any loan of money m a d e by the bank to any
person engaged in business as a wholesale manufacturer of
any goods, wares, and merchandise, whereby any of t h e
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procured for such manufacture, are transferred or assigned
to the bank as security for the payment of such loan. (53
V., c. 31, s. 75-)
144. Every person who, having possession or control of
any goods, wares, and merchandise covered by any warehouse receipt or bill of lading, or by any such security as in
the last preceding section mentioned, and having knowledge of such receipt, bill of lading, or security, without the
consent of the bank in writing, and before the advance,
bill, note, debt, or liability thereby secured has been fully
paid, (a) wilfully alienates or parts with any such goods,
wares, or merchandise; or (b) wilfully withholds from the
bank possession of any such goods, wares, and merchandise,
upon demand, after default in payment of such advance,
bill, note, debt, or liability, is guilty of an indictable offence
and liable to imprisonment for a term not exceeding two
years. (53 V., c..31, s. 75; 63-64 V., c. 26, s. 18.)
145. (a) If any bank having, by virtue of the provisions
of this act, a privileged lien for any debt or liability for any
debt to the bank, on the shares of its own capital stock of
the debtor or person liable, neglects to sell such shares
within twelve months after such debt or liability has accrued and become payable; or (6) if any such bank sells
any such shares without giving notice to the holder thereof
of the intention of the bank to sell the same, by mailing
such notice in the post-office, post paid, to the last known
address of such holder, at least thirty days prior to such
sale, such bank shall incur, for each such offence, a penalty not exceeding five hundred dollars. (53 V., c. 31,
s. 79-)
Prohibited business,
146. If any bank, except as authorized by this act,
either directly or indirect^, (a) deals in the buying or selling or bartering of goods, wares, and merchandise, or engages or is engaged in any trade or business whatsoever; or,
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(b) purchases, deals in, or lends money or makes advances
upon t h e security or pledge of any share of its own capital
stock, or of t h e capital stock of any b a n k ; or (c) lends
money or makes advances upon t h e security, mortgage, or
hypothecation of any lands, tenements, or immovable
property, or of any ships or other vessels, or upon t h e security of any goods, wares, and merchandise, such bank
shall incur a penalty not exceeding five hundred dollars.
(53 V., c. 31, s. 79.)
Rettirns.
147. Every bank which neglects to make u p and send t o
t h e minister, within the first fifteen days of any m o n t h , any
monthly return by this act required to be m a d e u p and
sent in within t h e said fifteen days, exhibiting the condition of the b a n k on t h e last juridical day of t h e m o n t h last
preceding, and signed in the manner and by the. persons
by this act required, shall incur a penalty of fifty dollars
for each and every day, after the expiration of such time,
during which the bank neglects to make and send in such
return. (53 V., c. 31, s. 85.)
148. Every bank which neglects to make and send to the
minister, within t h i r t y days from the date of the demand
therefor by the minister, or, if such time is extended by the
minister, within such extended time, not exceeding thirty
days, as the minister m a y allow, any special return, signed
in t h e manner and b y the persons by this act required,
which, under t h e provisions of this act, the minister m a y ,
for the purpose of affording a full and complete knowledge
of t h e condition of the bank, call for, shall incur a penalty
of five hundred dollars for each and every day during which
such neglect continues. (53 V., c. 31, s. 86.)
149. Every bank which neglects to transmit or deliver
to the minister, within twenty days after the close of a n y
calendar year, a return, signed in the manner and b y the
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quired in t h a t behalf, of all drafts or bills of exchange
issued b y t h e b a n k to any person and remaining unpaid for
more t h a n five years prior to the d a t e of such return, shall
incur a penalty of fifty dollars for each and every day
during which such neglect continues. (63-64 V., c. 26, s.
21.)

150. Every b a n k which neglects to transmit or deliver
to t h e minister, within twenty days after t h e close of any
calendar year, a certified list, as b y this act required, showing (a) t h e names of t h e shareholders of the b a n k on t h e
last day of such calendar year, with their additions and
residences; (b) the number of shares then held b y such
shareholders respectively; and, (c) the value a t par of
such shares, shall incur a penalty of fifty dollars for each
and every day during which such neglect continues. (53
V., c. 31, s. 87.)
151. E v e r y b a n k which neglects t o transmit or deliver
to t h e minister, within twenty days after the close of any
calendar year, a return, signed in t h e manner and b y the
persons b y this act required, of all dividends which have
remained unpaid for more t h a n five years, and also of all
amounts or balances in respect of which no transactions
have taken place, or upon which no interest has been paid,
during t h e five years prior to the date of such return, and
setting forth such further particulars as are b y this act
required in t h a t behalf, shall incur a penalty of fifty dollars
for each and every day during which such neglect continues.
2. T h e said t e r m of five years shall, in case of moneys
deposited for a fixed period, be reckoned from t h e date
of t h e termination of such fixed period. (53 V., c. 31, s.
88.)
152. If any return or list, mentioned in either of t h e
last five preceding sections, is transmitted b y post, the
d a t e appearing, b y t h e post-office s t a m p or m a r k upon the
envelope or wrapper inclosing the return or list received
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b y t h e minister, as the date of deposit in t h e post-office
of t h e place a t which the chief office of t h e b a n k was
situated, shall be taken prima facie, for the purpose of
any of the said sections, to be t h e day upon which such
return or list was transmitted t o the minister. (53 V.,
c. 31, ss. 85 and 86; 63-64 V., c. 26, s. 22.)
153. The making of any wilfully false or deceptive s t a t e m e n t in any account, statement, return, report, or other
document respecting the affairs of the b a n k is an indictable offence punishable, unless a greater punishment is in
any case b y law prescribed therefor, by imprisonment for
a term n o t exceeding five years.
2. Every president, vice-president, director, auditor,
manager, cashier, or other officer of the bank, who (a) prepares, signs, approves, or concurs in any such account,
statement, return, report, or document containing such
false or deceptive statement; or, (b) uses t h e same with
intent to deceive or mislead any person, shall be held t o
have wilfully made such false or deceptive statement, and
shall further be responsible for all damages sustained by
a n y person in consequence thereof. (53 V., c. 31, s. 99.)
Calls in the case of suspension

of payment.

