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2d Session

o n g ress



f D

o cum ent





Interviews on the Banking and
Currency Systems of


A Subcommittee of the National Monetary

Washington : Government Printing Office :



N elso n W . A l d r ic h , Rhode Island, Chairman.

d w ard

B . V r b b l a n d , N ew Y o r k , V ice-C h a irm a n .

J u l iu s C. B u r r o w s , Michigan.

J ohn W. W e e k s , M assachusetts.

E u g e n b H a l e , Maine.

R o b e r t W . B o n yn g e , Colorado.

P h ila n d er C. K n o x , P e n n sy lv a n ia .

S y l v e s t e r C. S m ith , C alifo rn ia .

T h eodore E . B u r to n , Ohio.

L e m u e l P . P a d g e t t , T en n essee.

H e n r y M. T e l l e r , C olorado.
H ernando D. Mo n e y , M ississippi.

G eo r g e F . B u r g e s s , T e x a s .
A r so n s P . P u jo , L o u isia n a.

J o seph W . B a i l e y , T exas.

A r th u r B . S h e lto n , Secretary.

A. P ia t t A n d r ew , Special Assistant to Commission.

B y a subcommittee of the National Monetary Commission:
H O N . E D W A R D B . V R E E L A N D , Chairman.
H O N . JO H N W . W E E K S .

HON. R O B E R T W. B O N Y N G E.

The committee was accompanied by M r. Clifford Hubbeli,
cashier of the M arine National B a c k , Buffalo, N . Y .



P age.

Interview with Henry C. McLeod, general manager of the Bank of
Nova Scotia..................................................................................................
Interview with George P. Scliolfield, general manager of the Standard
Bank of Canada..........................................................................................
Interview with George H. Smith, secretary of the Canada Permanent
Mortgage Corporation............................................................ •..................
Interview with Massey Morris, local manager of the Canadian Bank of
Commerce at Toronto................................................................................
Interview with Alexander Laird, general manager of the Canadian
Bank of Commerce...............................
Interview with Daniel R. Wilkie, general manager of the Imperial
Bank of Canada..........................................................................................
Interview with Sir Edward Clouston, general manager of the Bank of
Interview with H. V. Meredith, assistant general manager of the
Bank of Montreal........................................................................................
, Interview with M. J. A. Prendergast, general manager of the Banque
Answer of Canadian Minister of Finance to questions..........................
Statistical tables..........................................................................





Seventy-seventh general statement as at December 3 1 , 1908.
D eposits n o t bearin g in te re s t______ $ 6 ,4 1 8 , 9 0 8 . 81
D ep o sits b earin g in te r e s t___________ 24, 6 6 7 ,9 5 9 . 23
1 3 1 , 230 . 93
In te re st accru ed on d e p o sits----------

S p e c ie _______________________________ $ 2 , 3 9 9 . 6 2 3 . 44
2, 598, 022. 25
D om inion n otes, legal te n d e rs _____
N o tes o f and ch ecks on o th er b a n k s 1 , 8 6 5 , 7 ° 7 - 69
D ue fro m o th er b an k s in C a n a d a ---574-9 4
D ue fro m o th er b an k s in fo reign
x . 9 5 3 . 0 0 6 . IX
c o u n trie s _________________________
S te rlin g e x c h a n g e -------------------------I , 2 1 8 , 3 4 9 -73

D epo sits b y oth er b an k s in C a n a d a D ep o sits b y o th er b an k s in U n ite d
K in g d o m ______________ - _______ - - D ep o sits b y o th er b an k s in fo reig n
c o u n trie s_________
6 9 1,15 5 .8 8
N o tes in c irc u la tio n ________________
D ra fts d raw n b etw een b ran ch es
o u tsta n d in g ______________________

In v e s tm e n ts (p ro vin cial, m u n icip al,
and o th er b o n d s)_________________
C all loan s, secu red b y b on ds, de­
b en tures, a n d s to c k s -------- _
--------C a ll lo an s secu red b y g ra in and
o th er sta p le co m m o d itie s________

6 , 6 9 9 , 9 5 8 .95
6 . 3 9 1 . S i x - 01
3 ’ 6 7 5 ’ 7 2 7 ' 67

D e p o sits w ith D om in io n g o v e rn ­
m en t fo r s e c u rity of n o te circ u la ­
tion _______________________________
L o a n s to p ro vin ce s and m u n icip a li­
3 3 8 , 3 4 1 -13
ties _______________________________
C urren t lo an s secu red b y b o n d s, d e ­
1 .0 9 9 ,5 0 9 .4i
b en tures, an d s to c k s --------- --------C u rre n t lo an s secu red b y g ra in and
1 ,1 8 3 ,7 8 0 .2 5
o th er sta p le c o m m o d itie s________
159 . 29 5 - 6 3
O ve rd ra fts, s e c u re d ...... ..........................
O ve rd ra fts, a u th o rize d b u t n o t sp e­
8 8 , 7 3 8 .3 7
----------------------------c ia lly s e c u re d
N o tes a n d b ills d isco u n te d and c u r­
1 3 . 436, 1 2 1 . is
r e n t __________ - -------- -----------------7 X4 - 35
N o tes an d b ills o v e rd u e ---------------A d v a n c e s to th e so v e reig n b a n k of
C a n ad a in co n n ectio n w ith its
6 13 ,8 6 0 .18
liq u id a tio n _______________________
8 5 0 ,4 0 9 .4 8
B a n k p re m ise s ____________ _________
S ta tio n e ry d e p a rtm e n t-----------------—---------------


159. 48

$ 2 6 , 8 0 2 ,4 8 1 . 7 9

2 ,8 8 8 ,9 7 4 .8 9

C a p ita l paid u p _____________________
R e se rv e fu n d ____________________
R e se rv e fu n d fo r loss in liq u id a tin g
in so lv en t b a n k s __________________
P ro fit and loss, b ala n ce ca rried to
1 909.....................................................
R e b a te of in te rest a t 6 per c e n t on
tim e lo a n s ______________________
D ivid en d w a rra n ts o u tsta n d in g -----D ivid en d N o . 15 6 , p a y a b le Ja n u a r y
2, 1 9 0 9 . . . . . . . . . . . . . . . . . . . . . . .

3 ,0 0 0 ,0 0 0 .0 0
5 ,4 0 0 ,0 0 0 .0 0

$ 3 1,2 18 ,0 9 8 .9 7

2 4 2 ,3 3 9 . 96
2 1 ,8 6 4 . 5 7
9 5 5 . 36 o . 41
9 2 3 ,4 7 6 .2 6
3 , 8 1 2 , 4 5 1 - 15

10 0 ,0 0 0 .0 0
5 5 . 74I -78
114 ,5 6 0 .7 2
4 3 5 .0 0
9 0 ,0 0 0 .0 0

8, 760,

737 - 50

1 7 ,9 4 4 ,16 6 .2 4

4 4 ,7 4 6 ,6 4 8 .0 3
4 4 ,7 4 6 ,6 4 8 .0 3
N o t e .— A co n tin ge n t lia b ility o f $20 0 ,0 0 0 , in co n ju n ctio n w ith s ev era l o th er b an k s in con n ection w ith th e liq u id a tio n o f th e O ntario
B a n k , is n ot fu lly e x p re sse d in th e a b o v e s ta te m e n t.
__. , ,
T h e la te s t re tu rn fro m M an d e ville. J a m a ic a , is d a te d D e cem b e r 23. 190 8, an d th e figures th ereo f a re in co rp o ra te d herein.
Federal Reserve Bank of St. Louis



■ a

Interview with Henry C. McLeod, general manager of the Bank of Nova
B y Mr. V r e ELANd :
What is your position?
I am general manager of the Bank of Nova Scotia.
Are you located here?
I am located here.
Where is the home office of your bank?
The home office is at Halifax; the executive is

Q. You would regard this as a better point from which
to view the whole field than the home office, Halifax?
A. It is more central.
Q. Is it the practice of any of the other banks to have
managers resident near the center of business?
A. No; it is not a general practice. We have interests
in the West, interests in the United States, and it was
found that Halifax was a point from which it was rather
difficult to communicate promptly with some of the
larger branches.
B y Mr. W e e k s :
Q. Being the Bank of Nova Scotia, you would be bound
to have your main office in Nova Scotia?
A. There is a sentiment of that kind.
B y Mr. H u b b e e l :
Q. You are not legally bound to do so?
A. No; we are not obliged to. We could apply to Par­
liament and have the head office transferred to Toronto,
if it were so desired.


N at ion a l M on et a r y C o mmi s s i o n
B y Mr. V reeeand :
Q. I was going to ask you a few questions with regard
to the general banking laws; have you had occasion to
give them any special attention, Mr. McLeod?
A. Not much more than the ordinary attention of a
banker operating under them.
Q. The first general act, Mr. McLeod, relating to the
banks of Canada seems to have passed in 1870 and 1871.
A. That is the first general act governing the banks of
the whole country, with the exception of a temporary
extension of the powers already granted by provincial
charters; the extending act was passed in 1868.
Q. Each bank, as I understand, was chartered sepa­
rately by the provinces before that.
A. Yes; by the provinces.
Q. When were the general amendments made to the
act of 1871 ?
A. There were amendments made in 1873 and in 1875.
In 1880 the act was revised and extended. In 1883 there
was a small amendment, and in 1890 the act was revised
and extended. The act was amended and extended in
Q. I notice that there seems to be some difference in
the language of the law as applied to the Bank of British
North America; do you know the cause for that? The
amount of its circulation seems to be specified sepa­
rately, and the provisions of the law that apply to it are
A. The Bank of British North America has its head
office in England, and there is no double liability; that


B a n k i n g and Cu r r e n c y


bank is therefore allowed to issue a less amount of circu­
Q. Three-fourths of capital?
A. Three-fourths.
Q. Was that bank chartered in England?
A. It is chartered in England, and is mentioned in the
Canadian bank act as one of the banks to which the act
Q. The law—that is, your general Dominion law—
makes detailed provision for organizing banks, as regards
public notice, the opening of stock books, and all such
items of management; what then is the final step? Does
the right to authorize the actual opening of a bank lie
with the Dominion government or finance minister or
your council?
A. That is dealt with by the treasury board. The
treasury board gives the final decision.
Q. Of which the finance minister is chairman?
A. Yes.
Q. It does not have to go to the Canadian parliament
for ratification?
A. The charter is given by the Canadian government
first and the treasury board passes upon the qualifications.
The treasury board has to see that the requirements in
regard to paid-up capital are carried out. But a new
bank desiring to open its doors or to get a charter has first
to make an application to the Dominion parliament.
Q. I had an idea that you had what we call free bank­
ing here now; in other words, that no special legislative
act was necessary, but that any bank might open after
complying with provisions of a general law.

N at ion al M on et a r y C o mm i s s i o n
A. No.
Q. They still have first to get a charter from the par­
A. They have first to apply to parliament for a charter,
and then the question arises whether they are entitled to
get a charter.
Q. How would that be determined? Suppose they
complied with the requirements as to capital and all the
other features of the law, would it be granted as a matter
of course?
A. It would be granted as a matter of course.
Q. I notice that the number of your banks is much
smaller than twenty-five years ago.
A. Yes.
Q. The number of chartered banks is 31 now?
A. I think about 29 at present.
Q. Here is the last statement of banks acting under
charter for the month of Ju ly, 1909. It seems to figure
up 3 1, and the Sovereign is included in that.
A. Y es; that is a failed bank, and I think there are
one or two others.
Q. The Sovereign is the only one. I do not think the
Ontario is included.
A. There are two there, Mr. Vreeland. The St. Hyacinthe and the Sovereign.
Q. What was the other?
A. The St. Hyacinthe; so there are 29 doing business.
Q. Have any applications for charters been refused
within the last ten years that you know of?
A. I can not recall that any applications have been



Ba n k i n g and Cu r r e n c y


Q. How do the present chartered banks look upon it?
Do they look with favor upon new banks, or do they
think it is better to permit the old ones to grow and estab­
lish branches and become strong in that way?
A. They do not look with disfavor on a new bank that
is started under proper auspices. The cause of the de­
cline in number is the amalgamation of banks and the
failure of banks. We have had a good many failures.
B y Mr. W e e k s :
Q. Will you state how many in ten years; do you recall?
A. I can not give you the number for ten years, but I
wrote a short letter on the subject some three years ago
comparing the resulting failures of our system with yours.
B y Mr. V r e ela n d :
Q. It was based upon the number started?
A. Yes. The failures in the United States were 5 per
cent. Taking Canada from the year 1880 up to the date
of my letter the failures were 25 per cent. Up to the
present from the same date the percentage is 30 per cent.
B y Mr. H u b b e e l :
Q. That is the number of head offices, is it not?
A. Number of banks.
Q. You do not include the branches?
A. No; we do not include the branches.
B y Mr. W e e k s :
Q. The casualties among Canadian banks have been,
numerically, five times as great as among the United
States national banks?
A. I wrote the article urging outside inspection of
banks, and of course the letter made the case as strong


N a t i o n a l M o n et a r y C o mm i s s i o n
as possible, but the facts as stated are correct neverthe­
less. Since then we have had three more failures.
B y Mr. B o nynge :
Q. That is, since 1906?
A. Since October, 1906; since the date of my letter.
Q. What banks have failed since that time?
A. The Sovereign, the Banque de St. Hyacinthe, and
Banque St. Jean.
Q. Which was the largest of those three banks?
A. The Sovereign.
Q. What was its original capital?
A. It commenced business in May, 1902, with $1,300,000,
issued at 125.
Q. How much capital had it when it got into trouble?
A. Its capital was $4,000,000, at the highest point,
according to the books and statements.
Q. How much of it paid in?
A. All paid in, and all lost, with a good deal more, in
that short time.
Q. You are familiar with the circumstances of its failure ?
A. Yes.
Q. Would you object to stating?
A. Bad management—corrupt management.
Q. Corrupt management?
A. Yes; false returns. That is true of the Ontario
bank as well.
Q. How long was the Ontario bank in operation?
A. The Ontario bank was started in 1856, and was prob­
ably insolvent for forty years before its failure.


B a n k i n g and Cu r r e n c y Systems
B y Mr. V r EEEANd :
Q. I notice in the record of regulations of banks that
the amount of discounts and loans to directors or firms
in which they are interested is fixed by your by-laws.
The Dominion laws do not cover liabilities and loans?
A. There is no limit.
Q. To either directors or anyone else?
A. No.
Q. So if there are any regulations of that kind they are
in the by-laws of the institution?
A. By-laws are seldom published, so that any limit is
practically a dead letter.
Q. I notice that the law provides that the business of
banks shall be managed by a board of directors. I wish
you to tell us, Mr. McLeod, to what extent the board of
directors actually manages your banks? We have a good
deal of discussion on that point in the States.
A. The directors supervise. They do not initiate busi­
ness, and seldom pass upon it before it is transacted.
The method is, we furnish our directors with the inspection
• reports of the branches as soon as they are made. We
furnish them with a report every year by every manager
on any loan or liability of the bank that amounts to a thou­
sand dollars. That is, we have special reports. These
reports come in from the branches with a report on
each loan by each manager, and they are bound into
volumes and sent, after they are examined by my depart­
ment, to our directors. So that they have full informa­
tion about all loans in the bank. They have this state­
ment on the 31st of March for every year, showing every


N at ion a l M o net a r y C o mm i s s i o n


loan we have, full particulars, statement of the borrowers,
etc. Then, in addition, we have the inspectors’ report;
so that they are as fully informed as they well can be
with regard to loans.
Q. That would hardly be management?
A. It is supervision.
Q. After the event?
A. After the event.
Q. As a matter of fact, about the same as with us, the
directors do not initiate and they do not to any extent
make regulations under which the officers of the bank
shall act?
A. They made regulations.
Q. That is their by-laws?
A. The general management, as a rule, suggests the regu­
lations and they are submitted to the board for approval.
Appointment of officers, and all that, lies with the general
management, subject to confirmation by the board. I
shall be pleased to give you a copy of our book of regu­
lations if it would be of interest to you.
Mr. V reela n d . I shall be very glad to have it.
B y Mr. B onyngE:
Q. The book of regulations for your own bank?
A. The book of regulations for our own bank.
B y Mr. V r eela n d :
Q. There are a few points upon which I wish to get
the practical information of bankers. How many kinds
of banks? You have your commercial banks, and you
have some savings banks separate from your savings
departments and commercial?


B a n k i n g and Cu r r e n c y Systems
A. Very few savings banks.
Q. Those are all government?
A. No; they are not all government. There are a few
trust companies, and a few savings and loan companies,
and there are one or two savings banks.
Q. Then you have trust companies?
A. Yes.
Q. Do you have what you may call mortgage banks
separate from trust companies or loan companies ?
A. Yes, we have mortgage and savings companies.
Q. You have the postal banks?
A. Yes; government banks.
Q. Have you any private banks?
A. Very few.
Q. You have them?
A. Y es; but they are so few in number now as not to
cut any figure.
Q. Your savings banks—there are more than two gov­
ernment savings banks left here?
A. The government savings banks now consist mainly
of the postal savings bank. There are government savings
banks in the lower provinces.
Q. Just the savings banks that are left from the time
when the Province had charge of the banking laws?
A. Yes.
B y Mr. B o n ynge :
Q. Is there any general law for the organization of sav­
ings banks?
A. No; the City and District Savings Bank of Montreal
and the La Caisse d ’Economie are the most important
savings banks we have.
22561°—1 0


N a t i o n a l M o n e t a r y C o mmi s s i o n
B y Mr. V r e ela n d :
Q. When did they get their charters?
A. Before 1850.
Q. Do they have capital stock?
A. Yes.
Q. Who owns the stock—general subscribers ?
A. General stockholders.
Q. Do you know anything about any special limitations
upon that bank which do not apply to the commercial
banks ?
A. Not at the moment.
Q. As to the investment of funds?
A. I can not recall those limitations at present.
Q. Tell us about your trust companies.
A. Our trust companies are very much of the same
order as yours.
Q. They receive?
A. A provincial charter generally.
Q. They have to apply for a special charter?
A. Yes.
Q. They are not permitted to do commercial business?
They do not discount commercial paper?
A. I think there is nothing to forbid that.
Q. You say that you have mortgage banks separate
from your trust banks?
A. Mortgage and loan companies.
Q. Corresponding somewhat to our savings and loan
A. I could not answer that. I could not sav that they
are similar, but we have some mortgage and loan com­


B a n k i n g and Cu r r e n c y


Q. You think 31 is the correct number of chartered
banks ?
A. Twenty-nine in actual active business.
Q. As to the number of other banks—of savings banks,
and trust companies, that is other forms of banks—you
have not the figures?
A. Postal savings banks 1,084 at the close of 1908.
Dominion government savings banks 18 at the end of
March, 1908.
Q. If possible, we should like to have the number of
banks that have failed of each kind.
A. Sixteen chartered banks since 1880.
Q. And the losses to noteholders, if any, and depos­
itors, if any.
A. Practically no loss to noteholders; depositors lost
about $3,000,000.
Q. I suppose that, where the chartered bank association
takes over a bank and liquidates it and sustains the loss,
information is not given freely as to what the loss is?
A. Knowledge of the loss would be available.
Q. The bankers usually say there is no loss at all?
A. When they take over a bank?
Q. Y es; they never undit a loss.
A. I am inclined to take exception to that. We have
had painful demonstrations that losses do occur through
assisting banks even in your country.
Q. They have plenty of losses, but I say the bankers
concerned very seldom admit publicly there are any
losses. I suppose note holders have never had a loss?



N a t i ona l M on et a r y C o mmi s s i o n
A. Yes, they have losses. Not, I, think since 1890.
Prior to that there were losses.

B y Mr. B o n ynge :
In 1890 was there any change in the law?
Y es; the banks became joint guarantors of circula­
That is when the fund was created?
Y es; when the fund was provided for.

B y Mr. V r e ela n d :
Q. What reports are the commercial banks legally
required to make now ?
A. They report once a month.
Q. Is that report published?
A. That report is published by the government and by
the leading financial papers.
Q. Have you a copy of your last report?
A. Not with me. I can give you a copy. You mean
the government report of all the banks?
Q. The annual published report of your bank?
A. Yes; I will furnish you with one. You have the
form of government report before you. That is a monthly
Q. The report of the government?

It is not published?
But it is published in bulk—all of them together?
With particulars.
I mean each bank.

Ba n k i n g and Cu r r e n c y Systems
Q. There is no examination of any kind made by the
government, Mr. McLeod?
A. None whatever.
Q. What examination of these banks is made by the
banks themselves or by the association?
A. No examination is made by the association other than
to verify the figures of circulation. The banks have in­
spectors that inspect the branches, but there is no inde­
pendent examiner to inspect the general management.
The general manager is practically supreme in so far as
the accounts of the bank are concerned. The directors
supervise the general manager, but directors in Canada
are the same as they are in your country.
Q. The directors look at the end of the year?
A. They are not posted in detail.
Q. Is it customary for the by-laws of the bank to
expose any limitation upon the size of loans to any
individual ?
A. No; it is not customary.
Q. All of the savings banks that you have here are
capitalized ?
A. The savings banks?
Q. Yes.
A. The savings banks we have in Canada outside of the
chartered banks, the commercial banks, do not cut any
considerable figure in the business of Canada, and I think
you may almost eliminate them from consideration in
that connection.
Q. And to organize any class of bank application must
be made to parliament for a charter?


N a t i o n a l M o n e t a r y C o mmi s s i o n
A. Yes.
Q. In each specific case?
A. In each specific case.
B y Mr. B o nynge :
Q. All the chartered banks have savings accounts?
A. I think so.
Q. Do they make any difference in the manner in which
they treat the deposits in the savings account and the
commercial deposits?
A. None whatever.
Q. There are no rules or regulations governing the
investment of savings accounts?
A. No; there are not any regulations or restrictions.
B y Mr. W e e k s :
Q. Do you think that is wise?
♦ A. From the experience of Canadian banks with such
accounts I do not see any objections. We find savings
depositors no more dangerous in regard to sudden with­
drawals than ordinary commercial depositors.
By Mr. V r e ela n d :
Q. You mean savings deposits?
A. Savings deposits.
Q. But the general rule is, is it not, to have time notice
for a withdrawal in your savings accounts?
A. That is the rule, but not the practice. Withdrawals
are made without notice.
Q. But under the law you have the right, in case of
need, to put on the time notice?
A. I am in doubt about that, so much so that we pub­
lish our savings deposits as payable on demand.


B a n k i n g and Cu r r e n c y Systems
Q. From the general statement it would seem that
about two-thirds of the deposits in Canada are time
A. The banks generally treat savings deposits as pay­
able after notice. We treat our deposits on savings
account as payable on demand. If a depositor wants to
draw a check against a savings account, we very seldom
call him to task for drawing the check.
Q. Is that the general practice?
A. That is the general practice. And where we make
the practice of paying checks against savings accounts
I think it would hot be open to us some morning to notify
the depositor that his account was payable after notice
instead of on demand.
Q. What form of certificate or paper do you give to
a customer upon a savings time deposit?
A. We give him a savings deposit book with informa­
tion and regulations printed on the cover. Most banks
include a regulation requiring ten or fifteen days’ notice
of withdrawals.
Q. Is that the usual notice for time deposits?
A. Mr. Vreeland spoke of savings deposits; these are
deposit receipts as well, and deposit receipts are issued
payable after notice. As a rule, we pay those without
notice, but they are undoubtedly subject to notice if the
bank asks for notice. The great bulk of savings in
Canada is on the savings deposit with the pass-book sys­
tem I speak of.
By Mr. B o nynge :
Q. What proportion of deposits in the bank are savings
deposits ?


N at io n a l M o n e t a r y C o mm i s s i o n
A. I should suppose that about 70 per cent were savings
Q. Seventy per cent of the total deposits?
A. Yes; that percentage would include savings deposits
and deposit receipts.
Q. And time deposits?
A. What you call a time certificate.
Q. Can you give the proportion of time deposits as dis­
tinguished from savings deposits ?
A. I think I could give that from that return that you
have there.
B y Mr. V r e ela n d :
Q. It makes a distinction between demand deposits,
twenty-two millions altogether, and deposits for which
notice is required, four hundred and sixty-six.
A. The deposits of the Bank of Nova Scotia subject to
notice in Canada are $6,944,000; then we have deposits
outside that----Q. That is, in your bank?
A. That is in our bank. I was speaking of deposits
elsewhere than in Canada. I presume we would have
about $10,000,000 subject to notice, and we have deposits
by the public payable on demand in Canada, including
the savings deposits, $18,234,000; then we have a little
over $8,000,000 outside of Canada.
B y Mr. B o nynge :
Q. You pay the same interest on time deposits as on
savings deposits?
A. The same interest.
Q. What rate of interest?
A. Three per cent.


B a n k i n g and Cur r e nc y


B y Mr. V r e ELANd :
Q. Do any chartered savings banks in Canada pay 4 per
cent interest?
A. Not that I know of. Some of the chartered banks
pay a higher rate of interest on time deposits, but that is
against the agreement with the other banks—in violation
of the agreement.
B y Mr. B o nynge :
Q. You have an agreement between all the chartered
banks as to the interest that you shall pay on deposits?
A. We have.
B y Mr. We e k s :
Q. Mr. McLeod, in your judgment, does the postal sav­
ings bank system work so that it gives good results to the
government—to the people?
A. Well, I do not think it gives good results either to
the government or to the people. I think the commercial
banks would serve the people better if there were no postal
savings banks.
Q. I understand there are about $50,000,000 of de­
posits ?
A. I have forgotten the figures.
Q. Is it true that this money is used as a current
receipt by the government?
A. Yes.
Q. Do you think that is a wise governmental provision?
A. There are no reserves kept against these deposits.
Q. None whatever?
A. No; there are reserves kept against the legal-tender
notes, or government notes, but not against the postal


N a t i o n a l M o n e t a r y C o mm i s s i o n
Q. Do you think that that system could be changed to
suit your conditions so it would be of material advantage
to the people of Canada?
A. I have not studied the matter closely, but I think
there is always a danger in the government handling the
savings, particularly in the matter of reserves. There are
never adequate reserves kept. That is the experience in
England. The postal savings in England are inade­
quately protected by reserves.
Q. Do you know whether these deposits come largely
from places where there are no banks, or from the country
generally ?
A. They come from the country generally. There is
always a percentage of people that prefer the government
to a bank.
Q. What is the rate of interest paid?
A. Three per cent.
Q. From the date of deposit?
A. From the end of the month on which the deposit is
Q. Suppose the rate of interest which banks paid were
4 per cent and the government paid i per cent on postal
deposits, do you think there would be any material postal
deposits under those circumstances?
A. No; I do not.
Q. Do you think there would be any danger of people
in time of distress withdrawing the money from the banks
and depositing in postal savings banks under those cir­
cumstances ?
A. Y es; then there would be, but I think our people
are wonderfully quiet under disturbed conditions.


B a n k i n g and Cu r r e n c y Systems
Q. If that were the case it would simply add to the
distress rather than lessen it, wouldn’t it?
A. Yes.
B y Mr. B o nynge :
Q. Have the deposits of postal savings banks been
increasing in recent years or decreasing?
A. I think they have been remaining about the same.
I have not compared the figures with recent years.
Mr. K night . They are not increasing.
B y Mr. V r e ee a n d :
Q. What year were the postal banks established?
A. The postal banks have been in existence, I think,
ever since confederation.
Q. That was 1867, was it?
A. About that time.
Q. Do you know how many postal banks there are now?
I suppose, however, that the moneys are received at the
A. Yes.
Q. How many post-offices receive money for the postal
A. Ten hundred and eighty-four.
Q. When they were started I notice 4 per cent interest
was paid, then it was reduced to 3 ^ per cent, and is now
3 per cent?
A. Yes.
Q. I assume that, when the interest was above the
rate payable among the banks, the bank rate would
naturally grow in order still to attract deposits?


N at ion a l M on et a r y C o mm i s s i o n
A. Yes; the banks paid about 4 per cent, I think, at
that time. The banks would have to pay the same as
the government.
Q. You found yourself obliged to pay the same interest
as the government ?
A. Yes; when we went below the interest paid by the
government our deposits would fall off very materially.
Q. Do you know what class of people use the postal
funds mostly?
A. All classes.
Q. Don’t they have postal offices in the rural places of
the country where you do not have branches of banks?
A. In some cases, I think.
Mr. K night . I do not think there is a case, Mr. McLeod.
I can not recall a place in Nova Scotia.
Mr. McL eod . The postal savings banks were not estab­
lished in Nova Scotia until very recent years. I do not
know how many there are now.
Q. You must have post-offices in a great number of
small communities where there are no branches of banks?
Mr. K night . N o; there would not be a savings bank
B y Mr. We e k s :
Q. You remember there were some government savings
banks and not postal-savings banks?
A. In the upper provinces they had the postal banks
instead of the savings banks. Recently there has been
a change, they have been withdrawing the regular savings
banks and establishing a post-office bank instead.


B a n k i n g and Cur r e nc y Systems
B y Mr. V r e ela n d :
Q. The post-office here receives funds for the postal
savings bank?
A. I think so, although I could not answer you defi­
nitely on that point.
Q. As to competition for the business, Mr. McLeod,
you think it is not increasing?
A. No, it is not increasing. The country is progress­
ing very rapidly and the banking business of the coun­
try is increasing, and the government deposits are not
increasing. They are remaining about stationary.
Q. The rate that your commercial banks pay as fixed
by your association is 3 per cent?
A. Three per cent.
Q. And are there any of the banks that refuse to accede
to the general agreement?
A. No; not at present.
B y Mr. B o nynge :
Q. Do any of the banks pay in excess of the amount
agreed upon?
A. I think not.
Mr. V reela n d . Our report here shows the Northern
Crown Bank refused to come in under the agreement;
how is that, Mr. Knight? You are the secretary.
Mr. K night . May I ask you a question?
Mr. V reela n d . Yes.
Mr. K night . Whence do you get that information?
Mr. V reela n d . That is a report we had made by a
man who looked over the banking system very carefully,
and that information was given to him by some of your


N a t i o n a l M o n e t a r y Co mmi s s i o n
Mr. K night . I would not act upon it. You can not
keep a man straight by an act of violence. If a man
enters into an understanding with you and violates an
agreement, it is of no use to introduce an isolated case
like that as an indication what the system is.
Mr. V r EEEAnd. It is very natural to inquire, Mr.
Knight, how well the agreements of the association can
be kept, and whether there are violations of them.
Mr. K night . Admirable; the Northern Crown is a
new bank—comparatively new. It is the result of the
union of two new banks, one of them the Northern Bank
and the other the Crown Bank, which were managed by
brothers; both of those men are now out of the bank and
another man has the management of it. At the time that
the Northern was run in I understand its branches through
the northwest agreed to conform to the understanding with
the other chartered banks. In the center, Winnipeg, they
said they would not bind themselves in the dilapidated
places all over the West, and they probably gathered some
thousands of deposits by offering 3 ^ per cent, or some­
thing like that. That is the plain story.
Mr. McL eod. It is simply a breach of agreement.
Mr. K night : That is a question of management. It
has nothing to do with the system. The system is all
right. It is like quarreling with the bank act. There is
no quarreling with the bank act. The general manager
is able to control affairs and do as he pleases without any
supervision whatever. That is not a fault of the act.
Mr. Coueson. Banks are clearing houses and have
clearing-house agreements and understandings with regard


B a n k i n g and Cur r e nc y Systems
to rates, but occasionally those rates are broken. Some­
times an inspection will show a reason for departure from
the rate, but in the great majority of cases—I should say
ninety-nine out of a hundred, speaking of chartered banks
and chartered managers—the agreements are kept. There
are a few exceptions.
Mr. V reeeand . I should say they were very generally
kept, in fact in a remarkable degree.
Mr. McL eod. And with regard to the management, and
the general manager becoming supreme, that is with us
much as it is with you. You generally have in each bank
one supreme head. I think it is well it should be so.
B y Mr. V r eeea n d :
Q. Do you know the total number of branches in
A. I have not the figures.
Q. You do not have to pay in any additional capital for
additional branches?
A. No.
Q. That is entirely within the province of the bank to
A. Yes.

Q. Whether they increase their capital or not?
A. Yes.
Q. Deposits are kept at the head office as a rule, are
A. No, deposits are left at the branch. That is, the
accounts of deposits, but we have some branches that
practically are all deposits. There are branches that are
practically all loans, and, of course, we draw the deposits


N a t i o n a l M on et a r y C o mm i s s i o n
from the branch that has no loans and give them to the
branch that has loans and no deposits.
Q. Then the transfer of all loans or deposits from
branches where they have no loans would give the head
office an opportunity to send them wherever they would
be needed?
A. In accounting only.
Q. The actual transfer of money ?
A. Need not take place.
Q. Would not take place at all?
A. No. In fact at the head office we never keep any
money. It is only accounts. We are merely a transfer
Q. The powers of your branch managers, I suppose, de­
pend upon the size of the branch and upon the manager
A. Exactly; mainly on the capacity of the manager.
Q. As a rule, at the small points they have authority
to make loans of about $1,000 or less without reporting
to the home office?
A. That would be about it.
Q. And other points perhaps $5,000?
A. Yes; and with a successful manager the limit is
very much larger, perhaps $25,000 or $50,000 or $100,000
to regular customers, but those things are regulated from
day to day. If we have a good customer, a man that has
kept his account with us for a good many years, and
transactions have always been satisfactory, our man­
ager knows quite well how far he may go with that indi­
vidual. Loans to him might not be referred or approved


B a n k i n g and Cu r r e n c y Systems
before they are made, but the report is made immediately
afterwards, and if we fail to approve we telegraph or write.
Q. How are managers selected? I suppose you grow
them, do you not, in the older banks?
A. We grow them. They are selected by competition
really. We endeavor to give the best man the best place.
Q. You mean competition between your own managers;
if there is a removal, a promotion would be made?
A. The best man gets it.
Q. You select, then, a man who you think will fill the
place; as you think, the best man?
A. Yes; if they have a good man in the management
of a small branch, and there is a vacancy in a larger one,
he is moved up a peg.
Q. How nearly are your rates of discount uniform among
branches? Depends something upon the country, I sup­
A. The rates are fairly uniform at 6 per cent.
Q. Rates of interest are fairly uniform at 3 per cent?
A. Rates of interest on time deposits are uniform at 3
per cent.
Q. And rates of discount are fairly uniform, you think,
at 6 per cent?
A. At places.
Q. Aren’t rates of discount much higher in places in
the wheat country that is opening up in the west than in
Ontario ?
A. In some cases they are as high as seven, and I be­
lieve, with some banks, eight.
Q. Do rates of exchange go up accordingly? I suppose
the deposits are small?
225610—10----- 3


N a t i o n a l M o n e t a r y C o mmi s s i o n
A. The deposits are the same—3 per cent. I think we
would take, speaking of ourselves, an account at Van­
couver on the same terms we would take an account
at Toronto and where the interest is 7 per cent and 8
per cent. These rates are applied to small loans, and
for our own bank I do not think we have a loan at 8 per
cent in the west. We adhere to the legal rate of 7 per
Q. In small communities, where there is only one branch,
rates might be a little higher?
A. Y es; that would apply to the eastern country as
Q. To what extent is there competition among
branches; how do they compete? Your rates of in­
terest and your rates of discount are about the same, I
see. How do you compete? What are the inducements
that you offer for new business?
A. Each bank is competing with the other for a share
of the business as much as two grocery stores compete for
a share of business in that section. One has nothing
better to offer than the other, perhaps. It is generally a
case of personal popularity of the local manager and the
Q. Do not these branches sometimes get business by
offering increased inducements, free exchange?
A. Quite often.
Q. Do they not have some leaders to locate the custom ?
A. Yes.
Q. They go to the customers?
A. That is quite true.


B a n k i n g and Cu r r e n c y Systems
Q. But as a rule the amount of business is determined
by the popularity of the people running the bank and its
reputation ?
A. Yes.
Q. All those things?
A. Yes.
Q. And not by better rates of interest or lower rates
of discount?
A. As a rule it is the former influences that govern.
Q. What sized towns would you consider entitled to
one or more branch banks?
A. We would consider a town with a thousand people
entitled to a branch bank.
Q. Would there be likely to be more than one branch
in a town of that size unless they had some special busi­
A. In some places there are three or four.
Q. There would be some special reason—a large busi­
ness of some kind, that is a center of grain shipments,
or something of that kind?
A, It is more often a case of some bank putting
in a branch and the other banks going in to protect the
accounts they have in that section. There are places
with not more than 250 inhabitants with one or more
Q. There was some special reason?
A. No other reason than the reason I give, that some
bank has started in there to cut off another bank from
some of its business, and rather than lose its business the
other has gone in and established an office.
Federal Reserve Bank of St. Louis

N at ion a l M o n e t a r y C o mmi s s i o n
Q. What amount of deposits would you say justified
a branch bank?
A. About $200,000 to $250,000 of deposits.
Q. In these small villages you speak of you would not
expect to get that amount?
A. Sometimes we do. We might start in and it might
be a year or two before we reached even a hundred thou­
sand deposits, but they gradually grow until we might have
$200,000 or $300,000 or $400,000 in a surprisingly small
B y Mr. B o nynge :
Q. You have some branches where you have no deposits?
A. No; there are no branches where there are no de­
posits. There are branches where we have very small
deposits, so small that they might, perhaps, be almost
Q. I thought you spoke some time ago of branches that
had simply loans and no deposits?
A. That was practically all loans and practically no
deposits, while another might have practically all deposits
and practically no loans.
B y Mr. V r eela n d :
Q. In the business of a central bank like the Bank of
England changes are made from time to time in the rates
of discount. Is that done by your association?
A. The association does not deal with rates of discount
or commissions.
Q. They deal only with rates of interest on deposits?
A. Rates of interest on deposits are fixed practically by

B a n k i n g and Cu r r e n c y Systems
Q. I should think that would be a fruitful field for
competition among the banks.
A. I do not think it would be well to have competition
shut off by agreement.
Q. Is there, as a matter of fact, a difference in rates
offered by the banks on discounts?
A. Not a very great difference. If a bank finds it has
more money than it should have it might possibly go down
to 5 per cent. We have several accounts at 5 per cent,
and I know some of our neighbors have the same.
Q. Then for good accounts the rates of discount would
be quite an element in attracting custom?
A. Yes; quite an element.
Q. But you say that there is no understanding in your
association as to rates of discount.
A. Absolutely no understanding either on those or on
rates of commission.
Q. Rates of commission?
A. Absolutely no understanding.
Q. Commission upon what?
A. On collections and domestic exchange.
Q. Inasmuch as that is all left open?
A. And foreign exchange as well. There might be some
understandings by banks in certain sections of the country
as to rates of exchange, but there are no understandings of
that kind within the association.
Q. You have two classes of deposits in the commercial
banks; that is, your current deposits and current accounts
that are subject to check?
A. Yes.


N a t ion a l M o n e t a r y C o mmi s s i o n
Q. And your deposit accounts that are upon time and
upon which interest is paid ?
A. Yes.
Q. You have those two general divisions?
A. Yes.
Q. Is interest paid upon current accounts?
A. Rarely.
Q. Checking accounts?
A. Rarely.
Q. It is to some extent?
A. It is to some extent.
Q. In what portions, or in what cities, or in the rural
districts ?
A. Mostly in the cities.
Q. Upon what is that based, upon monthly balances?
A. Generally on a monthly balance.
Q. What is the ordinary rate, the same as other interest
rates, or smaller?
A. A lower rate, generally 2 or 2% per cent.
Q. How often is that changed by the association?
A. That is not dealt with by the association.
Q. Then your understanding relates merely to time
deposits ?
A. What they call time deposits.
Q. And not current deposits?
A. Yes; we could pay 3 per cent on our current deposits
if we wished to do so. I must say that the practice of
paying interest on current accounts is not general to the
same extent as it is in your country. We very rarely have
an account. It is very rare.


B a n k i n g and Cur r e nc y Systems
Mr. K n ig h t . I do not think there is one case in a thou­
sand of a current account.
Mr. MchKOD. I think I should be well within the truth
in saying that we do not pay interest on i per cent of our
current accounts.
Q. According to your statement to the Government here,
about two-thirds of the deposits are put down as drawing
interest. About two-thirds are put down as being sub­
ject to notice, that means interest, I suppose, in all those
accounts, or most of them?
A. Yes.
Q. Of the other third, a large proportion, of course,
would consist of current accounts. Since interest is paid
on them also, that brings the proportion of your total
deposits upon which interest is paid up to much more
than two-thirds?
A. Yes; it would bring it up.
Q. I suppose it would be a mere guess as to the per­
A. Y es; for our own bank I can give you actual figures.
Q. Would you mind giving them?
A. I will give you our annual statement, with the
actual figures at the end of last year.
Q. How generally is the checking system used with you?
A. The checking system against savings accounts?
Q. No; how largely is business done by checks instead
of by cash?
A. Very largely.
Q. Is that true in the smaller towns and cities as well as
the large cities?
A. Yes.


N at ion a l M o n et a r y C o mmi s s i o n
Q. In towns of 500 inhabitants, wherever there is a
branch bank, they usually do their business by check?
A. Yes.
Q. Are pay rolls usually paid by check or in cash?
A. In cash generally. You speak about small towns; in
all small towns where there are branches practically every
individual in that community will have an account with
the bank, and he likes to pay his small bills by check,
sometimes to the annoyance of the bank, but the checking
system is very generally used.
Q. Of course, it would be a mere estimate on your part;
could you give an estimate as to what proportion of the
total business is done by check and what by cash?
A. I should suppose, speaking roughly, that 90 per cent
of the business is done by check.
B y Mr. B o n ynge :
About the same as ours.
A. You are a little above that, are you not?
I think we are about 90 per cent.
A. Speaking of your whole national system I think it
amounts to more than that. The checking system is not
quite as general with us as it is with you.
Q. Do you fix any limit for the account? That is to
say, do you take any amount for a checking account, or
does the depositor have to keep a certain balance?
A. Generally we take any amount he chooses to give us.
Q. You attend to the business regardless of the amount
of balance he carries ?
A. We do his business regardless of the amount of bal­
ance he carries.