154. (a) If any suspension of p a y m e n t in full, in specie
or Dominion notes, of all or any of the notes or other liabilities of t h e b a n k continues for three months after t h e
expiration of t h e time which, under the provisions of this
act, would constitute the bank insolvent; and, (b) if no
proceedings are taken under any act for the winding u p
of t h e b a n k ; and, (c) if any director of the bank refuses t o
m a k e or enforce, or to concur in the making or enforcing
of any call on the shareholders of the bank, to any a m o u n t
which t h e directors deem necessary to pay all t h e debts
and liabilities of the bank, such director shall be guilty of
an indictable offence, and liable (a) to imprisonment for
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any t e r m not exceeding two years; and, (6) personally for
any damages suffered b}^ any such default. (53 V., c. 31,
s. 92.)
Undue preference to the bank's creditors.
155. E v e r y person who, being t h e president, vice-president, director, manager, cashier, or other officer of the
bank, wilfully gives or concurs in giving to any creditor
of t h e b a n k any fraudulent, undue or unfair preference
over other creditors, b y giving security to such creditor, or
b y changing the nature of his claim, or otherwise howsoever, is guilty of an indictable offence, and liable (a) to
imprisonment for a term not exceeding two years; and,
(6) for all damages sustained b y any person in consequence
of such preference. (53 V., c. 31, s. 97.)
The using of the title "Bank"

etc.

156. E v e r y person assuming or using t h e title of " b a n k , "
" b a n k i n g company," " b a n k i n g house," " b a n k i n g association," or " b a n k i n g institution," without being authorized so t o do by this act, or by some other act in force in
t h a t behalf, is guilty of an offence against this act. (53
V., c. 31, s. 100.)
Penalty for offence against this act.
157. Every person committing an offence, declared to
be an offence against this act, shall be liable to a fine not
exceeding one thousand dollars, or to imprisonment for a
term not exceeding five years, or to both, in the discretion
of t h e court before which the conviction is had. (53 V.,
c. 31, s. 101.)
PROCEDURE.
158. The amount of all penalties imposed upon a bank
for any violation of this act shall be recoverable and enforceable, with costs, at the suit of His Majesty instituted
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2, Such penalties shall belong to the Crown for the public uses of Canada: Provided, That the governor in council,
on the report of the treasury board, may direct that any
portion of any penalty be remitted, or paid to any person,
or applied in any manner deemed best adapted to attain the
objects of this act, and to secure the due administration
thereof, (53 V., c. 31, s. 98.)

SCHEDULE A.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
1.5.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.

The Bank of Montreal.
The Bank of New Brunswick,
The Quebec Bank.
The Bank of Nova Scotia,
The St. Stephen's Bank.
The Bank of Toronto.
The Molsons Bank.
The Eastern Townships Bank.
The Union Bank of Halifax,
The Ontario Bank.
La Banque Nationale.
The Merchants Bank of Canada.
La Banque Provinciale du Canada.
The People's Bank of New Brunswick.
The Union Bank of Canada.
The Canadian Bank of Commerce.
The Royal Bank of Canada.
The Dominion Bank.
The Bank of Hamilton.
The Standard Bank of Canada.
La Banque de St. Jean.
La Banque d'Hochelaga.
La Banque de St. Hyacinthe.
The Bank of Ottawa.
The Imperial Bank of Canada.
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26. The Western Bank of Canada.
27. The Traders' Bank of Canada.
28. The Sovereign Bank of Canada.
29. The Metropolitan Bank.
30. The Crown Bank of Canada.
31. The Home Bank of Canada.
32. The Northern Bank.
33. The Sterling Bank of Canada.
34. The United Empire Bank of Canada.
(63-64 V., c. 26, s. 4, and sch. A.)

SCHEDULE B.

AN ACT TO INCORPORATE THE

BANK.

Whereas the persons hereinafter named have, by their
petition, prayed that an act be passed for the purpose of
establishing a bank in
, and it is expedient to grant
the prayer of the said petition:
Therefore His Majesty, by and with the advice and consent of the Senate and House of Commons of Canada,
enacts as follows:
1. The persons hereinafter named, together with such
others as become shareholders in the corporation by this
act created, are hereby constituted a corporation by the
name of
., hereinafter called the bank.
2. The capital stock of the bank shall be
dollars.
3. The chief office of the bank shall be at ...„„„._..
4
shall be the provisional directors of the
bank.
5. This act shall, subject to the provisions of section sixteen of the bank act, remain in force until the first day of
July, in the year one thousand nine hundred and eleven.
(53 V., c. 31, sch. B.; 63-64 V.f c. 26, s. 45.)

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SCHEDULE

Commission
C.

In consideration of an advance of
dollars made
by t h e
Bank to A. B., for which the said b a n k holds
t h e following bills or notes: (describe the bills or notes, if
any), [ory in consideration of t h e discounting of t h e following bills or notes b y the
Bank for A. B . : (describe
the bills or notes),] t h e goods, wares, and merchandise mentioned below are hereby assigned to the said b a n k as
security for the payment on or before the
day of
of the said advance, together with interest thereon
a t t h e rate of.... per centum per annum from t h e
day
of
(ory of the said bills or notes, or renewals thereof,
or substitutions therefor, and interest thereon, or as the
case may be).
This security is given under t h e provisions of section
eighty-eight of the bank act, and is subject to t h e provisions of the said act.
The said goods, wares and merchandise, are now owned
by
, and are now in t h e possession of
, and are free from any mortgage, lien, or charge
thereon (or as the case may be), and are in (place or places
where the goods are), and are the following (description of
goods assigned).
Dated, etc.
(Ar. B.—The bills or notes and the goods, etc., may be set
out in schedules annexed.)
(63-64 V., c. 26, s. 46 and sch. C.)