B a n k i n g and Cu r r e n c y Systems
Q. Do you make any charge for keeping the account
unless he keeps a certain balance?
A. Practically nothing.
B y Mr. V r EEEANd :
Q. There are no provisions in the Canadian law in rela­
tion to reserves?
A. No.
Q. That is, as to the amount of reserves?
A. No.
Q. There is a provision, is there not, that of the cash
reserves you keep on hand 40 per cent shall be Dominion
notes ?
A. Shall be in legal tenders, yes.
Q. It provides specifically it shall be Dominion notes,
does it not?
A. Dominion notes and legal tenders are synonymous
Q. Gold is a legal tender?
A. We call them legal tenders. We call paper money
legal tenders.
Q. That is synonymous with Dominion notes?
A. Yes.
Q. What proportion of reserve do the banks generally
find it necessary to keep on hand at their head office and
at their branches?
A. The proportion has increased materially in the last
ten or twelve years. Before that the reserve got down, I
think, to about 7 per cent, in some cases 3 1 2 per cent.
Now the reserve averages about 15 per cent.
Q. In cash?
A. Yes.

N a t i o n a l M o n e t a r y C o mmi s s i o n
Q. Is the bulk of your receipts kept at the home office or
head office?
A. More at the bank than at the branches. As I said
before, the head office never retains any cash. It is only
a transfer station.
Q. In case you have need of reserve ?
A. It is generally at the local branch. We ordinarily
keep our reserves where they are most likely to be re­
Q. I supposed, upon the theory of your banking with a
head office, that the cash reserves were kept largely at
the head office with a view of placing them anywhere
needed. If reserves are needed they are needed usually
in cash.
A. In twelve years I have not had the custody of $100
of the bank’s money.
Q. Where are the bulk of the cash reserves kept at your
A. They are kept at the branches in proportion, as near
as we can, to where the deposits are likely to be called for.
Q. You mean by that, where customers are most likely
to ask for loans?
A. No; when loans are asked for they are generally set­
tled for with our banks. Often we make a loan and after
that loan passes over, checks against that loan very likely
come in through some other bank and come in through
the clearings. We settle with the clearing house every
morning. If a loan is made to a party out of town the
checks would be likely to come through a competitor and
would be settled for by a draft on Montreal, or a draft on


B a n k i n g and Cu r r e n c y Systems
Toronto, or a draft on Halifax, or some other point; so the
reserves are not called for in that connection.
Mr. K night . Take Montreal—it is necessary to keep
a large proportion of legal tenders or reserves, whichever
you like to call it, in Montreal for a day’s settlement.
The settlement with us is effected in these specific legal
tenders. In the clearing house you have got to settle
with legal tenders or gold.
Q. As a rule your banks would keep more cash at points
where these exchanges are made in large amounts?
Mr. K night . Yes.
Q. You would naturally keep more cash in Montreal
and Toronto and other large points than in other places?
Mr. Coueson. Exactly— at the clearing-house centers.
Q. You say, Mr. McLeod, that the banks generally carry
15 per cent cash reserve now?
Mr. Coueson. I think last month the figures were about
i 3 ttj per cent, or something of that kind.
Q. For all the banks together?
Mr. Coueson. For all the banks together. There is an
understanding with the banks of the association that we
are to keep 15 per cent in cash. It is voluntary; it is an
understanding among us, and if they get below that the
association might call their attention to it.
Mr. W e e k s . Y ou think your reserve is sufficient to
properly protect the business which the banks of Canada
are doing?
Mr. McL eod. I think it is sufficient to protect the busi­
ness of any bank that is doing a prudent and legitimate
business. That is, if its loans are made in a proper way.


N at ion a l M on et a r y C o mmi s s i o n
In other words, if it is a sound bank generally, that 15
per cent is sufficient under our conditions.
Q. What is the total amount of Dominion notes
issued ?
A. I can not answer that now offhand.
Q. The total amount issued?
Mr. Coulson. I think we had better furnish you that
Q. Dominion notes, if I remember your law, up to the
amount of $30,000,000 are protected by at least 15 per
cent gold reserve?
Mr. Coueson. Yes.
Q. And above that it must be full reserve?
Mr. Coueson. Yes; 15 per cent up to $30,000,000 and
Dominion debentures, and over and above that dollar for
dollar in gold has to be kept.
Q. I understand as to the funds to be kept by savings
banks no reserve is required by law?
Mr. Coueson. There is a reserve against that also, a
separate reserve. A separate fund and a separate reserve.
Q. Dominion notes are payable upon demand, are they?
Mr. McL eod. Yes.
A. In gold.
Q. Or silver?
A. Gold.
Mr. Coueson. Silver is not a legal tender here beyond
Q. Dominion notes are issued in ones, twos, threes, and
fours, and then what do they skip to next?



B a n k i n g and Cu r r e n c y


A. Ones and twos and then the larger numbers, twen­
ties and hundreds and multiples of hundreds and up to
thousands, and then they issue special; they have a spe­
cial issue for the bank, legal tenders, for paying exchanges.
Q. Then the bank notes are not issued below five?
A. The bank notes are not issued below five, and above
in multiples of five. Only in multiples of five.
Q. Is it the practice of your bank to keep what you
may call a secondary reserve in the form of government
securities or other securities?
A. Yes; banks generally have quite a large amount in
other securities, but very seldom in government securities;
generally in railway securities and municipal securities.
Mr. Coueson. Many of our banks keep a line of second
securities in United States securities and railroad bonds.
We usually keep large lines of sterling securities that are
not as readily available. They are available enough, but
very often in time of pressure it is difficult to get money
from those.
Mr. McL eod. Each bank formulates its own policy.
Q. I see all of your banks together up to July, 1909,
had due from agencies, other than from other banks, the
amount of $10,000,000.
A. I am afraid that section is not
Vreeland, for some banks include in it
their own agencies abroad, and others
balances due by other banks.
Q. They do not all figure that alike?
A. They do not all figure that alike.
return is defective in that respect.


very clear, Mr.
balances due by
include only the

Our government

N a t i o n a l M o n e t a r y C o mm i s s i o n
By Mr. B onynge :
Q. Did you count the amount that you have on deposit
with the Dominion as security for your notes as a part
of your 15 per cent reserve?
A. No; we have it down at the foot of our list.
By Mr. V r eeea n d :
Q. You show the total Dominion and provincial gov­
ernment securities to the amount of $12,600,000. Do
you have any bond issues in the Dominion?
Mr. Coueson. They do not issue any special bonds for
banks. It is the ordinary issue.
Q. That is a bond?
Mr. Coulson. Yes.
Q. They do have a bonded indebtedness?
Mr. Coueson. Yes; they do have a bonded indebted­
Q. What is the amount of the Dominion bonded in­
Mr. Mc L eod . It is very heavy.
Mr. Coueson. I can not remember the figures. The
bulk of that indebtedness is in Great Britain.
Q. You say $22,000,000 of municipal securities and
British or foreign securities other than Canadian. Do
you consider all of those a secondary reserve upon which
you could get the cash at short notice?
A. We so regard them and so place them in our state­
ments, but we have gone through several panics and we
have never realized on those securities. No doubt they
w^ould be available in case of absolute need.
Q. I was speaking from the standpoint of cash?


B a n k i n g and Cu r r e n c y Systems
A. Convertibility.
Mr. CouLSON. The money that could be borrowed on
them; I think you could always go out and borrow money
on the securities unquestionably.
Mr. McL eod. I do not agree with you.
Q. In case of a widespread demand for money in your
banks, which would you consider most immediately avail­
able to bring in cash, commercial paper of any kind, or
these bonds ?
Mr. Coudson. A Canadian bank would never think of
turning out any commercial paper. It is done occasion­
ally. The bank does cover this kind of business paper
in Canada.
Mr. Coudson. I am talking about uniform conditions
to provide against extreme conditions. You can not
profit and do business anticipating all the time; you
would have such a time as you had in 1907, a universal
Mr. McL eod. Our experience in 1907 was somewhat
different from Mr. Coulson’s. We kept the lid on as
tight as possible, but endeavored not to press it too hard.
We have applications from customers, the same as Mr.
Coulson has, and recognized a few times in 1907 that we
could not reduce loans in the aggregate. Every manager
is anxious to extend his business, and he will have to pay
out money to good customers, in the hope of holding their
business in the future, so that in my opinion it is prac­
tically impossible to reduce loans in a time of pressure,
such as 1907. That is, while the pressure is acute. If
it continued for several months I have no doubt loans


N a t i o n a l M o n e t a r y Co mmi s s i o n
could be reduced, but it is scarcely practicable to reduce
loans in time of pressure. Your municipal securities are
available practically only to borrow against. I would
not say that that was true of 1907, but it probably would
have been true if we had allowed some banks to fail, as
we might have allowed them to fail, instead of bolstering
them up and liquidating them with open doors. Cash
and balances abroad constituted about the only effective
Q. You speak of such extreme conditions?
A. Yes.
Mr. Coueson. Our eastern commercial demands were
reduced and we paid off 80 per cent of them.
Mr. McL eod. That would be through the west, but
there were demands all over we could not ignore.
Mr. Coueson. The money we got from our eastern
people went to the west to meet the crop and pay our obli­
gations there; although they were heavy they were all
complied with. There was no particular disturbance, so
far as our payments were concerned, in the east.
Mr. McL eod. The point I wish to make is, a bank to
go on and do business must have some regard for the re­
quirements of its customers, and in a time of stress it is
impracticable to reduce loans materially. Your only
reliance for cash reserves consists of cash in hand and
balances abroad, or borrowing facilities abroad, if a
panic is general; and by extending over London and other
financial centers you are cut off from borrowing against


Ba nki ng and Currency Systems
Q. Canada never has had, so far as I remember, what
you may call a currency panic similar to that in the
United States in 1907?
Mr. CouivSON. No.
Q. You may have had runs upon individual banks or
upon branches; doubtless have, I suppose. You never
have had a widespread currency panic as we had.
Mr. McL eod. Our people do not seem to have got the
run habit.
Mr. CouDSON. They do not care.
Q. One very good reason for it appears here, that of
taking over banks instead of permitting them to close
their doors in the ordinary way, and having an association
and liquidating them; their notes are good, their deposits
are secure; of course all of those things help to preserve
confidence of the public in your banking system and do
away with runs, but perhaps in a country the size of the
United States it would be impossible for us to run upon
those lines. I mean to have an association and keep track
of the banks and take them over and liquidate them.
Mr. Coueson. The Canadian banking system has never
been in such a stress as you have. If we had been run
upon to anything like the extent you were in 1907 I do
not know where we should have been. We should sim­
ply have been in a state of universal suspension until we
had made some headway. The standing of all the banks
is such, and their securities so widespread, that it would
be almost impossible to create a want of confidence in
them such as you suggest.
Q. On account of their mutual support largely?
2 2 5 6 1°— n



N a t i o n a l Mo n e t a r y Commissi on
Mr. Coulson. On account of their strong positions,
with their large paid up capital and large paid up reserve.
None of the largest banks have ever had any trouble in
that way. Take, for instance, the Bank of Montreal.
Q. Is it your opinion that confidence is created by
supporting and standing by each other, and by liqui­
dating banks and paying off the depositors?
Mr. Coulson. That all helps, and we have a large paid
up capital and paid up reserve, and upon that the gov­
ernment returns are issued from month to month and the
people can use them.
Mr. McL eod. They are not worth the paper they are
written on.
Mr. Coulson. I say ninety-nine out of every hundred
are fairly correct. I will not admit any such laxity in the
government as to say they are not worth the paper they
are written on at all.
Mr. McL eod. I do not regard them as worth the paper
they are written on, because there is no supervision.
In the cases of the failed banks they have them made with
every degree of falsification, and there is no check or
supervision. When confidence is shaken these facts will
become apparent to the public and will impair confidence
rather than help the situation. Our records compiled
from bank statements are valueless on account of the
misstatements by the many banks that have failed.
Mr. Coulson. Can you tell me where a bank inspection
has ever prevented a failure?
Mr. McL eod. In the United States.
Mr. We e k s . We are thoroughly committed to govern­
ment inspection in our country.


a & m v m ir-v m ^ h m s t

B a n k i n g a n d C u r r e n c y Systems
Mr. C oulson . There is supervision here. There is su­
pervision within ourselves. You say the government
report is not worth the paper it is written on.
Mr. McL eod. I made that statement, but it may be
subject to some modification. I adhere to my opinion
that positive external inspection is an important feature,
an indispensable feature, of every banking system.
Mr. We e k s . We are committed to government inspec­
tion of our national banks and we may conclude from
what has been said that Mr. McLeod would favor that
from his standpoint in Canada and Mr. Coulson would
Q. Is there any connection between the amount of
bank reserves and your bank rates of discount? I mean
when your cash reserves are getting small do you increase
your rates of discount for the purpose of building up or
diminishing loans ?
A. No; that is very seldom done.
Mr. C oulson . Two years ago we put up all rates on
commercial accounts. The sentiment was to reduce every
Q. That was the sentiment among the members of your
association, you mean?
Mr. Coulson . Yes; we did not want people to come in
and make new commitments.
Mr. H u bb EEE (cashier Marine Bank, Buffalo, N. Y.).
Did not the element of profit come in there a little bit?
Mr. C oulson . True; of course it did. But that was
not a feature. Our rate changed very little with our
commercial customers. For a year we did charge them,


N a t i o n a l M o n e t a r y C o mmi s s i o n
but that was to keep them from wanting more than their
ordinary requirements.
By Mr. V r e EEAnd :
Q. There are no requirements in the laws about gold as
a reserve?
A. No; with regard to the increasing of the rate, I
think I am correct in saying that to 75 per cent of bor­
rowers the rate would not be disturbed.
Q. That is, the regular customers of the bank, you mean ?
A. Yes; I want to make the point, in Canada as dis­
tinguished from your system, that our rates are more even.
We are not subject to anything like the fluctuations that
come to your country owing to your present imperfect
Q. You refer more especially to New York City?
A. No; I think it applies generally throughout the
Q. I think our rates run pretty even outside of large
A. Yes; I think that would be correct.
Q. To regular customers?
A. Yes.
Q. There is not much change in them?
A. That is about the same as here.
Q. Do your banks make any attempt to acquire gold
for any purpose?
A. No.
Q. You have no special use for it?
A. We have no special use for it except for reserves.
0 . They have nothing to do with your note issues and
no certain reason for your paying gold ?


Ba n k i n g and Cur r e nc y Systems
A. The operation of the law in regard to holding 40 per
cent of legal tenders is to preclude our acquiring any con­
siderable amount of gold.
Q. Is to prevent it ?
A. Yes; if we acquire the gold we have to acquire legal
tenders practically to the same proportion.
By Mr. B onyngE :
Q. Have you any means of knowing how much gold
there is in circulation in Canada?
A. I could give you the amount.
Mr. Coulson. We haven’t a Canadian circulation of
gold. The gold in circulation is the United States gold.
Q. Very little of it seen?
A. Very little gold in actual circulation.
Q. The money that is carried in the pockets of people
would be silver and your Dominion notes of small sizes
and your bank notes?
A. And the bank notes. *
Q. Very little gold in circulation?
Mr. Coueson. Very little.
Q. Your banks make no attempt to acquire or keep
gold. It has no special relation to the system except that
it is the standard of value and your Dominion notes are
redeemable in gold ?
A. Yes.
By Mr. H u bbe LE:
Q. Mr. McLeod, do you have a prevailing rate of ex­
change here? Is there a prevailing rate of premium and
discount between the banks?


N at ion a l M on et a r y Co mmi s s i o n
A. That rate fluctuates.
Q. Is that a matter of daily market?
A. Yes; a matter of daily market.
Q. Between the banks?
A. Between the banks.
Q. How high does that reach ?
Mr. Coulson. Don’t ask us. Go back to 1897. I
think it was as late as five years ago we had some collec­
tions due near Boston and our correspondent had sent
up clearing-house certificates on a Boston clearing house,
and I telegraphed him they were no use to us, and he
telegraphed back to cancel the arrangement.
B y Mr. V r eela n d :
Q. We will take up note issues, Mr. McLeod, and ask
you a few questions about that. The amount that can
be issued is the paid in capital of the bank besides the
emergency act of 1908.
A. The emergency act.
Q. And with the further exception of the Bank of
North America, which can issue up to 75 per cent of its
A. Yes.
Q. The note holders have a security and a first lien
upon the assets of the bank ?
Mr. Coulson. Yes; the assets of the bank.
Q. They have also the 5 per cent of total circulation in
hands of government ?
Mr. Coulson. It is 5 per cent, calculated on the highest
amount circulated during the year.
Q. B y each bank?


B a n k i n g and Cur r e nc y Systems
Mr. Coueson. By each bank. It is adjusted every
Mr. We e k s . Has the emergency circulation ever been
Mr. K night . A little last year.
Mr. McL eod. I do not know who did use it, and I do
not want to know.
Q. Mr. McLeod, your business in Canada is increasing so
fast that, unless you materially increase your bank capital,
I should think you would soon get to a point where you
would have to have more circulation than you can get;
what are you going to do about that?
A. That is a problem we shall have to meet, and I pre­
sume it will be up for discussion at the same time as the
modification of the bank act. The act is under considera­
tion now.
Mr. Coueson. The true way is to increase the capital.
Mr. McL eod. No bank not on the verge of insolvency
would use that emergency circulation.
Q. To what extent are your notes legal tender?
A. They are not legal tender at all.
Q. Aren’t banks obliged to receive the notes of other
A. Well, in payment of debts they do receive them.
They are not obliged to receive them.
Q. They are not obliged to?
A. No.
Q. Then if a customer comes in to pay his notes at your
bank you are not obliged to receive the notes issued by
another bank?
A. No.


N at io n a l M o n e t a r y Co mmi s s i o n
Mr. Coulson. You can demand legal tender.
Q. They are not made legal tender by mutual ar­
A. No.
Q. They are only legal tender to the bank that issues
A. Yes; they are an offset.
Q. Limited to that?
A. Yes.
Q. What is the government tax upon your bank notes?
A. No tax.
Q. No tax whatever?
A. No; we are not taxed at all, except in the matter of
the provision for 40 per cent of our reserve in legal tender.
Q. Who pays the expenses of issuing them?
A. The issuing bank.
Q. Each bank?
A. Yes.
Q. Does the Dominion make the arrangement for their
A. Each bank makes its own provisions under the super­
vision of the Banking Association.
Q. But each bank makes its own arrangement about
their design and the total of the issue?
A. Yes; they are issued to the bank direct on the ad­
vice of the association. That latter arrangement is under
a recent date—the last six or seven years.
Q. What is the average time that they stay out before
they are redeemed?
A. I think the average life of a note is less than a year.


Ba n k i n g and Cur r e nc y Systems
Mr. B onynge . Sixty-six days is the limit.
Mr. K night . Y ou refer to a different matter.
Q. Are you able to keep notes in circulation in Toronto?
A. I think there is a large amount of the bank notes in
circulation in Toronto. Perhaps the percentage would
be as great as in the country. The distance from the
centers, of course, tends to leave the notes out longer.
They are longer in transmission.
Q. You have so many notes in circulation in Canada
that the average time each note would stay out must be
very short ?
A. We could only estimate.
Q. They would come back to the clearing house?
A. Yes.
Q. The same as checks ?
A. Yes.
Q. And presented to you for payment ?
A. Yes.
Q. So the average time of circulation in the city of
Toronto would be very small?
A. Would probably be small; yes.
Q. Whereas, say, in the early distribution it would not
take them long to get to points where they would be
redeemed ?
A. Yes.
Mr. Coueson. Take the average circulation—we have
had some estimates on that during the actual season of
circulation, that is about sixty days.
Mr. McL eod. From the time you put it out?
Mr. Coulson. Yes.


N a t i o n a l M o n e t a r y Commission
Q. All of your notes are redeemed about six times a
Mr. Coueson. I am speaking of the Toronto demand; a
note stays out about an average of sixty days, and that
is the case particularly in the west. It is coming in and
going out, and the average is about sixty days.
Mr. McL eod . I do not know any way you can get
reliable figures on that better than to take an issue that
you have decided to cancel and take an average time
that issue would be out. At the present time those figures
would compare unfavorably with the figures that would
have been made ten years ago, before we got up to the
maximum of our circulation, and for the present time
they are not reliable. I do not think the average circula­
tion of a note is as long as Mr. Coulson’s estimate.
Mr. Coueson. We have had some experience of pay
rolls on some of the railway systems, and the average of a
circulation paid up from one end of the country to the
other is just thirty days, and we have tested that on two
or three occasions. That is for our own guidance, but
when you come to the moving of a crop where money is
paid out to the customers, of course, the bank gives each
man a ticket with two or three dollars, and he then takes
it to the bank or to the merchant, and the merchant may
have it for some little time. The time it will take getting
back to the redemption center will average nearly sixty
Mr. McL eod. Sitting here discussing this subject has
brought back to me one of my early experiences in
banking. It was in an isolated community where the

Ba n k i n g and Cur r e nc y Systems
operations were buying and shipping grain. The bank
had a capital of $100,000. Under the Provincial law
it had the right to issue $3 to $1 of its capital in circula­
tion. On one Saturday evening all our circulation was
outstanding. Over Sunday the winter set in, the harbors
froze up, the vessels had to put to sea, loaded or partially
loaded. By the middle of the week our circulation was
much reduced; we had received exchange for the car­
goes and within a month the circulation was down to
normal; the notes had gone out, had paid the farmers for
the grain, they had been paid by the farmer to the shop­
keeper and by the shopkeeper deposited in the bank.
The shopkeepers had bought out bills on London, thereby
paying their debts abroad, and the whole operation was
completed. When an elastic currency is spoken of, I
often think of that example of elasticity.

By Mr. We e k s :
What would you do if Mr. Coulson appeared in your
some morning with a million dollars of your bills ?
Pay the bills.
How would you pay them?

By Mr. V r e EEand :
Q. Draft on London?
A. I think we could satisfy Mr. Coulson in a very short
Mr. Coueson. I think so.
Q. Suppose he did not want to be satisfied; what could
he demand?
A. He could demand gold or legal-tender notes.
Q. I suppose he could limit his demand to two things,
could he?


N a t i o n a l M o n et a r y C o mmi s s i o n
A. Yes; he could limit his demand to legal tender.
Q. You would not have an amount like this in just gold
at any one of your offices, Toronto for instance?
A. Yes; practically.
Q. Take the Winnipeg office, for instance.
A. No; that is a very extreme case. There is no possi­
bility in the world that anyone could get so much of our
notes for presentation at one time.
Q. I am assuming some person is vicious and wants to
damage you.
A. Yes.
Q. I want to see how you would get out of that, what
would happen?
Mr. Coueson. We would go to our neighbor and try to
get them to sell an exchange on New York and get the
money on it.
Q. That is not legal tender.
Mr. Coueson. If I was in that position, I should go to
the Bank of Montreal straight and say I am short, I have
the money in London, I should buy my exchange and give
him the money. If your credit is good, there is no trouble
about it.
Mr. We e k s . What you would do would be to stand by
one another under those circumstances ?
Mr. Coukson. Undoubtedly.
Mr. McL eod . If that should happen, of course, we
should go to another bank—that would be a most extreme
case. We should say: “ There is a party that has collected
our notes until he has acquired a million of them; the
man comes in and demands legal tenders against us; we


Banking and Currency


will pay you legal tenders in Winnipeg, Montreal, St.
John, or Halifax, or we will transfer funds to your credit
in New York or London. We want the legal tenders to
use now.” Or we might say: “ We will replace the legal
tenders as soon as the express companies can get the
legal tenders here.” There would be no difficulty about
that matter.
Mr. Coueson. The other banks would simply come to
the rescue.
B y Mr. V r e EEANd :
Q. There is absolutely no tax on this circulation?
A. No tax.
Mr. Coueson. There was in times past.
Q. When was that discontinued?
Mr. Coueson. That was discontinued thirty years ago.
Q. What tax do you pay to the government?
Mr. Coueson. We pay none now on the circulation.
Q. You would be obliged to keep a tax reserve. I do
not see how you figure it as a tax on circulation.
Mr. K night . It takes the place of a tax.
Mr. McL eod . The interest is the tax.
Q. I am asking if it costs the bank anything?
A. No, it does not.
Mr. Coueson. It saves the government interest.
Q. The government saves interest on that amount of
the Dominion notes, but I am talking about your bank?
Mr. Coueson. It costs us nothing.
Q. There is absolutely no tax upon circulation?
Mr. Coueson. N o, sir.
Q. Direct or indirect?


f~ F S


N at ion a l M on et a r y C o m m i s s i o n
Mr. Coulson. No.
Q. What Dominion tax do yo.u pay to the government?
Mr. Coulson. We pay it to the government.
Mr. McL eod . Provincial governments and cities.
Q. Do you pay anything to the Dominion government?
A. Nothing.
Q. No regular tax at all?
A. Nothing.
Q. If a bank fails to pay its notes, they immediately
commence drawing interest, do they not?
Mr. Coulson. Yes; after a bank has suspended.
Q. That has the effect of taking them out of circula­
Mr. Coulson. Yes.
Q. Banks or some one else would commence accumu­
lating them and holding them?
Mr. Coulson. Yes; they keep them until the suspended
bank is in a position to pay them.
Q. I assume the banks generally hold them?
Mr. Coulson. Yes.
Q. And get 5 per cent interest?
Mr. Coulson. And get 5 per cent interest.
Q. Until they are paid by the----Mr. Coulson. Receiver or liquidator.
Q. You are not obliged to hold any reserves against
your notes ?
Mr. Coulson. Not specially, except that 5 per cent
that is held in the redemption fund.
Mr. McL eod . And that is not available.


B a n k i n g and Cur r e nc y Systems
Q. Are banks liable for the notes of failed banks, or
rather banks having notes of failed banks, beyond 5 per
cent ?
Mr. Coulson. Yes.
Mr. McL eod. After the 5 per cent fund is exhausted
further calls would be made on the banks by small per­
centages. I think the percentage is limited—a certain per
cent within one year. We are not guarantors for actual
payment. I think it is not to exceed 1 per cent per year.
Q. The information which was given us was that if the
assets of the bank were not sufficient, and if the 5 per
cent was not sufficient primarily, the other banks would
be guarantors of the notes?
A. That is correct.
Q. And on that they are to pay----, A. So much per year.
By Mr. B onynge :
Q. Until you have made up the full amount?
A. Yes.
Mr. K night . Of course, you know that fund has never
been touched since it was created?
Mr. V r e EEAND. The 5 per cent fund?
Mr. K night . Yes.
Q. Tell us how soon these notes of failed banks would
be paid out of the redemption fund. That is, how soon
would the notes be paid from the redemption fund after
the government had judicial notice of the failure of a bank?
A. That, as has just been said, never has been put to
a practical test.
Mr. Coueson. The first moneys collected are applied in
redemption of notes issued, and whatever proportion they


N a t i o n a l M o n e t a r y Co mmi s s i o n
may bear to the entire issue, the liquidator notifies the
banks that on a certain day he will pay that proportion
and interest.
Mr. McL eod. That is not the question. As I under­
stand it, Mr. Vreeland wishes to know how soon that fund
could be made available; that 5 per cent fund—
rhow soon
the government guaranty under the notes would be avail­
able to the note holders.
Q. How soon are these notes of a failed bank redeemed ?
Mr. Coueson. Just as soon as the liquidation provides
a fund for it.
Mr. McL eod. The notes have, in practice, been redeemed
as fast as they have been presented.
Q. That is, you mean that, in practice, the other banks
have taken over the failed bank?
A. No; where there is a liquidator. Take the case of
the Bank of Yarmouth; it was not taken over.
Q. When a bank fails here, doesn’t it close its doors?
A. Yes; it closes its doors.
Q. When would its notes be presented for payment?
A. The notes go into the other banks and go through a
liquidator and are so paid.
Q. Who is the liquidator?
A. Take the case of the Bank of Yarmouth; the banks
did not interfere at all with that bank failure, and the
notes were collected by the other banks and were paid by
the liquidator.
Mr. K night . Yes.
Mr. B onyngE. The court appointed the liquidator, I
suppose ?



B a n k i n g and Cur r e nc y Systems
Mr. V r e Eeand . N o; the association has a curator.
A. A curator or a liquidator.
Mr. B onynge . Who appoints the liquidator?
Mr. K night . The court.
Q. The curator is one appointed by the association, and
the court appoints a liqudator to close up the affairs of a
Mr. K night . Yes.
By Mr. V r e Eeand :
Q. Is that always so? Haven’t other banks ever taken
hold of a bank and liquidated it themselves without letting
it go to a liquidator?
A. I mean where a bank absolutely fails and is not
assisted by the other banks. I am speaking of an abso­
lutely failed bank.
Q. I understood it was not the exception, but the prac­
tice, for the other banks or the association to take over a
failed bank?
Mr. K night . No.
A. No; that has not been the practice.
Mr. Coueson. That has only happened in two cases.
Q. The practice is to let them close?
Mr. Coueson. The practice is to let them close.
Q. Is that a growing practice?
Mr. Coueson. It is.
Mr. H u bb EEE. It is a matter entirely of self-preserva­
Mr. Coueson. It might be that.
Mr. V r e Eeand . Ordinarily, then, first the associated
banks appoint a curator?
2 2 5 6 1 ° — 10 ------5


N a t i o n a l M onetary Commission
Mr. Coulson. Yes.
Q. What are his duties?
Mr. Coulson. He takes possession and takes charge,
collects in anything outstanding.
Mr. McL eod. He takes the management of the operation
and directs everything else in fact.
Q. How long does he stay?
Mr. Coulson. Until the liquidation is completed. When
the liquidator is appointed, he stays until he winds it up.
Q. When is a liquidator appointed?
Mr. Coulson. Just as soon as an application is made.
Q. I mean just when—to distinguish what the curator
does and when his duties end, and when somebody else may
be appointed. What has the curator done in the meantime ?
Mr. Coulson. I think in the Bank of Yarmouth the
curator was continued almost to the end.
By Mr. B onyngE:
Q. His duties ceased as curator and he became the
Mr. K night . N o; he was appointed liquidator formally.
Mr. McL eod. The bank was being wound up before
there was a liquidator appointed.
By Mr. V reela n d :
Q. I understand the practice is that the executive coun­
cil, in case of a failed bank, appoints a curator?
Mr. K night . Yes.
Q. Who immediately takes charge of the bank and pro­
ceeds to liquidate it?
Mr. K night . Yes.
Q. Collects in its drafts and pays off its indebtedness?


Ba n k i n g and Cu r r e n c y Systems
Mr. K n igh t . Yes.
Q. Then upon whose application does the court appoint
a liquidator who is usually the curator?
Mr. McL eod. He may be appointed on the application of
a stockholder, or a creditor, or of the association, I believe.
Mr. K n igh t . Yes; let me give you an illustration. The
last bank that failed before the Yarmouth was the Ville
Marie. Three liquidators were appointed in the ordinary
way; they were appointed by the court. Not one of the
three was a practical banker; not one of the three had an
eye to economy, expense, or the exigencies of the situa­
tion ; and these three parties sat together for nearly eight
years and practically lived off the bank, without any pur­
pose of.winding it up. The first bank that failed after
the Ville Marie was the bank mentioned by Mr. McLeod,
the Bank of Yarmouth. The liquidator wound the bank
up inside of nine months.
Q. Either upon the application of the association, or
upon the application of some stockholder, or of someone—
I suppose any creditor—a liquidator is appointed by the
court who is usually the curator who has been in charge?
A. Yes.
Q. And he proceeds to finish the liquidation of the bank?
A. Yes; by taking the necessary legal proceedings that
could only be taken by a liquidator.
Mr. B onyng E. What does the government do with the
5 per cent guaranty fund that you deposit?
A. It becomes----Mr. C oudson. They spend it.
Q. What do they do with it after they collect it?


N at i o n a l M on et a r y Co mmi s s i o n
Mr. Coueson. Treat it the same as if it was savings
banks deposits.
Mr. K night . They pay the bank’s interest.
Q. They pay bank’s interest on it?
Mr. K night . Yes.
Q. It is a loan to the Government?
Mr. Coueson. It is a loan to the Government upon
which they pay interest.
Mr. W e e k s . Suppose some of the notes of the Sovereign
Bank came into your possession, would you get 5 per
cent on them until they were liquidated?
Mr. Mc L eod . After a certain date.
Mr. Coulson. Until the liquidator gives notice.
Q. Then interest stops ?
Mr. Coueson. Then interest stops.
Q. What would prevent your holding those notes and
drawing interest for a long time?
Mr. Coueson. The notice. After that they cease to
bear interest.
Q. Do you think that the inspection methods which
you have for determining how much circulation a bank
has out are sufficient to prevent fraud provided the
officers of a bank want to perpetrate a fraud?
Mr. Mc L eod . I think they are. We have a statement
from the engravers supplied to the association.
Q. What engravers?
A. Generally the American Bank Note Company. A
record is made of that by the secretary of the association.
The notes are passed on to the bank. They are issued.
They are destroyed by the directors. Of course, if the


B a n k i n g and C u r r e n c y Systems
directors fail to destroy them, and instead of destroying
them put them into circulation, that would be one way
of defeating the check.
Mr. V reeeand . There would be no way of detecting
it except the statements of your directors?
A. There would be one way of detecting it; that is, by
keeping the record of each note that is outstanding and
the date that it was destroyed, etc.
Mr. K night . The chief executive officer also signs the
Mr. Coudson. Yes; an officer signs the certificate,
and there is a very carefully prepared certificate signed
by the directors. Also the destruction of notes is as
well safeguarded as can be.
Q. It is entirely in the hands of the bank officers?
Mr. McL eod. It is entirely in the hands of the bank
officers and directors.
Mr. Coudson. The association has supervision over
Mr. McL eod. Any such inspection could have no
effect on the burning of the notes. We have to rely on
Q. If the general manager of the bank and those
three clerks, instead of burning the notes were to put
them in their pockets for recirculation, what would hap­
pen, how would you determine the fact, and what pun­
ishment would be inflicted?
A. There is one way of determining that, and that is
by keeping a record of the circulation and the date of
destruction of each note as they were called home, and I


N at ion a l M on et a r y C o m m i s s i o n
think it should be kept. And there is another way of de­
termining it—that is, by the amount of notes that are
kept in circulation. A bank can’t keep in circulation an
inexhaustible supply of notes.
Mr. K night . There is one thing that must always be
kept in mind, namely, that the last thing a man would
resort to is an over issue of notes, he would have to come
back to the clearing house and he would have to redeem
Mr. McL eod. A s a general rule the banker that goes
wrong starts in hoping to recover, and his circulation
accounts would be the last account he would tamper
with, because he could not put it right. A good many
years ago we had a cashier of our bank who practically
looted the bank way back in the sixties, James Forman,
but although he had the notes practically in his own hand
so that he could order what notes he wanted — that
was before there was any bank act worth speaking of,
before confederation—and he had those notes so he could
do what he liked with them, still the circulation accounts
were correct.
By Mr. H u b b e e l :
Q. How can you keep the record of so many agencies
so as to get an exact record of the amount of deposits out­
standing and amount redeemed?
A. We do that by daily returns.
Q. Telegraphic returns?
A. By mail generally.
Q. Suppose a manager got a little bit close to it, wouldn’t
he be apt to make a haul?


B a n k i n g and C u r r e n c y Systems
A. If you will allow me I will answer that question as
it applies to ourselves. We have every day a report from
each branch, an estimate by each manager of the amount
in the Bank of Nova Scotia, notes held back, a statement
of the amount he has on hand at the close of business on
the day on which the return is sent, an estimate of the
amount that he will have on hand the following day and for
the two following days. We do not allow a manager to
go below his estimate. He must estimate what he needs,
and upon those estimates we judge what our circulation
will be. Formerly we used the telegraph, but we have
adopted the other method.
Mr. CouivSON. Our system is perfect. If we wish to
prevent an overissue our system is such we can check it
every day. There is a penalty for overcirculating.
Q: Isn’t the amount of circulation outstanding, Mr.
McLeod, pretty near the limit all the year round? Is
there really elasticity in the fall?
A. At the present time there is little elasticity.
Q. How can you explain the fact that ten years ago you
had deposits of 300,000,000 or 400,000,000 and now you
have deposits of about 750,000,000 and yet the note in­
crease has been about 75 per cent?
A. The wealth of the country has increased to a greater
extent than the active business of the country. Then
I may say, also, that we have got to the maximum circu­
lation at the present time in cash. We had to limit our
Mr. K night . We have got within 11,000,000 or
12,000,000 of the limit now.


N a t i o n a l M o n e t a r y Commi s s i on
Q. I speak more of elasticity.
Mr. K night . I mean of the notes available for circula­
tion. The variation of circulation is from 15,000,000 to
Q. You need about 50,000,000 or 60,000,000 out West
for the crops, don’t you?
Mr. Coueson. We paid out that amount of money and
were there redeeming them all the time.
Q. Then your 15,000,000 of circulation does not enter
into that 50,000,000 except for the West?
Mr. Coueson. In January last we had 30,000,000 that
we could issue before we reached the limit.
Mr. V r EEEand . Y ou mean in all the banks?
Mr. Coueson. I mean in all the banks.
Q. Last January?
Mr. Coueson. Last January. That 15,000,000 is what
the average of the circulation increased, but a great deal
more than that was paid out. Three or four times the
amount of that was paid out. We are redeeming this
every day. It is redeemed every day. It does not stay
out. It just passes out and comes back. We are redeem­
ing it at all the redemption centers. We have to keep
redeeming it every day, and we are keeping it out every
day. We always do that. When it gets up to the point,
we have to cease, but we may put out a very large amount
during that period; more than the 30,000,000. It keeps
turning over all the time. We redeem, at a time like the
present, $150,000 or $200,000 in Montreal and Toronto,
but that is day in and day out. Of course, we are
paying out as much each day, so it is only the excess


B a n k i n g and Cur r e nc y Systems
between what we are redeeming and what we are paying
out that goes to increase the volume of circulation.
Q. Your volume of circulation you consider the aver­
age per month?
Mr. C oulson . Yes.
Q. That is the average of each bank outstanding added
Mr. Coueson . It gives the daily outstandings. It
gives the average, and it gives the highest point during
the month. That is the return to the Government.
Mr. B onyng E. Y ou mean the statement made by the
bank to the Government?
Mr. C oueson . By the bank to the Government.
(Recess until 2.30 p. m.)
Q. Mr. McLeod, I see you have in your statement
24.000. 000 in deposits bearing interest and about
6.000. 000 in current accounts not bearing interest.
A. Yes.
Q. Is it your idea that this is about the proportion gen­
erally that the banks would average?
A. Y es; I think about that proportion.
Mr. K n igh t . Oh, no.
Mr. McL eod . Y ou mean they would have a larger per­
centage with interest?
Mr. K night . Yes.
Q. It is almost exactly two to one?
Mr. K n igh t . Yes.
Mr. McL eod . On referring to the statistics I find that
only 22.7 per cent of the total deposits in Canadian banks
are free from interest, so my estimate is practically correct.


N a t i o n a l M o n e t a r y Commi ssi on
Q. In this statement of July the Bank of Montreal had
$44,000,000 payable on demand and $88,000,000 payable
upon time. That was outside of government deposits?
Mr. K n igh t . Yes.
Q. Mr. Smith says the mortgage companies pay 3 % per
cent interest; isn’t there a possibility that they will ob­
tain deposits at the expense of banks if they pay a higher
rate of interest?
Mr. L a i r d . Yes; I think it is likely that paying that rate
they take some of the money that would naturally come to
us. I do not think it is very important.
Mr. B onyng E. The Canadian Permanent Mortgage
Company, that Mr. Smith represents, had a cash balance of
something over a million, and most of it on deposit with
Mr. Mo r r is . The Canadian Permanent Mortgage Com­
pany, I think, is an exceptional concern.
Q. It had practically 25 per cent cash reserve?
Mr. Mo r r is . Yes.
Q. It is the largest company of that kind in Canada,
is it not?
Mr. Mo r r is . Yes.
By Mr. V r EEEANd :
Q. I notice your current loans secured by bonds, de­
bentures, and stocks, $1,000,000; that is all secured?
A. Yes.
Q. Loans secured by grain and other staple commodi­
ties; those would be warehouse receipts and that form?
A. Elevator receipts for grain, etc.
Q. You mean stored grain?


Ba n k i n g and Cur r e nc y Systems
A. Quite a good proportion of the business is in America.
Q. Overdrafts; how many of these overdrafts have
been authorized and bear interest in proportion to the
amount used?
A. 'those are overdrafts—overdrawn accounts.
Q. Without the consent of the bank?
A. Sometimes without the consent.
Q. It is the aggregate of overdrafts and checks which
you considered good which you have paid?
A. No; they are the amount outstanding at the time
the balance sheet was made up. You state the amount.
Q. One hundred and fifty-nine thousand dollars.
A. Yes.
Q. What I was getting at is, you know, that, especially
in Scotland, they have a form of authorizing drafts with­
out any money in the bank?
A. Cash credit.
Q. And interest is paid upon the amount actually
used ?—I was getting at whether you follow any of that
line of business.
A. No; they have to borrow that money.
Q. 1 hese are simply temporary advances, payments on
checks ?
A. Yes.
Q. To be made up by deposits?
A. Yes.
Q. You have another form of overdraft authorized but
not specially secured, $88,000?
A. Yes.
Q. What does that mean, “ authorized?”