SCHEDULE

I).

Return of the liabilities and assets of the
of
,A.D.
Capital authorized
Capital subscribed
Capital paid up
— _
Amount of rest or reserve fund
.
_
R a t e per cent of last dividend declared
280

bank on the

day
$

_

~_
—

. _. _
per cent.




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Ban k ing

in

Canada

LIABILITIES.

i. Notes in circulation
$
2. Balance due to Dominion government, after deducting advances
for credits, pay-lists, etc
3. Balances due to provincial governments
—
4. Deposits by the public, payable on demand, in Canada
5. Deposits by the public, payable after notice or on a fixed day,
in Canada_ _ _ _,
6. Deposits elsewhere than in Canada
7. Loans from other banks in Canada, secured, including bills rediscounted
8. Deposits made by and balances due to other banks in C a n a d a .
9. Balances due to agencies of the bank, or to other banks or
agencies, in the United Kingdom
10. Balances due to agencies of the bank, or to other banks or
agencies, elsewhere than in Canada and the United Kingdom _
11. Liabilities not included under foregoing heads

$
ASSETS.

i. Specie
_.$
2. Dominion notes
3. Deposits with Dominion government for security of note circulation _ _.
4. Notes of and cheques on other banks
.
5. Loans to other banks in Canada, secured, including bills rediscounted
_ _.
6. Deposits made with and balances due from other banks in Canada
7. Balances due from agencies of the bank, or from other banks or
agencies, in the United Kingdom
8. Balances due from agencies of the bank, or from other banks or
agencies, elsewhere than in Canada and the United Kingdom,
9. Dominion government and provincial government securities. __
10. Canadian municipal securities, and British, or foreign, or colonial public securities, other than Canadian
11. Railway and other bonds, debentures, and stocks
12. Call and short loans on stocks and bonds in Canada
13. Call and short loans elsewhere than in Canada
14. Current loans in Canada_ _.
15. Current loans elsewhere than in Canada
16. Loans to the government of Canada
17. Loans to provincial governments
18. Overdue d e b t s . ,
._.
19. Real estate other than bank premises

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20. Mortgages on real estate sold by the bank
21. Bank premises.
22. Other assets not included under the foregoing heads

Commission
„
.

$

Aggregate amount of loans to directors, and firms of
which they are partners, $
Average amount of specie held during the month, $..„„
Average amount of Dominion notes held during the
month, $
Greatest amount of notes in circulation at any time during the month, $
I declare that the above return has been prepared under
my directions and is correct according to the books of the
bank.
E. F., Chief Accountant,
We declare that the foregoing return is made up from
the books of the bank, and that to the best of our knowledge and belief it is correct, and shows truly and clearly the
financial position of the bank; and we further declare that
the bank has never, at any time during the period to which
the said return relates, held less than forty per centum of
its cash reserves in Dominion notes.
(Place)

this

day of
A. B., President.
C D . , General Manager.
(63-64 V., c. 26, s. 47 and sch. D.)

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APPENDIX

III.

AMENDING LEGISLATION OF 1908.
An act to amend the bank act.
(7-8 Edw. VII S chap, 7.)

[Assented to 20th July, 1908.}
His Majesty, by and with the advice and consent of the
Senate and House of Commons of Canada, enacts as follows:
1. Section 61 of the bank act, chapter 29 of the Revised
Statutes, 1906, is repealed, and the following is substituted
therefor:
" 6 1 . The bank may issue and re-issue its notes payable
to bearer on demand and intended for circulation: Provided, That (a) the bank shall not, during any period of
suspension of payment of its liabilities, issue or re-issue
any of its notes; and (6), if, after any such suspension, the
bank resumes business without the consent in writing of
the curator, hereinafter provided for, it shall not issue or
re-issue any of its notes until authorized by the treasury
board so to do.
" 2 . No such note shall be for a sum less than five dollars
or for any sum which is not a multiple of five dollars.
" 3 . The total amount of such notes in circulation at any
time shall not exceed the amount of the unimpaired paidup capital of the bank: Provided, That during the usual
season of moving the crops—that is to sa)^, from and including the first day of October in any year to and including
the thirty-first day of January next ensuing—in addition to
the said amount of notes hereinbefore authorized to be
issued for circulation, the bank may issue its notes, to an
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a m o u n t not exceeding fifteen per centum of t h e combined
unimpaired paid-up capital and reserve or rest fund of the
b a n k as stated in the statutory monthly return m a d e by
the bank to t h e minister for t h e m o n t h immediately preceding t h a t in which the additional amount is issued.
" 4. Whenever, under the authority of the proviso t o t h e
next preceding subsection of this section, t h e issue of an
additional a m o u n t of notes of t h e bank has been made, t h e
general manager, or other chief executive officer of the
bank for the time being, shall forlliwith give notice thereof
by registered letter addressed to t h e minister and to the
president of t h e Canadian Bankers' Association.
" 5 . While its notes in circulation are in excess of the
a m o u n t of its unimpaired paid-up capital, the b a n k shall
p a y interest t o t h e minister at such rate, not exceeding
five per centum per annum, as is fixed b y t h e governor in
council, on the a m o u n t of its notes in circulation in excess
from day to d a y ; and t h e interest so paid shall form p a r t
of the consolidated revenue fund of Canada.
il
6. A return shall be made and sent by the bank to the
minister showing the amount of its notes in circulation for
each juridical day during any m o n t h in which any amount
of notes in excess as aforesaid has been issued or is outstanding.
" 7 . Such return shall be m a d e u p and sent within the
first fifteen days of the m o n t h next after t h a t in which any
such amount in excess has been issued or is outstanding,
and shall be accompanied by declarations in the form prescribed in Schedule D t o this act, and shall be signed by the
persons required to sign the monthly returns made under
section 112 of this act.
4i
8. The provisions of section 153 of this act shall apply
to t h e return mentioned in the next preceding subsection.
" 9 . Notwithstanding anything in this section hereinbefore contained, the total amount of such notes of the Bank
of British North America in circulation at any time shall
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not exceed seventy-five per centum of the unimpaired
paid-up capital of the bank: Provided, That—
" (a) The bank may issue its notes in excess of the said
seventy-five per centum upon depositing with the minister, in respect of the excess, in cash or bonds of the Dominion of Canada, an amount equal to the excess; and the cash
or bonds so deposited shall, in the event of the suspension
of the bank, be available by the minister for the redemption of the notes issued in excess as aforesaid; and
" (b) The total amount of such notes of the bank in circulation at any time shall not, except as in paragraph (c)
of this subsection authorized, exceed its unimpaired paidup capital;
" (c) The bank may, during the said season of moving of
crops, in addition to the circulation of its notes hereinbefore in this subsection authorized, issue its notes to an
amount not exceeding ten per centum of the combined unimpaired paid-up capital and reserve or rest fund of the
bank as stated in the statutory return made by the bank
for the month immediately preceding that in which the
said additional amount is issued; and the said additional
amount shall be otherwise subject to all the provisions of
this section respecting circulation in addition to or in excess of the unimpaired paid-up capital permitted to other
banks.
" 10. All notes issued or re-issued by any bank, and now
in circulation, which are for a sum less than five dollars,
or for a sum which is not a multiple of five dollars, shall be
called in and cancelled as soon as practicable/'
2. The following section is hereby inserted immediately
after section 147 of the said act:
"147a. Every bank which neglects to make and send to
the minister within the first fifteen days of the month next
thereafter a return showing the amount of its notes in circulation for each juridical day during any month in the
usual season of moving the crops—that is to say, from and
S. Doe. 332, 6 1 - 2