N a t i o n a l M on eta ry Commission
A. That is generally approved after the event.
Q. After the event?
A. Yes.
Q. These overdrafts that were not secured, the other
item, must have been approved before the event?
A. Not necessarily. They might be approved by the
manager, or granted by the manager and afterwards
approved by us.
Q. Notes and bills discounted and current; that is the
item of loan?
A. Yes.
Q. Does that include a great amount of single-name
A. No; a very moderate amount.
Q. What class of single-name paper would that be
mostly—actual paper purchased such as your banks would
consider good in the cities?
A. This item of single-name paper would be paper we
would purchase through brokers.
Q. Note brokers?
A. Yes.
Q. You have the note broker here?
A. No; we buy in Chicago and Boston.
Q. And that would be such single-name paper as is being
sold in the cities by large manufacturing concerns?
A. Yes; in addition we make some single advances in
this country, particularly to good clients.
Q. What would be the form the greatest portion of that
$ 1 3,000,000 of paper would be in ? Is it in the form of notes
for two or three or four months?


B a n k i n g and Cu r r e n c y Systems
A. Y es; portions of it would be bills receivable, trade
Q. It is business paper?
A. Yes.
Q. Do your loans on single paper, using that as a
general term, covering all kinds of notes upon time draw­
ing interest, correspond quite closely to our loans across
the border?
A. No; your loans on the other side are more generally
given on single-name paper. A large merchant will come
to the bank and apply for a loan; perhaps he would want a
loan of $100,000; he simply gives his note for it. The bulk
of our advances are against trade bills.
Q. A, merchant in St. Paul who is in first-class credit
makes arrangement with his banker and discounts his
bills and pays all of his accounts by check; what would
a similar concern do here in the city of Toronto, a firm in
first-class credit, what form would they have to be, manu­
facturer and wholesaler?
A. As your St. Paul merchant will make an arrangement
with two or three different banks to grant him a loan of
$50,000 or $100,000 or $150,000 each, then the chances are
he will sell his paper through a note broker; you have
these loans agreed to be made by his bank in reserve to be
used when panic or trouble comes. That is very often the
case. The Canadian merchant relies upon one bank to
take care of him. Sometimes an account is divided. I
think, perhaps, I may state with propriety that we have
catered more to trade bills than most banks do. That is,
as against single-name advances.


N a t i o n a l M o n e t a r y Commission
Q. What do you call a trade bill?
A. A bill given to a merchant for an invoice of goods, or
a draft drawn by a merchant on a customer some distance
Q. You call both of them trade bills?
A. Yes.
Q. Then your merchant here—you say you take care
of him—would make arrangements with your bank for
the money with which he would discount his bills and
pay them by check?
A. Yes.
Q. Would a firm here in first-class credit, a mercan­
tile firm, give its notes to a manufacturer or whole­
saler upon time for goods?
A. They sometime do.
Q. Would they accept drafts upon time for goods with
A. No.
Q. Your practice is that they discount their bills and
pay by check?
A. Yes.
Q. Making their arrangements for their money with
their bankers?
A. Yes; of course, where you go to the middleman,
or the wholesaler who supplies small purchasers through­
out the country, he draws on these small purchasers
and they accept the draft. As a rule, they do not pay
cash for their purchases.
B y Mr. H u b b e i x :
Q. Do you use a signed statement at all for your
single-name paper?


B a n k i n g and C u r r e n c y Systems
A. Yes.
Q. You do not use any audited inspection of a mer­
chant ?
A. No.
Q. Just your own judgment?
A. Yes; just a signed statement, and sometimes the
statement is attested by an auditor, but an auditor
selected by the merchant, not by us.
B y Mr. V r e ELANd :
Q. Do your banks buy foreign bills to any extent?
A. Bills drawn on Europe and Great Britain?
Q. Yes.
A. Yes.
Q. You make no distinction, I take it, between what
we call financial bills and commercial or trade bills,
A. We prefer the commercial or trade bill as against
financial bills.
Q. Do the banks here borrow to any extent from their
correspondents in London?
A. I think not. I think that the strongest banks
very seldom borrow from the London bankers.
B y Mr. B onyng E:

Q. Have any of the Canadian banks branches in
A. I think there is one in Paris—one of the French
Canadian banks has a branch in Paris—and there are
several branches in London.
Q. Are there any in South America?
A. No; not any in South America.


Statement of Ja n u a ry 30, 1909.

B a la n c e brough t forw ard from Ja n u a r y 3 1 , 19 0 8 _____
P ro fit fo r y e a r ending Ja n u a r y 30, 1909, afte r d e­
ducting expenses, in terest accrued on deposits,
reb ate of in terest on u n n iatured bills, and m akin g
provision fo r b ad a n d d oub tful d e b ts _______________
P rem iu m on new s to c k ________________ _____ ________

$ 6 1 ,9 0 2 .6 0

2 8 3 ,0 6 5 .2 7
2, 8 0 0 .0 0


D iv id e n d No. 70, paid M ay 1 , 19 0 8 __________________
D iv id e n d No. 7 1, p aid A u g u st 1, 190 8________________
D iv id e n d N o. 72, p aid N o vem b er 2, 19 0 8 ____________
D iv id e n d No. 73, p ay ab le F e b ru a ry 1 , 19 0 9 __________
C ontribution to officers’ pension fu n d .................................

Transferred to reserve fund from profits____________
Transferred to reserve fund, premium on new stock. .
Balance of profit and loss account carried forward___

$46, 80 0 .4 3
4 6 ,8 0 2 .3 8
4 6 ,8 0 2 .7 0
4 6 ,8 0 4 .6 7
7 .5 0 0 .0 0
10 0 ,0 0 0 .0 0
2 .8 0 0 .0 0
50, 257. 69

347 , 767- 87

347. 76 8
7- 7

A ssets.

L ia b il it ie s .
N o tes in circu latio n _____ ____________________________
D epo sits b earing interest (including
in terest accrued to d a te )_________ $ 1 4 , 1 2 8 , 286. 99
D epo sits not b earing in te re st______
1 ,8 8 5 ,9 2 0 . 93

$ 1 , 1 6 6 , 9 6 7 .0 0

Former dividends unclaim ed______________

1 6 , 0 1 4 , 2 0 7 .9 2
24. 00
46, 804. 67

Canada_____________________ _______
United States..............................................

2 2 1, h i . 76
19 6 ,9 0 8 .3 2

D ivid e n d No. 73, p ayab le F e b ru a ry 1, 19 0 9 .
D ue to other b an k s in —

C a p ita l______________________________ $ 1 ,5 6 2 ,5 0 0 .0 0
R e se rv e fu n d ________________________
1 ,8 6 2 ,5 0 0 .0 0
R eb a te o f interest on bills discounted.
4 1,0 0 6 . 12
B a la n c e o f p rofit an d loss account
carried fo rw a rd ___________________
5 0 ,2 5 7 .6 9
Federal Reserve Bank of St. Louis

1 7 ,6 4 6 ,0 2 3 .6 7

3 ,5 16 ,2 6 3 .8 1

2 1, 16 2 , 287. 48

T oronto , Ja n u a ry

jo ,

iq o q


G old an d silver co in __________________
$ 5 2 1 ,1 5 6 . 0 4
D om inion notes, legal te n d ers_________ 2 ,3 1 4 , 039. 00
N otes o f and checks on o th er b a n k s _________________
D ue from oth er b an k s in—
C a n a d a __________________________________________
U n ited S t a te s ___________________________________
G re at B r ita in ____________________________________
D om inion g o vern m en t and oth er first-class bonds____
L o an s on call on govern m en t, m unicipal, and oth er
bonds and s to c k s__________________________________
D eposit w ith D om inion g o vern m en t fo r secu rity o f
note circulation____________________________________
B ills discounted and ad van ces c u r r e n t_______________
L o an s to o th er b an ks in C an ad a secu red ______________
N otes and b ills overd u e (estim ated loss provid ed fo r ) .
B a n k p rem ises_______________________________________
R e a l estate oth er th a n b an k prem ises________________
O ther assets not included under the fo reg o in g _______

52,835,19 5.04
6 8 i,19 0 .59
2 8 5,723-32
284, 398. 20
33. 757- 27
2 , 0 3 0 , 846. 94
1 , 264, 486. 44

7 , 4 i S . 597 -80
6 1,0 0 0 . 00
1 3 ,0 6 8 , 2 4 3 .0 0
2 5 9 ,1 2 5 . 2 7
42, 9 8 1 .5 3
2 7 9 ,8 3 9 .8 9
10 , 000. 00
2 5 ,4 9 9 . 99
2 i , 1 6 2 ,2 8 7 .4 8

G eo . P. S ch o lfi ELD, General Manager.

N a t i o n a l M o n e t a r y Commission


B a n k i n g and Cu r r e n c y Systems
Interview with George P. Scholfield, general manager of the Standard
Bank of Canada.

B y Mr. V r e e e a n d :
Q. Mr. Scholfield, your head office is in Toronto?
A. In Toronto.
Q. How many branches do you have?
A. Seventy-seven.
Q. What would you say, Mr. Scholfield, about the aver­
age amount of cash reserves carried by the commercial
banks ?
A. As regards the proportion that should be carried?
Q. No; but the amount which is actually carried in cash
as reserves?
A. Yoti are speaking now of legal and specie holdings?
Q. I mean cash.
A. I think it will average between io and 11 per cent.
Q. Is that about what the Standard runs?
A. Yes; it varies from about 8 to 15 per cent. I think
in our last annual statement the amount of cash held was
over 16 per cent, but our financial year closes at the end
of January, when our current loans are rather less than
usual, so that naturally it has the effect of increasing our
cash reserves proportionately somewhat.
Q. Do you have any call loans with stock collateral in
your bank?
A. Yes, but not outside of Canada.
Q. Some of the banks do, I suppose, have call loans in
New York?
A. The Montreal, Commerce, British, Merchants, Royal,
and Nova Scotia are the chief Canadian banks, I think,

N a ti o n a l M onetary Commission
lending outside of Canada. In years past we have loaned
through our foreign agents, but not recently.
Mr. W e e k s . Do they charge a commission for doing it?
A. Yes; if they guarantee the loan.
By Mr. V r e e e a n d :
Q. January 30, 1909; this would be your last general
statement that is made according to law and published?
A. Yes; but the information supplied would not be
applicable to our to-day’s affairs in that we have since
absorbed the Western Bank, and with the acquiring of it,
together with the natural increase in our business, our
assets are nearly double what they were when the state­
ment you have in your hands was published.
Q. Absorbed the Western?
A. Absorbed the Western.
Q. Is the Western on this list of ours?
A. It is among the chartered banks.
Q. Was it the 1st of January that you absorbed that?
A. The assent of the treasury board, which is the final
act in absorption, was obtained in February last.
Q. I do not find any Western Bank in the list.
A. The 1 5th of February was the date of consumma­
tion. They would not have to send a government return
on that date.
Q. There are 31 chartered banks given us.
A. January, 1909, you are looking at there?
Q. Yes.
A. The end of January?
Mr. H u b b e r l . This is in Ju ly.


B a n k i n g and Cu r r e n c y Systems
A. The Western Bank statement would not appear in
the July return.
By Mr. V r e e k a n d :
Q. That is July, 1909. There were 32 last year?
A. Yes.
Q. Thirty-one are given here, not including yours, and
the Sovereign is included, and that leaves 30 now.
A. The Northern and Crown have recently been amal­
gamated, and perhaps they appear in the statement you
have in front of you as two rather than one. Both the
Northern and Crown are comparatively new institutions.
By Mr. We e k s :
Q. What do you think about the amount of reserve?
Is the reserve carried by the banks sufficient to provide
for the conditions which you have to meet?
A. Yes; I think, generally speaking and having a
regard to the Canadian situation, that the cash reserves
carried, while not generous, are sufficient for our purposes,
provided always, of course, that, in addition to the cash,
the quantity of government bonds or securities which
have an immediate market value and ready sale outside
of our own country are relatively substantial in amount.
Q. It seems that the number of banks in Canada is
constantly decreasing?
A. The present disposition, and I think a wise one, is
to decrease rather than increase the number of banks.
I do not think the needs of our country at the present
time would be better served by increasing the number,
but on the contrary I should be of opinion that if we


N a t i o n a l M o n e t a r y Commission
had fewer, but not materially fewer, and very strong
institutions, it would be moving in the right direction.
This is my opinion, of course, and there are many in the
country, and thoughtful men, too, who do not agree or
share in it. I should think it would be better if, in grant­
ing new charters, the government insisted that at least
$500,000 capital must be actually paid up before a bank
should be allowed to open its doors for business and issue
its circulation.
Mr. V r e e l a n d . T o get a new charter?
A. New banks may be safely conducted, and, we will
assume, very conservatively; but it is rather a difficult
matter to give to their shareholders for some years a
better return than say 4 per cent, and, having regard to
the double liability always existent, that can not be con­
sidered an attractive investment.
Mr. B o n yn ge . I s it necessary to go to parliament for
such new charter?
A. It is necessary to go to the government for a
charter. The charters of existing banks are renewed
every ten years, and in the event of a bank being ab­
sorbed its charter remains in force for winding-up pur­
poses, but after the approval of the treasury board has
been given it is forbidden to reissue its notes for circula­
tion, or carry on any business whatever, except to realize
upon the assets not included in the agreement of sale,
and discharge its liabilities. The Western Bank charter,
assuming that the transfer would have been assented
to by the treasury board, has a very substantial value,
but by reason perhaps of sentiment on the part of some


B a n k i n g and Cur r e nc y Systems
of the former directors of the Western Bank, who are
also members of the Standard Bank board, we should be
unwilling, except under very special circumstances, to
make a disposition of it.
B y Mr. V r e e e a n d :
Q. Was their charter any better than that of your
own bank?
A. No.
Q. The Standard?
A. No; it was not better. The officers of the Western
Bank, I understand, were of the opinion that by reason
of the name “ Western,” and our northwest now becom­
ing such a factor in our national life, it should have
more than the usual value attaching to a name, but I am
not prepared to admit or deny the soundness of that
contention. When a bank’s liabilities have been dis­
charged a surrender of the charter will be permitted.
Mr. W e e k s . Would it die if the bank failed?
A. Yes; the failure would operate as a forfeiture of the
charter, except so far as the latter would remain in force
for the winding up of the business, and if necessary the
enforcement of the double liability.
B y Mr. V r e e k a n d :
Q. What is there about the charters expiring in 1 91 1 ?
A. A decennial revision is made and the charters are
continued in force during that period as regards name,
capital stock, shares, value, and head office; but, of course,
a bank meantime might be permitted by application to
increase or reduce its capital stock; and also assuming
that meantime it did not become insolvent or fail to per­
form the conditions required under the act.


N at ion a l M o n et a r y C o m m i s s i o n
Q. As a matter of law your charters do expire in 1 9 1 1 ?
A. As I have explained previously.
Q. It would be at the option of the Dominion govern­
ment parliament to renew them?
A. Quite so.
Q. How long would they renew them?
A. Ten years. They are decennials.
Q. They are renewed every ten years?
A. Yes.
Q. The government has shown a disposition to accede
quite generally, haven’t they, to the wishes of the banks?
A. Yes; quite so. The attitude of the government
would appear to give the banks quite as much responsi­
bility as they are willing to accept.
B y Mr. W e e k s :
Q. You think it is a good thing for the business of the
country that the banking is being concentrated in so few
hands ?
A. Yes.
Q. That the number of banks are being decreased in­
stead of increased?
A. Yes; within reason.
Q. What would you call reason?
A. Having regard to our small population of 6,000,000
of people, I think the present number sufficient for our
purposes. I do not think we would suffer if we had 20
banks rather than 30; in fact, I should be inclined to
think we would be better off, but doubtless if we had too
few banks the public might think, and we have frequently
heard suggestions of it, that by reason of the control being
in so few hands it might be termed a monopoly.


B a n k i n g and Cur r e nc y


B y Mr. B o n y n g e :
Q. Have you an executive committee of the Canadian
Bankers’ Association?
A. Yes.
Q. How is that executive committee appointed ?
A. The executive committee is elected by the members
of the association at their annual meeting.
Q. How many banks are represented on the executive
committee ?
A. I think 18 or 19.

B y Mr. V r e ELANd :
Q. I understand any bank has the right to join the
association ?
A. All the banks named in the schedule at the time of
incorporation became members of the association, and
subsequently any other banks, after having obtained the
right to do business, upon application have been admitted.
I do not think there is a Canadian bank carrying on busi­
ness at the present time that is not a member of the asso­
Q. It says in the law “ Any bank to which the bank act
applies, carrying on business in Canada and not named in
the schedule to this act, shall, on its own application, at
any time be admitted as a member of the association by
resolution of the executive council hereinafter named.”
A. A bank is admitted by resolution of the executive
Q. To what extent is the number of associated banks
increasing ? There were 34 at the time this act was passed
in 1900.


N at i o n a l M o n e t a r y C o m m i s s i o n
A. The number has decreased somewhat in the last few
years by reason of failures and absorptions.
Q. I was about to ask you to what extent the associa­
tion is able to fix along mutual lines, for instance, rates of
interest and rates of discount and rates of exchange, and
other matters that would be of general interest?
A. The association has no powers in this respect other
than moral suasion, and would be unable to penalize a bank
which was unwilling to accept the views of the majority.
Q. Do not the associated banks of the association have
any understanding about what rates of interest shall be
A. The fixed rate for deposits is 3 per cent, except in
specially provided cases, such as to employees of the bank,
municipal corporations, and pension funds. In respect to
these there is no maximum or minimum. Two or three of
the newer banks have maintained that they should be
privileged to offer a higher rate than 3 per cent, and this
is not objected to by the larger and older banks. I do not
think the banks, other than some of the newer ones, would
be desirous of paying a higher rate than 3 per cent, and
although some banks have been charged with it, I am not
inclined to believe that any bank has broken the 3 per
cent rule.
Q. Does the association make any attempt to enforce
discipline in such cases?
A. If a bank offends, the association is powerless beyond
that the general managers could instruct their representa­
tives in the various clearing houses to move in the direction
of having the offending bank dismissed from the privileges
of those clearing houses.


B a n k i n g a n d C u r r e n c y Syst ems
Q. You do not, as a matter of fact, attempt to inflict
punishment ?
A. No.
Q. Except by talking with them about it?
A. Yes.
Q. Does the same understanding exist with regard to
loans ?
A. No; that in my opinion, would be absolutely impos­
sible, as loans, even for similar amounts, are so entirely
different in character.
Q. Are rates of discount cut somewhat by competition
between banks for the purpose of getting business ?
A. They were very frequently prior to 1907. Since that
time banks do not seem anxious to cut the rate, nor are
the public so willing to make a change, seemingly rather
preferring, if necessary, to pay a slightly higher rate than
trust themselves in the hands of new friends.
B y Mr. WEEKS:
Q. Do you think savings accounts should be segregated
and invested under special regulations, or used as they
are now?
A. I do not think savings accounts should be segregated
and invested under special regulations. Experience has
taught us that, no matter how badly banks are man­
aged, or even, I might add, dishonestly, depositors, except
in the case of very small institutions, do not run much, if
any, risk of loss under the conditions of our present bank
Q. You think the government policy regarding postal
savings banks is a wise one?
Federal Reserve Bank of St. Louis


N a t i o n a l M o n eta ry Commission
A. It is useful in serving the purposes of particularly
timid people, but apart from this I do not think any par­
ticular benefit accrues from it.
Q. I refer particularly to collecting this money and
using it as receipts ?
A. Using it as what?
Q. As receipts, as ordinary revenue, without any re­
serve against it?
A. Of the specie held by the government a sum equal
to io per cent of the amount of the savings-bank deposits
is held as a special reserve as against those deposits. The
balance of the specie would be available for taking care
of the government’s note circulation.
B y Mr. B o n yn g e :

Q. What have you as reserve against the postal savings?
A. A little less than 6,000,000.
Q. You know the amount of the postal deposits?
A. About 59,000,000.
Q. Do you think the postal savings banks in Canada
are of material benefit to the people ?
A. I think they serve the purpose at the present time
in providing an assuring depository for nervous people
who feel that the government’s guaranty is the only
proper protection for their savings. As a matter of fact,
I think the people would be practically quite as well
served, and certainly much more conveniently, by the
banks. The government in return, in a new and growing
country like Canada, could well afford to obtain its money
abroad even at a slightly higher cost and leave the peoples’
money available for the banks to be used in the channel’s
of trade.


B a n k i n g and Cur r e nc y Systems
B y Mr. V r EEEANd :
Q. Are you familiar with the details of depositing in
the postal savings bank?
A. Fairly so, I think. You mean the time necessary
for withdrawal and the maximum amount of the deposit?
Q. Yes; the limitation upon deposits.
A. You mean up to 3,000?
Q. Yes.
A. Yes.
Q. Is it up to 3,000 they are permitted to deposit?
A. Yes; 1,000 in any one year and 3,000 is the maxi­
mum. Of course, trust accounts are sometimes created
by which the maximum difficulty is eliminated by the
Q. Then how much detail is there to withdrawing
funds? For example, in an ordinary time, the method
of it?
A. The book has to be sent to Ottawa, together with
the receipt, and if in order a check is returned to the postoffice to which the depositor has applied.
Q. Would it have to be sent from Toronto?
A. Yes.
Q. In all cases down to Ottawa?
A. It is a federal savings bank, not a provincial.
Q. The holder of the book would have to present it at
the post-office in Toronto with his application, and then
it would have to go to Ottawa?
A. Yes; I think there would be no other way, and a
savings-bank check would be sent back to the post-office
for delivery to the depositor.