19

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Commission

including the first day of October in any year to and including the thirty-first day of January next ensuing—in
which any amount of its notes in excess of the amount of
the unimpaired paid-up capital of the bank has been
issued or is outstanding, and signed in the manner and by
the persons by this act required, shall incur a penalty of
fifty dollars for each and every day, after the expiration of
such time, during which the bank neglects to make and
send in such return/'

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APPENDIX

VII.

BY-LAWS OF THE CANADIAN BANKERS' ASSOCIATION.
[A corporation created by special act of the Parliament of Canada, 63 and 64 Vict., C.
93 (1900).]

The following by-laws are hereby enacted as by-laws of
the Canadian Bankers' Association:
1. The annual general meetings of the association shall
be held on the second Thursday of the month of November
in each year, at such hour and place as may be decided
upon by the executive council of the association from time
to time. Special general meetings of the association may
be called at any time by the said executive council, and
shall be called by the president or secretary-treasurer on
the written requisition of at least 5 members of the association.
The requisition (if any) for and the notice calling any
special general meeting shall specify therein the general
nature of the business to be considered or transacted thereat. Special general meetings shall be held at such time,
hour, and place as shall be mentioned in the notice calling
the same. Thirty days' notice shall be given of every general meeting of the association, whether annual or special.
At any annual or special general meeting of the association
7 persons, duly representing members of the association,
shall form a quorum.
At any annual general meeting of the association any
business may be transacted thereat.
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Co rn m i s s t o n

At any special general meeting of the association only
such business shall be transacted as is mentioned in the
notice calling such special general meeting.
2. At every annual general meeting the members of the
association, through their representatives or proxies, shall
elect from among the chief executive officers (as defined
by charter of incorporation) of members of the association,
a president, 4 vice-presidents, and 14 councilors, all of whom
shall hold office until the next annual general meeting, or
until their successors are appointed, and may also elect
honorary presidents of the association, not exceeding 3 in
number, who shall also hold office until the next annual
general meeting after their election.
3. The executive council of the association shall consist
of the president and vice-presidents, and the said 14 councilors aforesaid, and 5 shall form a quorum for the transaction of business.
The honorary presidents shall also have seats at the executive council, but shall have no vote thereat.
4. At all meetings of the association each member shall
have one vote upon each matter submitted for vote. The
chairman shall, in addition to any vote he may have as
chief executive officer or proxy, have a casting vote in case
of a tie.
Each associate shall also have one vote on all subjects
except the following, on which members only shall be permitted to vote: 1, election of officers; 2, action relating
to proposed legislation; 3, by-laws; 4, adding to or
amending the charter; 5, all other subjects on which general action by the banks is contemplated.
5. The executive council may meet together for the
dispatch of business, adjourn and otherwise regulate its
meetings as it by resolution or otherwise may determine
from time to time,
The secretary-treasurer shall at any time at the request
of the president or any vice-president or any other member
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of the executive council convene a meeting of the council:
Provided, however, That no business shall be transacted at
a meeting called at the request of a member unless the
notice calling the meeting specifies in some general terms
that such business will be transacted thereat, but this provision shall not apply to any meeting called at the request
of the president or any vice-president.
On all questions arising at any meeting of the executive
council each member shall have one vote in addition to
any vote he may have as proxy, and the chairman shall
have in addition a casting vote.
6. At all meetings of the association and of the executive council the president, when present, shall be chairman, and in his absence one of the vice-presidents chosen
by the members of the council then present; and in the
absence of the president and vice-presidents the members of the council then present may choose some one of
their number to be chairman of such meeting.
7. Any member not represented at a meeting of the
association by one of the officers named in section 8 of
the charter of incorporation may vote by proxy, provided such proxy is held by an associate who is an assistant general manager, or assistant cashier, inspector or
manager of any bank, or any branch thereof.
Any member of the executive council, when not present at any meeting thereof, may be represented thereat
by proxy, provided such proxy is held by such an associate as is before mentioned in this by-law. Proxies shall
be in writing.
8. The executive council may from time to time repeal,
amend, or add to any of the by-laws of the association,
except those relating to dues, to the clearing house, to the
curator and his duties, and to the circulation; but every
such repeal, amendment, or addition shall only have force
until the next annual general meeting of the association,
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C omm is s ion