N at ion a l M o net a r y C o m m i s s i o n

Drawn upon what?
Drawn upon the Bank of Montreal, Ottawa.
Payable at any of its branches?
Yes; or at the offices or branches of all other banks.
B y Mr. B o n yn g e :
Q. Have to send the book from the western country
to Ottawa, too?
A. I believe so.
B y Mr. We e k s :
Q. The government issues these checks and books?
A. The Dominion government.
Q. Is the bank capital increasing rapidly under the
mode of requirement?
A. You mean so far as circulation is concerned?
Q. Yes; so far as circulation is concerned.
A. The government and banks were a little fearful that
during the grain-moving periods the sum might not be ade­
quate, and to meet this the issue of temporary circula­
tion, known as “ emergency circulation, ” has been author­
Q. It looks as if in three or four or five years you might
get to a point where you might need more capital or further
means of getting circulation.
A. Yes; quite possibly, but when the situation arises it
will be met either, I think, by additional circulation being
permitted as against capital, capital and reserve, or gold
B y Mr. B o n yn g e :

Q. What amount of notes does your bank ordinarily
have outstanding?


B a n k i n g and C u r r e n c y Systems
A. About 80 per cent.
Q. Eighty per cent of the authorized amount?
A. Of the paid-up capital.
Q. Of the paid-up capital?
A. Yes.
Mr. V reega n d . The capital since 1900, Mr. Weeks, has
increased from $67,000,000 to $96,000,000 in round num­
bers; the surplus has increased from $34,000,000 to
A. The increased emergency circulation now permitted
is the amount of paid-up capital plus 15 per cent in excess
of that amount together with 15 per cent of the amount of
the reserve.
Mr. B onyng E. When you can not loan any more money
here in Toronto you stop discounting at all of your branches
at the same time, I take it?
A. No; not necessarily. In times of stringency banks
are inclined to insist upon the curtailment of loans more
in the centers, perhaps, than in the rural districts, but, of
course, at all times having regard to the character of the
account concerned.
Q. And would not necessarily take the same course in
regard to loans in the Saskatchewan district that you
would in Toronto or Montreal?
A. No; you would have regard to the individual and his
occupation. As, for instance, the idea of declining to loan
a farmer money to buy cattle for grazing when he already
had the pasture would be, I think, approaching waste, but,
on the other hand, a banker would not hesitate when
money was tight to insist that his large business customers
must not ask to extend their operations.


N at ion a l M o n e t a r y C o m m i s s i o n
Q. The reason I asked that question is to try to come to
a conclusion whether your branch in the country will an­
swer the purpose for the people as well as an independent
A. I think it answers better, because, as I have stated, if
any favoritism is to be shown by the bank to its customers,
those in the country will doubtless be more generously dealt
with than the business community in the larger centers.
By Mr. V r e e e a n d .
Q. I notice in the statement made before your consol­
idation that you had at the time about $16,000,000 of
deposits, and $14,000,000 of it was upon interest; the
other was current deposits not bearing interest?
A. Yes.
Q. Do you think in the banks generally as large a pro­
portion of deposits are interest-bearing deposits?
A. The proportion of interest-bearing deposits to the
whole in the bank of which I am general manager is some­
what above the average, but I do not regard this alto­
gether as an unfavorable feature, in that our branches are
largely in the smaller places. Consequently we have
fewer numbers relatively, I think, of temporary large free
balances, but, on the other hand, the small deposit,
upon which you do allow interest, is of a much more stable
character and can be depended upon to remain, and per­
haps grow, so that the amount of cash reserve that has to
be carried as against this class of deposit is not so great.
By Mr. W e e k s :
Q. You mean you pay a higher rate?
A. No; 3 per cent is the maximum rate we pay.
Banks have different ways of making up their govern-


Ba nk i n g and Cur r e nc y Systems
ment return and sometimes use their current ledger
balances containing loan company and other large ac­
counts for the purposes of making up noninterest-bearing
deposits, but we are absolutely careful in this respect
and select every account in our current ledger that
returns anything whatever in the shape of interest, and
include the balance in the interest-bearing deposits.
B y Mr. V r E E E A N d :
Q. Notes of and checks on other banks, $681,190.59;
you call that a cash item?
A. They are cleared on the day following the return,
and actual cash is received for them, but, on the other
hand, checks and notes drawn on the bank itself appear
as a balance against them in the same clearing to which
I refer, but one is not an offset as against the other in
that under our clearing-house rules until such time as
checks and notes have been actually accounted and paid
for they are ear marked on behalf of the depositing bank,
so that in the event of a bank which was a member of
the clearing house failing, the securities of all other banks
lodged that day and drawn on it would be returned to
the depositing bank.
Q. Cash assets: due from other banks, $285,000 in
Canada, $284,000 in United States, $33,000 in Great
Britain; you call that a cash asset ?
A. Subject to check without notice.
Q. Loans on call on government, municipal, and other
bonds and stocks, $1,250,000?
A. Those are call loans.
Q. Where are they located?


N a t i o n a l M o n e t a r y Co mmi s s i o n
A. In Toronto.
Q. Do you have a strictly call market here?
A. It can hardly be so designated. However, it is
some years, with the exception of 1907, since call loans
by solvent houses have not always been promptly met
when asked for, and even during the stress of 1907 our
best brokers asked no favors.
B y Mr. B onyng E:
Q. Did you include these items Mr. Vreeland has re­
ferred to in making up your 13 or 14 per cent reserve?
A. No.
Q. Those are in addition?
A. Yes; our immediately available assets usually
amount to 35 or 40 per cent. When I referred to cash
reserve I had in mind only government legals and specie.
This is the Canadian acceptation of the term “ cash.”

B y Mr. V r e e e a n d :
Q. You have $2,835,000 as your issue of coins and
Dominion notes?
A. Yes.
Q. As against deposits of $16,000,000 and note issue
of $1,100,000?
A. Our reserves are usually rather larger at the end
of January, since at that time of the year the grain has
been realized upon, loans are paid off, and deposits some­
what increased.
Q. In the States quite a considerable portion of your
items would be counted in the reserve—that is, due from
other banks ?


B a n k i n g and Cur r e nc y Systems
A. Yes; we have what we call quick assets, and the
figures above the line of the statement that you are holding
in your hand constitute such in our minds. Those assets
are all supposed to be realizable upon immediately; on the
other hand, even the deposit with the government for the
redemption of the bank notes, although absolutely good,
of course, could not be termed a quick asset, and conse­
quently it appears below the line.
Q. You know where it is, so that you could go and get it?
A. That is it.
Q. You have an entry, “ First-class bonds, $2,030,000; ”
those you own ?
A. Those we own.
Q. Would that $2,000,000 include some first-class railroad
A. Yes; but chiefly municipal.
Q. Is it the policy of your banks generally to hold
considerable portion of government or other first-class
securities as secondary reserves?
A. Yes; should a bank require it, it would be likely to
have arrangements abroad whereby that it could borrow
money upon these securities at any time, and even
though the markets of the world were not in a particu­
larly comfortable position. An arrangement such as this,
and which has been definitely arrived at, is practically as
available in time of need as foreign balances.
B y Mr. W e e k s :
Q. Do you own your own banking house?
A. Yes.
Q. Do you own your own branch houses ?

N at ion a l M o n et a r y Commi ssi on
A. We own quite a number.
Q. You own them?
A. We paid for them. We do rent at some places.
B y Mr. V r e e e a n d :
Q. What forms of commercial paper do you have?
A. General.
Q. You have, for instance, the indorsed notes such as
we have across the border?
A. Yes; different classes. We have single-name paper
to some extent in the farming communities; we have the
indorsed accommodation paper; we have strictly com­
mercial paper and what we term collateral paper under
Q. Your paper would correspond quite closely to our
lines across the border?
A. I think so, except that your banks, I understand,
specialize to some extent. By that I mean one institution,
doubtless through the personnel of its directorate, has a
leaning toward lumber accounts; and other leather
accounts, merchants’ accounts, etc.; at least that is as I
understand your practice. We have no particular prefer­
ence for any class of business other than what may obtain
in the particular locality in which our branches are
Q. Do you have much paper following the lines of com­
mercial paper in Great Britain and in France and Ger­
many—that is, paper based upon the actual business
transaction in the form of bills? For example, a manufac­
turer in Canada sells a bill of goods to a merchant, what
would be the ordinary method by which your merchant


B a n k i n g a n d C u r r e n c y Systems
would pay his bills? Would he make arrangement with
his banker and send a check, or would he accept a draft
perhaps on time from the manufacturer?
A. Transactions vary in this respect. Some manufac­
turers prefer to draw upon their customers, particularly
if the people to whom they sell are jobbers, while, on the
other hand, some purchasers, if they are quite good, have
a prejudice against accepting drafts and pay by check.
In the majority of instances in Canada as yet our retail
merchants are unable to pay cash, so that it is the prac­
tice rather than otherwise for the wholesaler or manu­
facturer to draw upon his customers.
B y Mr. V r EEEANd :
Q. Suppose there is a general store in first-class credit
would they be expected, and would it injure their credit,
if they accepted time drafts from manufacturers of whom
they buy goods or wholesalers?
A. No; it would not necessarily have any bearing upon
his actual credit, unless the drafts were drawn for a time
that would show that the buyer was unable to discount
his purchases, which would of course show a weakness.
Q. Would the practice be for your merchant to accept
drafts from the wholesaler and manufacturer upon time,
or does he make arrangements with his banker so as to dis­
count his bills and pay cash?
A. If he is in a strong position he would make arrange­
ments with his banker for assistance to enable him to dis­
count his purchases, but to do this he would require in all
probability to be in a position to discount all his purchases
and with only a comparatively small amount of assistance
on the part of the bank.


N a t i o n a l M o neta ry Commission
Q. I am talking about a firm of first-class credit.
A. Yes; he would send his check.
Q. He would not be expected to accept drafts upon
A. No; because he would lose his discount.
Q. I am trying to get at whether you follow the lines
of commercial paper we have in the States, or whether you
follow the lines of commercial paper abroad ?
A. An accommodation to a merchant by a bank to as­
sist him in discounting his purchases would be styled by
us accommodation paper, not commercial paper.
Q. Growing out of an actual commercial transaction?
A. Yes; even if growing out of an actual commercial
transaction it would still be accommodation so far as the
banker and purchasing customer are concerned.
Q. Bills discounted and advances current $13,000,000;
that is the same item of loans here?
A. Yes.
Q. Those would be mostly made up of notes given for
time, probably not to exceed four months? What is the
usual time?
A. Four months would be about a maximum for ordi­
nary commercial paper, although sometimes six months’
terms are given. In a manufacturer’s account the col­
lateral he lodges and made by farmers is frequently drawn
for one and two years.
Q. Do you follow the system of permitting overdrafts
and charging interest upon the cash actually used?
A. As far as possible we avoid making loans by way of
overdraft. We think, and so advise our branches, that it


B a n k i n g a n d C u r r e n c y Systems
is wholesome that if a man requires accommodation he
should come to the bank and make arrangements for it,
telling what he needs it for and fixing a specific date for
repayment, and we think also that when a customer is
compelled to explain to his banker why he needs the
money the transaction, from his standpoint at least,
usually has merit. We discourage the idea of overdrafts
as far as it is practicable.
Q. You do not follow that system?
A. No.
Q. Of advancing and charging actual interest upon the
amount used?
A. Occasionally, but not usually.
Q. What extent do you take single-name paper without
A. We are inclined to think our single-name paper is,
as a rule, the strongest paper we hold, as it is loaned to
farmers and through the small country branches, and the
losses in the rural offices are in reality very small. Manu­
facturers, of course, are expected to supply collateral paper,
and frequently pledge their goods under a section in the
act known as No. 88.
Q. You have some excellent provisions in your law
from the banker’s standpoint here?
A. You are quite right. The act gives the bank a
decided preference over other creditors if it avails itself
of the protection possible, but in the long run I find diffi­
culty in persuading myself that in many instances the
privilege is not abused, and it would be better, even for
itself, if the bank had not possessed it. The customer,


it is generally understood, is quite at liberty to use the
goods thus pledged without reference to the bank, and it
is almost unknown where criminal proceedings are insti­
tuted in this connection; but, on the other hand, where
goods are warehoused and a shortage obtains prosecu­
tions are relatively not infrequent.
Q. Of that twelve millions what proportion would you
say was secured in any way?
A. Oh, possibly 90 per cent; but, as I told you before,
I would regard perhaps the remaining 10 per cent as the
Q. Is it the practice for banks to loan upon one name
that is considered good?
A. It was not a few years ago, but banks have no longer
any particular feeling in that respect, save that, of course,
we always like two names rather than one if we can get
Q. To what extent do you require indorsements on
A. There is no particular percentage; each transaction
is dealt with on its merits, whether it be single or double
name paper.
Q. Do you use it to a large extent?
A. Single name?
Q. Indorsed notes requiring the men to have somebody
else indorse their notes.
A. Yes; in cities particularly the great bulk of the paper
is either indorsed or otherwise secured.
Q. You have indorsed notes in general use, do you?
A. Yes.
Q. Especially in the cities?

Ba n k i n g and Currency


A. Especially in the cities.
Q. Your lines of paper follow quite closely ours across
the line?
A. Yes; I think so.
Q. You have the single-name paper that we use, a note
given by a man for three or four or six months, whatever
it may be?
A. Yes.
Q. Then you have the line of paper with two or three
names on, perhaps with two indorsers besides the maker?
A. Not the paper such as is sold upon the bond market
in your country; that is unknown in Canada, although
some of your paper of this class is purchased when funds
are plentiful by Canadian banks.
Q. Then you have the note with collateral security?
A. We do not lay the same stress I think upon names
in Canada that you do under your system. We are
rather more concerned about the nature of the transac­
tion which is involved. Our wealthy people are limited
in number, and their names are not frequently found on
paper offered for discount, so that a Canadian banker
has usually first to conclude that the nature of the pro­
posed transaction with which the paper is associated is
Q. Supposing some one in town doing business wants
to enlarge his business and purchase an extra amount
of goods.
A. Yes.
Q. He hasn’t collateral to put up; he hasn’t stocks or
A. Yes.


N a tio n a l M onetary Commission
Q. Could you under your bank laws take security on
his stock of goods?
A. If he were a manufacturer, wholesale shipper or
dealer, you could; but you could not take security from
an ordinary retail merchant except for past indebtedness,
and then it would have to be done under the Ontario
Mercantile act, or what we term a chattel mortgage, of
which the world would have notice, and his credit would
be practically ruined.
Q. You say to him: “ We do not feel quite at liberty to
advance this money on your own account; can you get
someone that is responsible to indorse your note?”
A. No; we should not say that.
Q. How would he get his money?
A. He would not get his money from the bank, unless
it was a temporary expedient and for a specific purpose,
and the bank knew quite well that its advance would be
repaid at a very early date, as otherwise, even though he
supplied an indorser, we should be putting capital into his
business rather than lending him money—something that
Canadian bankers, I think, should decline to do.
Q. Assuming he merely wishes to discount a check and
save the discount, and you think his credit is such you
would want to loan it on his single name?
A. And he will be able to repay it at maturity?
Q. Yes.
A. The indorser will satisfy you then.
Q. You would say to him then: ‘‘ Get some respectable
indorser to back you up?”
A. Yes.



B a n k i n g a n d C u r r e n c y Systems
Q. You do that sort of business?
A. It is not frequent, though.
Q. It must be that a tradesman, as a rule, doesn’t bor­
row money of you ?
A. Only when he is able to discount his purchases with
but relatively small assistance from the bank. We do
not encourage the lending of money by our officers to a
merchant who will be unable to meet the obligations at
an early date, even though he did supply a good indorser.
Q. Because a small percentage of them can not half
secure you?
A. Money should be put into the business not in the
shape of a loan, but in the form of capital.
Q. H qw will he introduce capital; he is trying to get
some capital to put in his business?
A. No; we do not think we should go into partnership
with him.
Mr. W e e k s . Y ou do not propose to furnish capital to
go into a business?
A. No.
By Mr. H u b b e e e :
Q. How do you judge his ability to pay; there is a
signed statement?
A. That is not sufficient, even though it were an
audited statement rather than a signed one, as the
auditor’s certificate usually certifies that the statement is
correct as shown in the books, but having no regard to
Q. Isn’t he liable if he makes a false statement?

N a t i o n a l M on e t a r y Commi ssi on
A. Yes; he would be for obtaining money under false
pretenses, but prosecutions rarely follow, and the mis­
demeanor is frequently difficult of proof.
Q. That is your ordinary judgment of him and not
from any ordinary figures he gives you?
A. Yes; you have your judgment of the man and the
statement he supplies.
Q. You require both?
A. I neglected, perhaps, to cover that ground fully.
We should require, first, to know what the money was
needed for; secondly, the character and capability of
the borrower, and lastly, the security, either of himself
or otherwise, that he had to offer.
Q. That is the ordinary method?
A. That is the ordinary method.
B y Mr. V r e e e a n d :
Q. Are bills to any considerable extent paid by means
of time drafts? A manufacturer sells to a dry goods
store a bill of goods, and makes a draft on them for two
or three months?
A. Yes.
Q. Draft accepted?
A. Yes.
Q. Then the manufacturer takes the bill to the bank?
A. Yes.
Q. Is that thing done to any great extent?
A. Yes.
Mr. W e e k s . Don’t you think it would be a good thing
to develop that idea? When the manufacturer or the
builder sells he draws on the purchaser, and you get the
two names—you know it is a bona fide transaction.


B a n k i n g and Currency Systems
A. Yes; that is what we endeavor to develop. We
should like to discount for a manufacturer only paper
drawn on the purchaser and for which value had been
given and received; but we frequently discount all such
paper for him and supply him with some capital in ad­
dition, although on the security of a pledge of his goods
and perhaps an assignment of his book debts.
Mr. H u b b EEE. Some of your firms refuse to give you
their business paper and prefer to borrow on other firm
A. Yes.
B y Mr. V r EEEANd :
Q. Are there any defects in your system that you think
should be corrected by additional legislation?
A. The government will probably see sufficient defects
without our suggesting any, and, so far as our side of the
question is concerned, we would be, I think, content to
leave matters as they now stand.
Q. Do you think there should be any government
laws as to examination, for example? You have no
examinations ?
A. You mean outside examinations?
Q. Yes.
A. External inspection?
Q. Yes.
A. I should certainly be in favor of inspection, either
governmental or by the Canadian Bankers’ Association,
if it could be sufficiently thorough to do what it purports
to do; but, on the other hand, if that can not be accom­
plished, and I am somewhat doubtful of its practicability,


N a t i o n a l M o n e t a r y Commission
then I should prefer no inspection whatever, as it is only
inducing deception by the banks seemingly making a
profession to the public that an examination of their
affairs has been made and found sound, which might be
entirely misleading. The system of routine has been
very much improved in late years in banks, so that
adjustments as between branches in a large bank can now
be made in a few hours, whereas a few years ago it was a
matter of weeks, so that the inspection of banks, if seri­
ously undertaken, might, I think, be accomplished,
although I am strongly of the opinion that it should be
done through the Canadian Bankers’ Association rather
than the government.
Q. Do I understand you are in favor of an examination?
A. Yes, decidedly so, provided it can be competently
and thoroughly done.
Q. If such an examination is made by accountants of
character and reputation?
A. I should not value 'the certificate of a chartered ac­
countant. He undoubtedly could add up the columns
and balance the books correctly, but when it came to a
discussion of the merits of the paper, which really is the
final analysis as to the solvency or otherwise of a bank, I
would not give twopence for the opinion of the ordinary
accountant, unskilled and inexperienced in valuing paper,
and to which he would be an absolute stranger.
Mr. W e e k s . In an examination, you do not expect that
they will pass upon the character of the paper.
A. No.


General statement fo r December
L ia b ilitie s to th e public:
D eposits and accrued in t e r e s t .. $ 3 ,9 9 8 ,8 3 8 .1 0
D eb en tu res (sterling) an d a c­
cru ed in te rest (1,9 7 6 ,5 14 9s.
4 d .) -------------------------------------- 9 .6 1 9 ,0 3 7 .0 7
D eben tures (curren cy) a n d a c­
crued in te re s t_________________ 3 , 1 0 7 , 7 7 7 . 7 7
D eben ture sto ck and accru ed
in terest (87,850 6s. n d . ) ___
4 2 7 ,5 3 8 .3 5
S u n d ry acco u n ts________________
11,4 6 9 .5 6
L ia b ilitie s to shareholders:
C ap ital s to c k ____________________
R eserve fu n d ____________________
D ivid en d s u n cla im ed ___________
D ividend p ay ab le Ja n u a ry ' 2.
19 0 9 ________
B ala n c e
carried fo rw ard
credit o f profit and lo s s _______


, 1908.

M ortg ag es on real e s ta te ______________________________ $ 2 3 ,2 0 9 ,6 3 9 . 79
A d v a n c e s on bonds an d s to c k s _______________________
9 5 2 ,4 8 6 .3 6
M u n icipal deben tures, bo n d s, a n d o th er se c u r itie s..
6 2 0 ,3 5 9 .2 0
O ffice prem ises (Toronto, W in n ipeg, R eg in a , and S t.
Jo h n , N ew B r u n s w ic k ) ____________________________
3 9 8 ,3 7 1 . 1 9
C ash on han d and in b a n k s _____ .'.__________________ _
x, 284, 446. 87


$ 1 7 , 1 6 4 , 660. 85

6 ,0 0 0 , 000. 00
3 ,0 0 0 ,0 0 0 .0 0
6 3 .9 0
2 10 ,0 0 0 .0 0
90, 578. 66

9, 300, 642. 56
26, 4 6 5 ,3 0 3 .4 1

2 6 ,4 6 5 .3 0 3 - 4 1

R. S.



u d so n ,

Ma ssey,

Jo in t General Managers.

We beg to report that we have made an audit of the accounts, and examined the vouchers and securities of the
Canada Permanent Mortgage Corporation for the year 1908. We certify the accompanying statement is a true exhibit
of the corporation’s affairs as shown by the books as at December 3 1, 1908.
A. E . O s l e r , A. C . A.,
H e n r y B a r b e r , F. S. A. A. (Eng.),

T o ronto,

Ja n u a ry x6, 1909,

B a n k i n g a n d C u r r e n c y System


Interview with George H. Smith, Secretary of the Canada Permanent
Mortgage Corporation.

B y Mr. V r e e e a n d :
Q. Mr. Smith, what is your bank?
A. Our corporation is not a bank.
Q. It is a form of bank ?
A. We do not call it a bank.
Q. I take it you receive deposits?
A. We receive deposits.
Q. And loan them?
A. And loan them, primarily on real-estate securities.
The name of the company is the Canada Permanent
Mortgage Corporation, of which I am secretary.
Q. Do you have debentures of your own to sell against
these loans on which you guarantee the payment of the
loan and interest?
A. We issue debentures, but not against any particular
loan or any particular number of loans.
Q. They are general?
A. General debentures.
Q. With your responsibility added to them?
A. With our promise to pay.
Mr. W e e k s . What rate of interest do you pay on de­
posits ?
A. Three and one-half per cent.
Mr. V r e e e a n d . Have you a statement with you of
your bank?
A. Yes.
By Mr. W e e k s :
Q. Are these deposits subject to call?
A. Subject to thirty days’ notice.

-*4 .


B a n k i n g and Currency Systems
Q. They are not subject to check at all?
A. They are subject to check with that reservation.
B y Mr. B o n yn g e :

Q. Have you ever enforced the thirty-day notice?
A. We never have.
Q. Are there many such companies as your company
in existence?
A. Throughout Canada they vary slightly; there are
some which do not take deposits, but only issue deben­
tures. Of all classes, I should say there are seventy or
Q. You are a member of the Bankers’ Association?
A. No.
Mr. WEEKS. D o you loan on all kinds of real estate
or do you confine it to some particular class?
A. No; wemakenoiestrictions. The application is con­
sidered on its merits. There are many classes, of course,
upon which we should be a good deal more careful in
loaning than we should upon others.
Mr. B o n yn ge . Y ou loan upon urban and farm prop­
A. Both.
Mr. W e e k s . D o you know how much money is de­
posited in Canada in such companies as you represent?

A. The statement that the government issues from the
returns made to it includes not only such companies as
ours, but the trust companies as well, so that I can not
answer that definitely.
Mr. V r e e e a n d . The government issues a separate re­
port of that branch of banking?

h i

N a t i o n a l M o n e t a r y Commi ssi on
A. We have a report including the building associa­
tions, loan companies, land companies, and trust com­
panies. The total deposits by the last statement of all
these companies, including the trust companies, are
$22,953,000— about $23,000,000.
Mr. B onyng E. I s there a general statute governing the
organization of such companies as yours, or do you get
special charters?
A. There is a general statute, and a few companies have
special charters, but the special charters are very much
along the line of the general statute.
B y Mr. V r e e l a n d :
Q. Don’t you have to get a special charter from Parlia­
ment in all cases before you can commence business ?
A. No; generally speaking that is so. But in Ontario,
for instance, there was, some years ago, an act under which
some of the companies were incorporated merely by order
in council. Some of these companies are very old. A
company coming up for incorporation now would have to
get a special act.
Q. They are separate institutions altogether that were
incorporated under a general act?
A. Yes; under a general act. You were speaking of
the deposits and debentures. I might perhaps say that
both under the general act and under any special act that
a company might have it would be limited as to the
amount it might receive in either of these ways. The
total amount that any such company as ours can receive
on deposit is limited to the amount of its paid-up capital.
It is not permitted to receive them to an indefinite extent.


Ba n k i n g and Currency Systems
Q. Your deposits can only be equal to your capital ?
A. Yes; to the capital actually paid in.
Q. Not even including your reserve?
A. Not even including our reserve.
Q. Your deposits are limited to $6,000,000?
A. Our deposits are limited to $6,000,000, but the total
liabilities, including both the deposits and debentures, are
limited to four times the paid-up capital. You can see
from our statement the larger proportion of our liabilities
is debenture money.
Q. When you receive deposits what rate of interest do
you pay?
A. Three and one-half per cent.
Q. What do you give your customer; do you have a
book or a certificate of deposit?
* A. Generally speaking, a book. He may have a certifi­
cate of deposit if he prefers it.
Q. What time do you give yourself for notice for re­
A. We reserve the right of thirty days’ notice. As I
stated in reply to some gentleman’s inquiry a few mo­
ments ago, we have never required that.
Q. Always pay cash?
A. Yes.
Q. As a cash asset you have on hand money to the
amount of a million and a quarter in this statement?
A. Yes.
Mr. B o n yn ge . I s your cash actually in your vault, or
on deposit at other banks?

A. Most of it deposited with the banks.

N a t i o n a l M o n e t a r y Commission
B y Mr. V r EEEANd :


You have liabilities here of $17,000,000?
Yes; we are well within our statutory limitation.
All of it payable at thirty days’ notice?
No; the debentures are for various terms.
It is only your deposits that are payable that way?
Then you carry cash of about 25 per cent against
The actual cash exceeds 25 per cent, but we also
other quick assets.

B y Mr. B onyng E:
Q. You have an actual cash reserve of more than 25
per cent?
A. Yes; and other quick assets in the shape of bonds
and loans on call.
Q. Do you loan upon unimproved property?
A. No; it is not our practice to do so.
Q. What per cent of value do you expect to loan, or
don’t you have any fixed proportion? Does the law make
any limitations upon your loans?
A. No.
Q. It is just your own regulations?
A. Yes.
Q. Upon improved city property, say, in Toronto,
what per cent of the value would you loan?
A. Very rarely over 50 per cent.
Q. And upon property in smaller towns you perhaps
wouldn’t go so high?
A. No; from 30 to 40 per cent, as a rule.


Ba n k i n g and Currency Systems
Q. And for what time are these mortgages made—
made payable at a year?
A. Various terms. No; generally the terms are from
five to ten years, with a condition for a small portion to
be repaid each year, or each half year.
Q. You do not follow the life-insurance custom of
making them all payable in a year, with the understand­
ing they can run upon the payment of interest?
A. No.
Q. How many of these companies are there in Canada?
A. In the neighborhood of 70, I think.
Q. How old is your company?
A. We are a consolidation, about ten years ago, of four
companies, the oldest of which was established in 1855.
Q. Are you operating under a special charter, or under
a general statute?
A. Special charter.
Mr. H u b b e e e . Do you have a large force of clerks?
A. Yes; we have in addition to our office here five
other offices throughout the Dominion. I suppose we
have a staff in the neighborhood of a hundred altogether,
perhaps more.
B y Mr. V r e e e a n d :
Q. You pay a 7 per cent dividend?
A. We paid 7 per cent last year; this year we increased
it to 8 per cent.
Q. With deposits of about $4,000,000 you held cash
to the amount of a million and a quarter?
A. Yes.
Q. And your capital and reserve amount to $9,000,000?
A. Yes.


General statement jo th November, 1908.

N o tes o f th e bank in circ u la tio n _______________________________________
D ep o sits n o t b earin g in te re s t_______________________ $ 2 2 , 2 3 1 , 1 2 9 . 05
D epo sits b earin g in terest, in cludin g in terest accru ed
to d a te ____________________________________________
7 2 ,8 0 6 ,6 6 6 .9 7

$9 . 640, 8 4 5.6 8

B a la n c e s due to o th er b an k s in C a n a d a _______________________________
B a la n c e s due to o th er b an k s in foreign co u n tries______________________
D ivid en d s u n p a id _____________________________________________________
D ivid en d No. 87, p a y a b le D ecem ber 1 ________________________________
C a p ita l p aid u p ______________________________________
1 0 ,0 0 0 ,0 0 0 .0 0
R e s t _________________________________________________
6 ,0 0 0 ,0 0 0 .0 0
B a la n c e o f p rofit and lo ss acco u n t carried fo rw ard
1 6 1 , 244. 88

16 5 ,4 0 8 .3 6
1 , 1 3 1 , 3 8 6 . 64
I .S 3 2 - 69
200 , OOO. 30

95 .0 3 7 , 796. 02

16 ,16 1,2 4 4 .8 8
12 2 , 338, 2 14 . 27

Coin and b u llio n ____________________________________
D om inion n o te s_____________________________________
B a la n c e s due b y o th er b an k s in C a n a d a _____________
B a la n c e s due b y agen ts o f th e b an k in th e U n ited
K in g d o m __________________________________________
B a la n c e s due b y oth er b an k s in foreign cou ntries
N o tes o f an d ch eques on o th er b a n k s ________________

$ 4 . 584, 049. 06
8, 50 3, 293. 25
1 1,8 5 0 .5 5
6, 750, 669. 18
3 . 1 9 1 , 278. 88
4, 344, 762. 50

C a ll and sho rt lo an s in C a n a d a _______________________
C all and sh o rt lo an s in th e U n ited S t a t e s ____________
G o vern m ent bonds, m u n icip al and o th er secu ritie s__
D epo sit w ith D om inion go vern m en t fo r secu rity o f
note circ u la tio n ____________________________________

14 , 298,
7. 3 14 .
10 ,6 2 2
4 . 673

5 6 1 .1 1
1 8 1 .5 3
7 0 3 .1 4
390. 71

450 0 00 .00

L o a n s to o th er b an k s in C an ada, secu red ______________________________
O ther cu rren t loan s an d d isco u n ts_____________________________________
O verdue debts (loss fu lly pro vid ed fo r ) -------------------------------------------R e a l esta te (other th an b an k p re m ise s)______________ ________________
M ortgages_____________________________________________________________
B a n k prem ises------------------------------------------------------------------------------O ther a ss e ts ___________________________________________________________

S 1 3 .0 8 7 .3 4 2 .3 1

50, 4 4 6 ,1 7 8 . 80
1 , 0 6 1 , 252. 09
68, 694, 649. 07
14 3 , 648. 74
36 , 3 2 5 .4 4
2 7 ,10 2 .9 1
1 ,7 2 7 , 4 4 4 . 3 3
2 0 1 , 6 1 2 .8 9
12 2 , 3 3 8 , 2 14 . 27

A l e x a n d e r L a ir d ,

G eneral M anager.

B a n k in g and C urrency Systems
Interview with Massey Morris, Local Manager of the Canadian Bank of
Commerce at Toronto.
B y Mr. V r e ELANd :
Q. I assume, Mr. Morris, the management of your part
of the bank here in the city would be like the management
of any bank; you meet the customers and receive all de­
posits and make the loans, and then your report goes to
the general office here as it would if you were manager
somewhere else?
A. Exactly, yes; practically we are treated as if we
were hundreds or thousands of miles away. Everything
of the kind has to be put in the form of correspondence.
Q. You conduct your business with the head office by
correspondence ?
A. Yes; of course, here we have the advantage of being
able to discuss things verbally more frequently than when
we are at a distance. After any verbal discussion of that
kind the decision arrived at has to be placed on record
in the correspondence.
Q. Then it is of not much matter here what your limita­
tion, for instance, in making loans is, because the matter
can be so quickly laid before the general manager?
A. Of course, we can get a decision quickly.
B y Mr. B o n yn g e :

Q. How many branches are there in the city of Toronto?
A. Of ours?
Q. Yes.
A. Up to a short time ago we had ten. I think there
are ten or twelve. They are organizing two new ones.


N at ion a l M o net a r y C o m m i s s i o n
B y Mr. V r e EEANd :
Q. They report to the head office, or to you?
A. To the head office, just the same as others. They are
separate branches.
Q. I wish you would tell us, Mr. Morris, how money is
sent from various parts of the country to other parts, and
about the expense of it and the details of its management.
A. We have to send from here, or from other circulation
points west where circulation is accumulated, notes of
the bank as required by the other branches; for instance,
if our branch at Barrie, which is 60 miles north of this,
runs short of our own currency, we supply it from here,
send the bills up usually by registered mail, and insure
them. That is our method in the case of our own notes.
The notes we receive from Barrie of banks which haven’t
any branches there, and which they can not get redeemed
there, they send down to us and we send them in to the
different banks here for redemption.
Q. That is the method with your branches?
A. Yes.
Q. I was speaking of exchange generally. Suppose I
want to send $1,000 to some point in the Far West and
applied here to the Bank of Commerce to send it?
A. We just issue a draft on the branch concerned and
that branch has to look after the payment of it, but we
keep the branches in funds for the payment of these de­
mands upon them in the way I have described.
Q. If I want to send $ i ,000 out into the West you would
give me a draft upon your nearest branch?
A. Yes; suppose you were going to Vancouver and
wanted to take or send $1,000, we should give you a draft
on Vancouver and the branch there would cash it.


Ba n k i n g and Currency Systems
B y Mr. B onyng E:
Q. Suppose I was a depositor in the Bank of Commerce
and was out at Vancouver and wanted to get $1,000,
couldn’t I go to the branch and present a check on the
Bank of Commerce and have it cashed there?
A. No; they would not know about you.
Q. w i was identified as being the party?
A. If you were identified and they were satisfied of the
goodness of the check; certainly.
By Mr. V r e e e a n d :
Q. You have authority as manager of the Toronto
branch to accept deposits to any amount, do you not?
A. Yes; no limit upon the deposit side.
Q. How large a loan would you make without speaking
or writing Mr. Baird ?
A. Five thousand dollars is supposed to be the limit.
Q. I suppose that in the other branches in the city
the limit would be even smaller than that?
A. Yes.
Q. Perhaps not over $ i ,000?
A. I think in some of the smaller branches the limit is
even smaller than that. Practically no loaning business
is done at the city branches. It is mostly all deposit
Q. What would you charge me for a draft upon your
branch at Vancouver?
A. In some cases we might not charge anything where
a customer had a nice account with us. We charge from
an eighth to a quarter of 1 per cent.


N at ion a l M o net ary Commi ssi on
B y Mr. B o n yn g e :
Q. Suppose I was a customer of a bank and sent my
check from Toronto out to Vancouver in payment of a
bill I owed in Vancouver, and that check was deposited
in the branch bank, do you charge for the collection of
the check?
A. Yes; certainly.
Q. How much would you charge for the collection of
the check?
A. Probably the same, an eighth to a quarter.
Mr. W e e k s . Would you charge any customer who kept
a deposit here for any draft?
A. Yes; we practically charge for everything. If we
do not charge we expect to get an equivalent. We ha'tfe
to charge in some form or another. The customers will
often make arrangements to keep a certain balance to
their credit as an equivalent for the privilege of getting
their checks cashed free of charge, or they will pay a fixed
lump sum per month or per annum, or the account may
be of so valuable of a character as to warrant our giving
the privilege to them. In the absence of some arrange­
ment of that kind a charge is made upon everything.
Mr. V r e e e a n d . In the case of customers who keep a
very small balance with you and not a remunerative
balance, do you make a yearly charge for it?
A. In some cases; yes. A monthly charge of 50 cents.
B y Mr. WEEKS:

Q. Suppose I have an account here of $10,000 in the
bank and I want to pay a bill in Winnipeg, and I come in
here with my check drawn on you for $1,000 and ask you
for your check in place of it?


B a n k i n g and Currency Systems
A. We do not do that. We do not issue to depositors
a cashier’s check.
Q. What would you issue?
A. We would probably give you a draft on Winnipeg.
Q. If you gave a draft on Winnipeg, would you charge
me for that?
A. Yes.
Q. Wouldn’t you charge that direct to my account at
A. Yes.
Q. I would be drawing out my own money?
A. Yes.
Q. You would be charging me for drawing my own
money ?
A. Drawing it out in Winnipeg.
Q. I am drawing out my money here?
A. If you draw it out here there is no charge on it.
Q. But I draw it out in that way when you give me a
check on Winnipeg?
A. No; if you come in and get your check certified
against your account we debit it to you. That is all we
have to do with it. We have no further concern as to
what happens to it until it comes back again and we have
to pay it. But if you come in and ask us to certify your
check and pay it up at Winnipeg, then we charge you
for it.
B y Mr. H u bbel ,Iy‘
Q. Suppose you are shipping money to the West, you
wouldn’t pay any premium?
A. No.

12 I

Q. You do not buy and sell exchange on the West?
A. No; we do not on Winnipeg.
Mr. W e e k s . D o your receipts from that sort of service
amount to very much?
A. In the aggregate it will amount to quite a little sum.
B y Mr. H u b b EEE:
Q. When you receive a deposit from a customer here
in Toronto containing checks all over the United States,
do you immediately give him credit for those items, or
is it dependent upon who the customer is?
A. Dependent upon who the customer is, of course.
If it is a customer in good standing, we have no hesitation
in giving him credit at once.
Q. You follow the collection of these checks by number?
A. Yes—I do not exactly catch the drift of your inquiry.
Q. If I should send $5,000 worth of checks to Cleveland
and I had 30 checks in that lot all over Ohio, you would
want to have a report on each one of those checks?
A. We would want to get returns on them.
Q. You would want an individual report upon each one
of the checks?
A. No; we follow in a general way and see they are
all paid. We have to check them off when the returns
come in.
Q. Most of the checks we receive from Canada are
numbered, and some of the banks require a report by us
on these checks.
A. Yes; they are numbered for the purpose of refer­
ence. When the remittance comes in the payment is
marked against the amount of the check.


B a n k i n g and Currency Systems
Interview with Alexander Laird; General Manager of the Canadian
Bank of Commerce.

B y Mr. V r e e l a n d :
Q. Mr. Laird, tell us about your branch banks here in
the city. I understand Mr. Morris is at the head of your
Toronto branch?
A. Yes.
Q. I suppose the general officers of the company attend
to them themselves at the home office?
A. Yes.
Q. You treat the branch here as if it were a Montreal
branch—that is, the reports from your branches here
come in to the general officers the same as if from Mon­
treal ?
A. Yes.
Q. How many branches are there of the Canadian
Bank of Commerce?
A. I think 204.
Q. That is, this morning?
A. That is, this morning.
Q. What cash reserve would you say banks carry on
an average?
A. I think an average of about 10 per cent, or perhaps
a little higher.
Q. You yourself carry a little more than that?
A. We do not; we try to keep it about 10 per cent.
We are not in favor, of course, of an arbitrary and fixed
reserve. We think for the proper conduct of the business
that we should keep it in reasonably liquid shape, and
in our experience we find that about 10 per cent makes

I2 3

N a t i o n a l M o n e t a r y Commi ssi on
us quite comfortable, and we do not need to bother from
day to day about the cash reserve. That is, the actual
cash reserve.
Q. I see you put down here “ coin and bullion” ;
what do you mean by “ bullion” ?
A. That is anything that has got an assay stamp on
it. We should have bullion in Seattle from the Klondike.
Q. Are these bars stamped ?
A. Yes.
Q. What do you do with them?
A. Just keep them, as they do in New York banks,
in that shape rather than have the eagles and double
Q. For export business?
A. No; primarily for our reserves, though they might
be used for export business; but we do not do very
much of that business.
Q. What would you do with stamped bars in place of
cash if you were getting them?
A. All we have to do is to turn them in to the treasury
in Seattle and we get treasury notes for these bars;
and the same way in San Francisco. In San Francisco
we may have some bars, and when you come to meet
adverse clearing-house balances you simply hand in
these bars and get your gold certificate.
Q. You recognize gold bars as being pretty close to
A. Yes; I should think so.
Q. You seem to have very much more than io per
cent in this statement. This is the 13th of November,


B a n k i n g a n d C u r r e n c y Systems
A. Yes; of course there is a natural disposition on the
part of any bank at the end of the year to show a good
statement, not that we look for any better showing
in that direction, certainly we did not seek to make it
last year, but it did seem at the end that we had a great
deal more cash than we had figured on. I should not at
any time consider a statement showing io per cent in
cash unfavorable to us at all. I should think a great
many banks would not consider it advisable to show
Q. Of your io per cent cash reserve, for instance,
how much money have you on deposit in New York?
A. We do not count that.
Q. Or in Montreal?
A. We do not count that.
Q. You do not count that?
A. No; it must be actual cash, gold or Dominion notes.
It is the law.
Q. Who has the say under the law?
A. The Dominion government.
Q. I did not know that they had any laws about
A. Yes; they insist upon our having 40 per cent of Do­
minion notes. We have more than 40 per cent as a rule.
Q. What reserve does your law require you to keep—
what cash reserve?
A. They do not restrict us. That is a matter that is
regulated by ourselves. The Canadian Bankers’ Asso­
ciation has said that, in their opinion, there should be a
uniformity of practice in the keeping of reserves.