and if not confirmed thereat shall thereupon cease to have
force.
9. The said executive council shall have power from
time to time to appoint a secretary-treasurer, who shall
be an officer or ex-officer of a bank, and to remove him
from office, and to fix his remuneration and the tenns of
his engagement.
The executive council shall also have power from time
to time to appoint a solicitor or solicitors and to fix their
remuneration for either general or special services, and
also to engage counsel where such services may be needed.
10. Existing subsections of the voluntary association
are hereby continued as, and constituted, subsections of
the association as incorporated. Subsections hereby or
hereinafter constituted may pass by-laws for their guidance, subject always to the provisions of the charter of
incorporation and the by-laws of the association.
The bankers' section of the boards of trade in the cities
of Montreal and Toronto, respectively, shall be empowered
respectively to represent the association in all matters
connected with legislation in the legislatures of Quebec
and Ontario, respectively—it being understood that the
respective sections will, as fully as possible, keep the president and the executive council of the association advised
on all points that may arise in connection with the matters referred to, and will not make representations in the
name of the association contrary to the views of the executive council after such views have been expressed.
11. An editing committee appointed by the association
shall supervise the publication of the ''Journal of the Canadian Bankers' Association/' and the executive council
shall appoint such other officers as it may deem necessary;
and shall also make such provisions and arrangements
from time to time as it deems proper for lectures, discussions, competitive papers, and examinations.
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12. The dues or subscriptions payable to the association by the members thereof shall be as follows:
For banks with a paid-up capital stock of
For banks with a paid-up capital stock
$2,000,000
For banks with a paid-up capital stock
$3,000,000
For banks with a paid-up capital stock of

under $1,000,000
$100
of $1,000,000 and under
200
of $2,000,000 and under
300
$3,000,000 and over
400

The dues or subscriptions payable to the association by
the associates thereof shall be $1 annually. Members
and associates' subscriptions shall be payable on or before the 1st February and 1st July, respectively, in each
year.
CIRCULATION.

13. (a) A monthly return shall be made to the president of the Canadian Bankers' Association by all banks
doing business in Canada, whether members of the Canadian Bankers' Association or not, in the form hereinafter
set forth; said return shall be made up and sent in within
the first fifteen days of each month, and shall exhibit the
condition of the bank's note circulation on the last juridical
day of the month next preceding; and every such monthly
return shall be signed by the chief accountant or acting
chief accountant and by the president or vice-president, or
by any director of the bank, and by the general manager,
cashier, or other chief executive officer of the bank at its
chief place of business. Every such monthly return which
shows therein notes destroyed during such month shall be
accompanied by a certificate or certificates in the form
hereinafter set forth, covering all the notes mentioned as
destroyed in such return, signed by at least three of the
directors of the bank, and by the chief executive officer or
some officer of the bank acting for him, stating that the
notes mentioned in such certificate or certificates have
been destroyed in the presence of and under the supervision of the persons respectively signing such certificate
or certificates, respectively.
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Commission

FORM OF MONTHLY R E T U R N OF CIRCULATION ABOVE MENTIONED.

CIRCULATION STATEMENT OF THE (here state name of bank) for the month
of
, 190--.
Credit balance of bank-note accounts on last day of preceding
month (inclusive of unsigned notes)
$
Add notes received from printers during month, viz:
From
$
From
$

Less notes destroyed during month (as per certificate herewith)
Balance of bank-note accounts on last day of month
Less notes on hand, viz:
Signed
$
Unsigned
$

Notes in circulation on last day of month

Chief

Accountant.

We declare that the foregoing return, to the best of our knowledge and
belief, is correct, and shows truly and clearly the state and position of the
note circulation of said bank during and on the last day of the period
covered by such return.
this
day of
, 19-_
President.
General Manager,

FORM OF CERTIFICATE OF DESTRUCTION OF N O T E S ABOVE

MENTIONED.

Certificate of destruction of notes of the (here mention name of bank) accompanying monthly circulation statement for month of
A. D.
190.. _
We, the undersigned, hereby certify that we have examined bank notes
of this bank amounting to $
consisting of the following, viz: (here
set out the denominations) and have burned and destroyed the same, and
t h a t the said notes so burned and destroyed by us are not included in any
other certificate of destruction of notes signed by us or any of us, or to the
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best of our knowledge and belief by any other person, to accompany the
present or any monthly circulation statement made or to be made to the
president of the Canadian Bankers' Association,
this
day of
19. _

Directors o) Said

Bank.

General Manager.

(b) For all purposes of this by-law, the chief place of
business of the Bank of British North America shall be the
chief office of the said bank at the city of Montreal, in the
Province of Quebec.
And in the case of the said Bank of British North
America the said monthly circulation return shall be
signed by the general manager's clerk, or acting general
manager's clerk, and by the general manager or the acting
general manager of the said bank; and the said certificate
of destruction of notes shall be signed by the general
manager or acting general manager, the inspector or
assistant inspector, and the local manager of the Montreal
branch, or the acting local manager of the Montreal
branch of the said bank, instead of by the persons respectively hereinbefore directed to sign the said returns
respectively.
(c) Every bank which neglects to make up and send in
as aforesaid any monthly return required by this by-law
within the time by this by-law limited, shall incur a penalty of $50 for each and every day after the expiration of
such time during which the bank neglects so to make up
and send in such return.
(d) The executive council of the association shall have
power, by resolution, at any time, to direct that an inspection shall be made of the circulation accounts of any bank
by an officer or officers to be named in such resolution, and
such inspection shall be made accordingly.
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(e) Some person or persons appointed from time to time
by the executive council of the association shall during the
year 1901 and during every year thereafter make inspection of the circulation accounts of every bank doing business in Canada, whether members of the association or not,
and shall report thereon to the council, and shall thereafter inspect the circulation accounts of each bank during
each year; and upon every such inspection all and every
the officers of the bank whose circulation account is so
inspected shall give and afford to the officer or officers making the inspection all such information and assistance as
he or they may require to enable him or them fully to
inspect said circulation account, and to report to the council upon the same and upon the means adopted for the
destruction of notes.
(/) The amount of all penalties imposed upon a bank for
any violation of this by-law shall be recoverable and enforceable with costs, at the suit of the Canadian Bankers'
Association, and such penalties shall belong to the Canadian
Bankers' Association for the uses of the association.
(g) The president of the Canadian Bankers' Association
shall each month have printed and forwarded to the chief
executive officer of every bank of Canada subject to the
bank act, whether a member of the association or not, a
statement of the circulation returns of all the banks in
Canada for the last preceding month, as received by him.
(h) In this by-law it is declared for greater certainty that
the Canadian Bankers' Association herein mentioned and
referred to is the association incorporated by special act of
Parliament of Canada, 63 and 64 Vict., C. 93.
CURATOR.

14. Whenever any bank suspends payment, a curator, as
mentioned in section 24 of the bank act amendment act,
1900, shall be appointed to supervise the affairs of such
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bank. Such appointment shall be made in writing by the
president of the association or by the person who, during a
vacancy in the office of, or in the absence of, the president,
may be acting as president of the association.
If a curator so appointed dies or resigns another curator
may be appointed in his stead in the manner aforesaid.
The executive council may, by resolution, at any time
remove a curator from office and appoint another person
curator in his stead.
A curator so appointed shall have all the powers and subject to the provisions of by-law No. 15, shall perform all
the duties imposed upon the curator by the said bank act
amendment act; he shall also furnish all such returns and
reports, and give all such information touching the affairs
of the suspended bank as the president of the association
or the executive council may require of him from time to
time.
The remuneration of the curator for his services and his
expenses and disbursements in connection with the discharge of his duties shall be fixed and determined from
time to time by the executive council.
15. Whenever a bank suspends payment and a curator
is accordingly appointed, the president shall also appoint a
local advisory board consisting of three members, selected
generally as far as possible from among the general managers, assistant general managers, cashiers, inspectors, or
chief accountants, or branch managers of any bank at the
place where the head office of such suspended bank is situated, and the curator shall advise from time to time with
such advisory board, and it shall be his duty, before taking
any important step in connection with his duties as curator,
to obtain the approval of such advisory board thereto.
With the sanction of such advisory board, he may employ
such assistants as he may require for the full performance of
his duties as curator.
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CLEARING HOUSES.

16. The rules and regulations contained in this by-law
are made in pursuance of the powers contained* in the act
to incorporate the Canadian Bankers' Association (63 and
64 Vict., C. 93, 1900), and shall be adopted by and shall
be the rules and regulations governing all clearing houses
now existing and established or that may be hereafter
established.
Rules and regulations respecting clearing houses made in
pursuance of the powers contained in the act to incorporate the Canadian Bankers7 Association.
1. The chartered banks doing business in any city or
town, or such of them as may desire to do so, may form
themselves into a clearing house. Chartered banks thereafter establishing offices in such city or town ma}^ be admitted to the clearing house by a vote of the members.
2. The clearing house is established for the purpose of
facilitating daily exchanges and settlements between banks.
It shall not either directly or indirectly be used as a means
of obtaining payment of any item, charge, or claim disputed or objected to. It is expressly agreed that any
bank receiving exchanges through the clearing house shall
have the same rights to return any item and to refuse to
credit any sum which it would have had were the exchanges
made directly between the banks concerned instead of
through the clearing house; and nothing in these or any
future rules, and nothing done, or omitted to be done
thereunder, and no failure to comply therewith shall deprive a bank of any rights it might have possessed had
such rules not been made, to return any item or refuse to
credit any sum; and payment through the clearing house
of any item, charge, or claim shall not deprive a bank of
any right to recover back the amount so paid.
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3. The annual meeting of the members shall be held on
such day in each year and at such time and place as the
members may fix by by-law. Special meetings may be
called by the chairman or vice-chairman whenever it may
be deemed necessary, and the chairman shall call a special
meeting whenever requested to do so in writing by three
or more members
4. At any meeting each member may be represented by
one or more of its officers, but each bank shall have one
vote only.
5. At every annual meeting there shall be elected by
ballot a board of management, who shall hold office until
the next annual meeting, and thereafter until their successors are appointed. They shall have the general oversight and management of the clearing house. They shall
also deal with the expenses of the clearing house and the
assessments made therefor. In the absence of any member of the board of management he may be represented
by another officer of the bank of which he is an officer.
6. The board of management shall, at their first meeting after their appointment, elect, out of their own number,
a chairman, a vice-chairman, and a secretary-treasurer,
who shall perform the duties customarily appertaining to
these offices.
The officers so selected shall be, respectively, the chairman, vice-chairman, and secretary-treasurer of the clearing
house.
Should the bank of which the chairman is an officer be
interested in any matter his powers and duties shall, with
respect to such matter, be exercised by the vice-chairman,
who shall also exercise the chairman's duties and powers
in his absence.
7. Meetings of the board may be held at such times as
the members of the same may determine. A special meeting shall be called by the secretary-treasurer on the written
requisition of any member of the clearing house for the
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consideration of any matter submitted by it, of which
meeting twenty-four hours' notice shall be given, but if
such meeting is for action under rules 15 or 16 it shall be
called immediately.
8. The expenses of the clearing house shall be met by
an equal assessment upon the members, to be made by the
board of management.
9. Any bank may withdraw from the clearing house by
giving notice, in writing, to the chairman or secretarytreasurer between the hours of 1 and 3 o'clock p. m. and
paying its due proportion of expenses and obligations then
due. Said retirement to take effect from the close of business of the day on which such notice is given. The other
banks shall be promptly notified of such withdrawal.
10. The board of management shall arrange with a bank
to act as clearing bank for the receipt and disbursement
of balances due by and to the various banks, but such
bank shall be responsible only for the moneys and funds
actually received by it from the debtor banks, and for the
distribution of the same amongst the creditor banks, on
the presentation of the clearing-house certificates properly
discharged. The clearing bank shall give receipts for balances received from the debtor banks. The board of
management shall also arrange for an officer to act as
manager of the clearing house from time to time, but not
necessarily the same officer each day.
11. The hours for making the exchanges at the clearing
house, for payment of the debit balances to the clearing
bank, and for payment out of the balances due the creditor banks, shall be fixed by by-law under clause 17. On
completion of the exchanges, the balances due to or by
each bank shall be settled and declared by the clearinghouse manager, and if the clearing statements are readjusted under the provisions of these rules, the balances
must then be similarly declared settled, and the balances
due by debtor banks must be paid into the clearing bank
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at or during the hours fixed by by-law as aforesaid, provided that no credit balance, or portion thereof, shall be
paid until all debit balances have been received by the
clearing bank. At clearing houses where balances are
payable in money they shall be paid in legal tender notes
of large denominations.
At clearing houses where balances are payable by draft,
should any settlement draft given to the clearing bank
not be paid on presentation, the clearing bank shall at
once notify, in writing, all the other banks of such default;
and the amount of the unpaid drafts shall be repaid to
the clearing bank by the banks whose clearances were
against the defaulting bank on the day the unpaid draft
was drawn, in proportion to such balances. The clearing
bank shall collect the unpaid draft, and pay the same to
the other banks in the above proportion. It is understood that the clearing bank is to be the agent of the associated banks, and to be liable only for moneys actually
received by it.
Should any bank make default in paying to the clearing
bank its debit balance, within the time fixed by this rule,
such debit balance and interest thereon shall then be paid
by the bank so in default to the chairman of the clearing
house for the time being, and such chairman and his successor in office from time to time shall be a creditor of
and entitled to recover the said debit balance, and interest
thereon, from the defaulting bank. Such balances, when
received by the said chairman or his successor in office,
shall be paid by him to the clearing bank for the benefit
of the banks entitled thereto.
12. In order that the clearing statements may not be
unnecessarily interfered with, it is agreed that a bank objecting to any item delivered to it through the clearing
house, or to any charge against it in the exchanges of the
day, shall, before notifying the clearing-house manager of
the objection, apply to the bank interested for payment
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C om m iss i on

of t h e amount of the item or charge objected to, and
such a m o u n t shall thereupon be immediately paid to t h e
objecting bank. Should such p a y m e n t not be made t h e
objecting b a n k m a y notify the clearing-house manager of
such objection and nonpayment, and he shall thereupon
deduct t h e said amount from t h e settling sheets of t h e
banks concerned, and readjust t h e clearing statements
and declare t h e correct balances in conformity with t h e
changes so made, provided t h a t such notice shall be given
at least half an hour before t h e earliest hour fixed by bylaw, as provided in clause 11, for p a y m e n t of t h e balances
due to the creditor banks. B u t notwithstanding t h a t the
objecting bank m a y not have so notified the clearing-house
manager, it shall be the d u t y under these rules of t h e
bank interested t o m a k e such p a y m e n t on demand therefor being made at any time up to 3 o'clock: Provided, however, T h a t if t h e objection is based on t h e absence from
the deposit of any parcel or of any check or other item
entered on the deposit slip, notice of such absence shall
have been given to t h e bank interested before 12 o'clock
noon, the whole, however, subject to t h e provisions of
rule No. 2.
13. All bank notes, checks, drafts, bills, and other items
(hereafter referred t o as " i t e m s " ) delivered through t h e
clearing house t o a b a n k in the exchanges of the day,
shall be received b y such b a n k as a trustee only, and not
as its own property, t o be held upon t h e following trust,
namely, upon p a y m e n t by such b a n k at the proper hour
t o t h e clearing bank of the balance (if any) against it, to
retain such items freed from said t r u s t ; and in default of
p a y m e n t of such balance, to return i m m e d i a t e ^ and before 12.30 p . m., the said items unmarked and u n m u t i lated through the clearing house t o t h e respective banks,
and t h e fact t h a t any item can not be so returned shall
not relieve the bank from the obligation to return the re-

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Canada

maining items, including the amount of the bank's own
notes so delivered in trust.
Upon such default and return of said items each of the
other banks shall immediately return all items which may
have been received from the bank so in default, or pay
the amount thereof to the defaulting bank through the
clearing house. The items returned by the bank in default
shall remain the property of the respective banks from
which they were received, and the clearing-house manager
shall adjust the settlement of balances anew.
A bank receiving through the clearing house such items
as aforesaid shall be responsible for the proper carrying
out of the trust upon which the same are received as aforesaid, and shall make good to the other banks, respectively,
all loss and damage which may be suffered by the default
in carrying out such trust.
14. In the event of any bank receiving exchanges
through the clearing house making default in payment of
its debit balance (if any) then, in lieu of its returning the
items received by it as provided by rule 13, the board of
management may require the banks to which the defaulting bank, or an account being taken of the exchanges of
the day between it and the other banks, would be a debtor,
in proportion to the amounts which, on such accounting,
would be respectively due to them, to furnish the chairman of the clearing house, for the time being, with the
amount of the balance due by the defaulting bank, and
such amount shall be furnished accordingly, and shall be
paid by the chairman to the clearing bank, which shall
then pay over to the creditor banks the balances due to
them in accordance with rule 11. The said funds for
the chairman shall be furnished by being deposited in the
clearing bank for the purpose aforesaid. The defaulting
bank shall repay to the chairman for the time being, or
to his successor in office, the amount of such debit balance
S. Doc. 3,32, 61-2

20

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National

Monetary

Commission

and interest thereon, and the said chairman, and his successor in office, shall be entitled to recover the same from
the defaulting bank. Any moneys so recovered shall be
held in trust for and deposited in the clearing bank for
the benefit of the banks entitled thereto.
15. If a bank neglects or refuses to pay its debit balance to the clearing bank, and if such default be made not
because of inability to pay, the board of management may
direct that the exchanges for the day between the defaulting bank and each of the other banks be eliminated from
the clearing-house statements and that the settlements
upon such exchanges be made directly between the banks
interested, and not through the clearing house. Upon
such direction being given, the clearing-house manager
shall comply therewith and adjust the settlement of balances anew, and the settlements of the exchanges so
eliminated shall thereupon be made directly between the
banks interested.
16. Should any case arise to which, in the opinion of the
board of management, the foregoing rules are inapplicable,
or in which their operation would be inequitable, the board
shall have power at any time to suspend the clearings and
settlements of the day; but immediately upon such suspension the board shall call a meeting of the members of
the clearing house to take such measures as may be
necessary.
17. Every clearing house now existing or that may
hereafter be established may enact by-laws, rules, and
regulations for the government of its members not inconsistent with these rules, and may fix therein, among other
things:
1. The name of the clearing house.
2. The number of members of the board of management and the quorum thereof.
3. The date, time, and place for the annual meeting.
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Canada

4. The mode of providing for the expenses of the clearing house.
5. The hours for making exchanges and for payment of
the balances to or by the clearing bank.
6. The mode or medium in which balances are to be
paid.
Any by-law, rule, or regulation passed or adopted under
this clause may be amended at any meeting of the members, provided that not less than two weeks' notice of
such meeting and of the proposed amendments has been
given.
NOTICES.

17. Any notice of meeting, or any other notice authorized or required to be given to any member of the association, shall be deemed sufficiently given if sent through
the post-office in a prepaid letter or by hand to the head
office of any such member, addressed to such member or
to the general manager or cashier of such member, and
in the case of the Bank of British North America, through
its chief office in the city of Montreal, addressed to it or
to its general manager; and any notice sent by post shall
be deemed to have been given on the day following that
on which the same was mailed, and in proving the giving
of such notice it shall be sufficient to prove that the letter
was properly prepaid, addressed, and mailed.
Any notice authorized or required to be given to any
member of the executive council may be sent by the
secretary-treasurer by hand, or through the post-office,
or by telegraph, or in any other manner which the said
council may prescribe.
Any notice authorized or required to be given to any
associate as such shall be sufficiently given if given by advertisement once in a newspaper in the cities of Montreal
and Toronto,
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18. In the foregoing by-laws, unless there be something
in the subject or context inconsistent therewith, the
words:
"The association'' shall mean "The Canadian Bankers'
Association/' incorporated by special act of the Parliament of Canada (63 and 64 Vict., C. 93).
"The executive council/' or "The council/' shall mean
"The executive council of the Canadian Bankers' Association/'

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LPPENDIX V I I I .

E CLEARING HOUSES OF DIVERS CANADIAN CITIES, 1890-1908.

Page 309

[$000.00 omitted.]
897.
»oi, 185
,6i, 756
33,35o

1898.

1899.

$794,109
504,569
40,298
70,600

$73L 264
439,489

63,736

35,637
62,523

84,435
30,468

30,349

107,786
.12,628
33.506

90, 754

42,179

1900.

$734,941
513.697
40,262
77,594
106,956
37,907
32,038
46,161

1901.

$889,486
599.385
42,554
87,148
134,199
40,941
30,607
46,738

1902.

1903.

I904.

1905.

1906.

1907.

I908.

$1,089,976
809,078

$1,113,984
808,908

$1,324,313

$1,533,597
1,219,125

$1,555,712
1,220,905

$1,467,316
I,l66,902

X
2

45.970
88,532
188,370

53,7io

$I,06S,067
842,097
59,003

72,329
90,222
6l4,III

3
4

42,465
28,680
54,223
97,480

!

70,707

93.349
246,108
49.013
3C,817
66,100

90,115
294,60I

104,549
80,432

105,749
74,502

51,875
33,070
74,029

1,047,490
68,385
89,251
369,868
52,836
36, 890
88,460
121,215
86,389

78,480

88,104

91,837
504.585
60,042

93.587
599.667
66,150

45.615
132,606

191.734

135.327
91,618

66,435
55.356
183,083
154.367
i n , 812

55.33o
152,969
107.543

r
d „ , ~«„
.

.~

Q ,Q

.- - ~
. -

-. —

-_ o/:_

*L ^

_ ^ -

56,875

5
6

7
8
9
10

1




APPENDIX

IX.

)F BRANCHES OF CANADIAN BANKS ON DECEMBER 31, 1889-1908.
1892.

1893.

1894.

1895.

1896.

1897.

1898.

1899.

1900.

Page 310

1901.

1902.

1903.

1904.

1905.

1906.

1907.

1908.

254

263

272

275

272

269

285

321

336

349

420

491

94

102

103

115

112

114

128

113

123

137

147

30

29

31

3i

31

31

3i

62

62

64

101

6

6

7

11

10

11

14

10

12

12

13

7
16

69
8

70

6

58
6

35
89
9

41

53

34
74
9

183
47
99

46

52

24

19

20

22

29

127

78
166

163

162

8

8

8

8

9

11

150

209

231

252

3

3

55
95
87
3

66

24

5o
87
78
3

3

3

3

3

75o

904

1,049

1. 145

1,454

1,745

1,886

1,927

2
479

502

5*3

53o

533

24

555

2

34
85
10
48
So
19
3

622

663

708

8
36
46
16

41
50
19

52

79

30

54

549
196

49
101

701

845

929

918

246

270

297

311

50

54

55

58

<

100

106

104

104

4

14

16

90

103

5
6

2

8

10