N at ion a l M o net ary Commi ssi on
Q. That is what your association says?
A. Yes.
Q. I do not understand there is any Dominion law
requiring any record of reserves?
A. No.
Q. But of whatever reserve you do carry, 40 oer cent
must be in Dominion notes?
A. Yes.
Q. In your cash reserve you only include actual cash
on hand at your branches?
A. Yes.
Q. You say here, “ November, 1908, balances due by
agents of the bank in the United Kingdom, $6,750,000;”
what sort of agents were those?
A. Our own branch and our agents, such as the Bank
of Scotland.
Q. These are all your agents?
A. The Bank of England, too, would be included.
Q. Any money that you have on deposit with the Bank
of England?
A. Yes.
Q. Or with the Bank of Scotland?
A. Yes.
Q. Or any other English bank that acted as your agent?
A. Yes.
Q. Then “ balances due by other banks, $3,191,000” ?
A. Other foreign banks.
Q. Yes; and I notice you say, “ Notes and checks on
other banks, $4,300,000” ; you do not call that cash?
A. Actual cash; no.


Ba nk i n g and Currency Systems
Q. Y et you can get cash by presenting them?
A. Yes; in the clearings the next day. But against
that there must be a considerable amount in the hands
of the other banks.
Q. I notice you have $7,000,000 of call and short
loans. What do you mean by short loans?
A. Ten-day, fifteen-day, or thirty-day loans would be
short loans.
Q. Thirty-day loans?
A. Yes; or less.
Q. Where are your call loans?
A. Some in Canada; mostly in New York. I mean
strictly call loans. The money we have at New York
or Condon would be strictly on call. There is not very
much money with stock brokers in Toronto or Montreal
that we would regard as strictly call. I mean that it is
not as available as in New York.
Q. I see you carry about $4,500,000 of government
bonds other than municipal securities; do you and the
banks generally make a practice of carrying more or less
government bonds and other similar securities?
A. Yes; I think they do.
Q, For what purpose?
A. We probably would have more than some of the
other banks, except the Bank of Montreal, because of our
connection with the Canadian Northern Railway Com­
pany, which has a good many bonds to sell with govern­
ment guaranties. As to municipal bonds, with so many
branches we are often asked to help the municipalities in
the negotiation of their bonds; sometimes we buy them



N a t i o n a l M o n e t a r y Commi ssi on
out and out, or if the amount is large we purchase them
in combination with others. They would be held by us
until such time as we could dispose of them, or if we
thought the bonds extra good we might send them over to
London and might watch our opportunity to sell them
there, or if we did not sell them we might hold them as
first-class collateral against any acceptance credit which
we might get.
Q. Then it is not for the purpose of carrying out any
banking theory that you carry any securities of that kind ?
A. No.
Q. You do not intend them as a secondary reserve?
A. Yes; something of that kind. One important fea­
ture in connection with our own business is that we try to
put our securities in such shape that we can have the use
of them should an emergency arise, either by selling them
or by drawing against them by bills of exchange. In the
meantime we are getting interest, and they form a sub­
stantial reserve against any liabilities that we may have.

By Mr. B onynge :
Q. Do you ever buy for your own use the bonds of an
industrial concern?
A. No.
Q. And sell the bonds afterwards?
A. No; we have not gone into underwritings of that
By Mr. We e k s :
Q. Do you consider the reserves kept by banks in
Canada sufficient for the conditions that prevail here?
A. Yes; I should consider the reserves kept by our firstclass banks, every one of them, quite sufficient for any




Syst ems

demand that is likely to be made upon them. The fact is
that the banker here is a banker who knows his business,
he has got that business to serve, and it would be very
foolish for him not to protect himself in every way. I do
do not believe in an arbitrary fixed reserve. I think the
banker is the best judge as to how much he should have
and where he should have it.
Q. Do you consider the methods of issuing circulation
sufficient to protect the public against any overissue or
possible case of fraud that may arise?
A. Yes; I do not see how it is possible to issue circula­
tion beyond a certain amount. There is daily redemp­
tion, and I can not conceive how you could suddenly put
into circulation a considerable amount of the bills of any
Q. Do you believe that better results would be obtained
if outside inspection of banks were made in Canada?
A. As a banker of thirty-five years’ standing, and one
who had gone through every department of the bank, in­
cluding the inspection department, and who knows what
is involved in the inspection of a bank, I can not under­
stand for a moment how any one can suppose that an out­
side auditor could possibly give a correct report on the
standing of a bank, or keep so in touch with all the busi­
ness as to make it possible for him to certify that a bank is
solvent. What we want more than anything else is some
one that will tell us when we get hold of a piece of paper
that is not very good, or a customer who is not very pros­
perous. An auditor can not go through a bank and form
a reliable judgment about the securities, or tell whether
2 2 5 6 l0---IO------ 9


N a t i o n a l M o n et a r y C o mmi s s i o n
our customers are making a success of their business. As
far as the matter of inspecting the securities is concerned,
I can not imagine how any auditor, or body of auditors,
could examine a bank such as we have, with 204 branches,
when you find that with the division and subdivision of the
work it keeps us going all the year and every day of the
year to properly supervise this important work.
Q. The theory is that the auditor or the manager would
certify to the correctness of the returns that are made to
the government, not that he would pass on the value of
paper, though he might possibly want to inspect the loans
of someone whom he knew was borrowing largely else­
A. Yes; if he were able to get that information and
put it in shape I think that it would do some good, but
how is it possible to judge the business we do? I am
perfectly satisfied that a man such as our finance minister
in Canada would not know from the banker’s standpoint
what was good or bad business. Our system is a little
different from what you have on the other side. We
undertake to do all the business of a merchant. We will
not divide an account. There are very few divided ac­
counts in Canada, and if we did divide an account with
another bank we should do it in a different way, and should
ask and receive information from the other bank from
time to time which would be a check on the customer.
I would not take a divided account at all unless our rela­
tions with the bank with which I was dividing the account
were such that we could talk over from time to time how
the account was running.





S y s t e ms

Mr. V r e e e a n d . Do you also know if a customer bor­
rows in more than one place?
A. At the beginning of the year we sit down and con­
sider what our customers are entitled to as a full credit
for their business, and we decide what we should give
them. If a customer is to get $50,000 during the year
we promise to supply him with that amount in the
ordinary course of his business and during his season.
We are always ready to respond to that call.
By Mr. We e k s :
Q. Are you satisfied with the postal savings banks as
the policy is now carried out by the Canadian govern­
A. I do not know just now that there is anything to
say on that subject. I think it is wise to have postal
savings banks, although the banks cover the country
pretty thoroughly. There is not a village or a hamlet
of any great importance which has not got a bank, and
we do not hear very much call for the postal savings
banks. I do not know that I would say they should be
withdrawn altogether, but I do think that the govern­
ment should not take that money and pay more than
the borrowing rules in London for it. It seems hardly
economical for the government to pay to-day practically
3 K per cent to a farmer when they could probably get it
for about 3 per cent in London. When you have to sell
your securities on the basis of a yield of 2.95 per cent it
is absurd to pay over 3 ^ per cent for money. That is
the rate, including the cost of administration.
Q. Which would cost about one-half of 1 per cent?


A. The administration would cost about one-half of i
per cent.
Q. They estimate in this encyclopedia three-quarters?
A. I have always considered it as being about one-half of
i per cent. They come into competition with us and are
paying more for the money than they should, and taking
it out of the ordinary commercial banks of the country.
We could take that money and employ it in the business
of the country. They simply add it to the unfunded
debt of the government.
Q. Unfunded debt?
A. Yes.
Q. Payable on demand?
A. Yes.
B y Mr. V r EELAnd :
Q. I notice that you have to report all kinds of moneys
unclaimed for more than five years?
A. Yes.
Q. Does the government take a benevolent interest in
that fund with a view of acquiring it in time?
A. There are indications from time to time that they
would like to lay hands on it.
Q. *Do they, as a matter of fact?
A. They have not done so yet, except in case of an
insolvent bank.
Q. Does the government admit a liability for accounts
taken of that kind?
A. They have got to admit liability, and if they take
the funds they are responsible for the debt, deposit,
unpaid draft, or deposit receipt.

Ba n k i n g and Cur r e nc y Systems
Q. Who gets the benefit of note issues which are lost
and burned or mislaid?
A. The bank would get the profit in that case.
Q. That must be quite an item of profit?
A. I do not think there is as much profit as one would
Mr. K n igh t . It amounts to a fraction of one-half of
i per cent; it is less than a half of i per cent.
B y Mr. B onynge :
Q. Do any of the chartered banks engage in under­
writings ?
A. No; not to any extent. Underwriting what?
Q. Railroads or industrial concerns?
A. Railroads?
Q. Yes:
A. Yes; certainly. I thought you had reference to
industrial concerns.
Q- No.
A. Yes; and they are quite glad to do it.

l 33

Thirty-fourth annual balance sheet.



N o tes o f the b an k in circ u latio n ______________________ $ 3 , 1 1 5 , 1 0 0 . 00
G old an d silv e r co in __________________________________
$ 1,14 3 ,9 4 7 .8 2
D om inion go vern m en t n o te s_________________________
7 . 337 . 972 - 00 D epo sits not b earin g in te re s t_________________________ 6 , 5 1 7 , 7 3 1 .8 2
D epo sits b earin g in terest (including in te rest accru ed
D ep o sit w ith D om inion go vern m en t fo r note circu ­
to d a te ) ----------- ----------------------------------------------- 2 9 , 54 5, 784. 1 9
la tio n ______________________________________________
1 95 . 293- 5 2
252, 0 3 7 .8 2
N otes o f and ch ecks on o th er b a n k s __________________
1 , 9 4 1 , 6 1 1 . 48 D epo sits b y o th er b an k s in C a n a d a __________________
L o an s to o th er b an k s in C a n ad a secured, in cludin g
T o ta l liab ilitie s to th e p u b lic __________________ 3 9 , 430, 6 5 3 .8 3
b ills red isco u n ted __________________________________
4 5 0 ,2 7 8 .4 6
5 ,0 0 0 , 000. 00
B a la n c e due from o th er b a n k s in C a n a d a _______________
6 10 , 9 4 5 .6 0 p ita l sto ck (paid u p ) _______________________________
R eserv e fu n d __________________________________________
5 ,0 0 0 , 000. 00
B a la n c e due from agen ts in U n ited K in g d o m --------------1 1 5 , 758. 53
D iv id e n d No. 75 (p a y a b le M ay 1 190 9) fo r th ree
B a la n c e due from agen ts in foreign co u n tries_______ _
2, 4 9 1 , 3 1 5 . 9 7
13 7 , 500. 00
m on th s a t th e ra te o f n per ce n t p er a n n u m ______
D om inion an d provin cial go vern m en t secu ritie s____ 8 19 , 2 4 1.9 7
8 5 ,9 3 4 .11
L o a n s to pro vin cial go vern m en ts_____________________
8 19 , 199. 09 R e b a te s on b ills d isco u n te d __________________________
B a la n c e o f pro fit a n d loss acco u n t carried f o r w a r d ..
599, 978. 26
C an ad ian m u n icip al securities a n d B ritis h o r foreign
or colonial pub lic securities o th er th a n C a n ad ia n ___
2, 0 3 6 ,9 7 7 .5 0
R a ilw a y and oth er bonds, debentures, and s to c k s____
1 ,0 2 0 , 506. 60
C all a n d short loan s on sto ck s a n d b on ds in C a n a d a .
3 ,3 3 8 , 253. 71
O ther cu rren t loans, discounts, an d a d v a n c e s _______
2 6 ,5 7 1 ,9 5 8 .4 6
O verdue d eb ts (loss pro vid ed f o r ) ___________________
2 1 ,5 4 0 . 95
R e a l esta te (other th an b a n k p re m ise s)...............................
4 5 5 .3 8
92, 457. 9 1
M ortgages on real estate sold b y the b a n k . ..........................
B a n k prem ises, in clu d in g safes, va u lts, an d office
furn iture a t head office and b ra n c h e s ------------------1 , 200, 000. 00
O ther assets n ot included under foregoing h ea d s-----20, 3 5 1 . 25

50 , 254, 066. 20

50 , 2 5 4 ,0 6 6 . 20

N a t i o n a l M o n e t a r y Co mmi s s i o n


Ba n k i n g and Cur r e nc y Systems
Interview with Daniel R. Wilkie, General Manager of the Imperial
Bank of Canada.

B y Mr. V r EEEAn d :
Q. I have asked several of these gentlemen who have
been here these questions somewhat as an expression of a
personal opinion, particularly about reserves and the
postal savings banks, and one or two other questions.
I would like to know what you believe about reserves.
Do you think your reserves are sufficient to properly
safeguard the conditions of the banks?
A. If your inquiry refers to Imperial Bank of Canada,
I certainly think they are. Generally speaking, the cash
reserves of the majority of Canadian banks might be
* larger.
Q. Do you think that a fixed reserve under the law is a
desirable thing, or should that be left to the bank?
A. I think it should be left to the bank. A fixed
reserve would probably be more harmful than otherwise.
Q. You use your reserve, of course—a portion of it—
in case of distress?
A. There is a so-called “ fixed reserve” as regards the
amount of legal tenders (government notes) which we are
obliged to carry, but it is not fixed as regards any percent­
age of liabilities. A certain proportion of our cash re­
serves must be in government legal-tender notes, and our
object during distress would be to increase them and
realize on other liquid assets. During a period of strin­
gency or expansion in trade we are obliged to draw upon
our reserves other than cash reserves; these latter we
endeavor to maintain through storm or sunshine.


N a t i o n a l M o neta ry Commission
Q. Your idea is that the reserve in normal times should
be about 20 per cent, is it not?
A. If you include in reserves balances due by other
banks in Canada, in New York, and in London, I would
not be satisfied with 20 per cent.
Q. How much cash reserve do you average carrying in
the bank?
A. We carry as a rule about $7,000,000 of actual
cash (gold and government notes), besides balances in
New York, London, and elsewhere, amounting all the way
from $2,000,000 to $4,000,000. I see that on the 31st of
August, 1909, we had $7,500,000 in actual cash (gold and
government notes), and that we had $-5,600,000 in bal­
ances due by New York, London, and elsewhere. That .
made 33 per cent of our liabilities. I do not say that this
amount is necessary, as much depends on financial and
political conditions from time to time. We might, for
example, reduce this proportion during high rates for
money in New York, and take advantage of the demand
to lend a portion of the amount in that market.
Q. You loan that through your New York banks?
A. We loan that through our New York banks.
Q. Do you think that your system of inspection is
sufficient to care for your banks, or would you prefer a
public inspection—governmental inspection?
A. I look with horror upon a public inspection. I do
not see how, physically, it would be possible to carry out a
thorough inspection of the head offices and branches of
banks extending from the Atlantic to the Pacific, and with
further branches in San Francisco, New Orleans, London


B a n k i n g and Currency Systems
(England), France, Cuba, Jamaica, Porto Rico, and else­
where. It would be impossible for any public officer to
inspect that number effectively; it would take a magician
to carry out the inspection; it would be a farce. It would
be misleading, and do more harm than good.
Q. Do you think the postal savings bank system in
Canada is a good thing for the people cf Canada?
A. I do, if it were not abused by the payment of an
excessive rate of interest by the government, which should
be able to attract deposits and serve every useful purpose
intended by the offer of a rate of interest not exceeding
2p2 per cent per annum. It is to be borne in mind that
the moneys on deposit with the government are withdrawn
from the trading capital of the country. The govern­
ment pays 3 per cent on post-office savings accounts.
Q. Plus the cost?
A. Plus the cost of management.
Q. Do you hear expressions of opinion from people who
use these savings banks as to their desire to have that
restricted method of depositing their money?
A. One does not hear much from the people. One
great inducement to make use of the post-office is the
absolute secrecy observed, encouraging evasions and
improper secretions as well as legitimate savings, which
latter of course form the bulk of the deposits. A man
who is a depositor in the government savings bank is the
last man to say anything about it.

By Mr. B onynge :
Q. There is no way of reaching it?
A. There is no way of reaching it.


N at io n a l M o n e t a r y C o mmi s s i o n
Q. Other than by legal process?
A. Other than by legal process. , The government will
not give the information. It can not be had. The
amount of money that can be deposited in any one name
is limited.
B y Mr. W e e k s :
Q. To what amount?
A. I think it is $1,000. The government policy is to
encourage the lending of money by the people to the
government for permanent works, canals, railway sub­
sidies, public buildings—everything. It all goes into a
pool, and until two years ago there was actually no cash
reserve held against the liability. The government held
no reserve. They now hold a reserve in gold or Canadian
securities, guaranteed by the Imperial Government, equal
to io per cent of the deposits.
Q. Of what amount?
A. Ten per cent, but in order to acquire that reserve
they cut down the reserve against government notes in
circulation, reducing that reserve from 25 per cent in cash
or imperial securities upon a limit of $20,000,000 to 25
per cent upon a limit of $30,000,000.
Q. So the result was there was no current reserve
against their double liabilities?
A. A reserve of 25 per cent in cash or debentures guar­
anteed by the Imperial Government as against govern­
ment notes in circulation, etc., and of 10 per cent in cash
or imperial debentures against deposits in post-office
savings banks.

— ■

B a n k i n g a n d C u r r e n c y Systems
Q. You think your circulation is properly protected
against fraud and misrepresentation?
A. No, it is not. There ought to be better control over
the power that individual banks have of creating their
own currency. Under the present conditions a bank
authorized to issue, we will say, $1,000,000 of notes, in
order to keep its branches supplied with a sufficient supply
of notes, will have on hand ready for circulation from
$2,000,000 to $3,000,000, but there is nothing to prevent
their having $4,000,000 or $5,000,000. I do not think any
advantage has been taken of the privilege, but the danger
is apparent. I should like to see some control by the
Bankers’ Association of the total creation. Any excessive
issue would probably occur during the last days of an
institution, when demands of depositors would have to be
Mr. B o n yn ge . The last resort?
A. Yes; and unintentionally, too. The managers of
local branches can not tell what the total amount of notes
in circulation might be at any one time over the whole
B y Mr. H u b b e e e :
Q. Could it be made use of with these branches during
a time of stress and panic and then be rectified within
a few days?
A. Yes.
B y Mr. V r e e e a n d :
Q. What was the purpose urged in passing the act of
1908 providing for additional circulation?


N at io n a l M o n et a r y C o m m i s s i o n
A. The reason was this: That during a few months of
the year the amount of currency required to move the
crops proved to be in excess of the authorized limit of
Q. What year was that?
A. It was 1906, and was the result of the crop move­
ment of that year. At the same time the currency of the
United States was limited, so that we could not obtain
United States currency, and were constantly running the
risk of being heavily fined for overcirculation, although
unable to supply our requirements from any other source.
The government at our suggestion came to the relief
of the country and of the banks, and on terms permitted
us to exceed our authorized circulation during four
months of the year.
Q. In 1907 your Canada capital was?
A. Was $95,995,000, and the note issue was $77,000,00o.
Q. What month is that; December 31 ?
A. October and November. The end of October is the
crucial point.
Q. You got up, then, $11,000,000?
A. Eleven millions spread over 2,000 branches, or
about $5,000 for each branch.
Q. It is only in the crop-moving part of the country
that you would use it—would need your cash?
A. It wouldn’t make any difference. That is all that
would be left for any one branch, an average of an addi­
tional $5,000. It is worse than that, because every branch
has to be furnished with an ample supply at all times for
till money.



B a n k i n g a n d C u r r e n c y Systems
Q. You did not have a central bank to distribute it
among all your branches?
A. The head office of every bank directs the distribu­
tion of its notes among its branches.
Q. You send it wherever you wish?
A. We send it to all our branches as they require it.
Q. You don’t have to?
A. Yes; we have to respond to their requirements.
Q. Suppose there were $i i ,000,000 of additional currency
needed to move crops, you would send it to the cropmoving part of the country, you would not sent it where
it was not needed ?
A. No; but we should have to keep these other points
supplied with circulation. We could not earmark
$11,000,000 off the extra circulation. We should send
the circulation wherever it was wanted. It may be to
Alberta, it may be to British Columbia, or to Nova Scotia,
or Quebec, or Manitoba.
Q. You think that is a desirable law to have?
A. I do.
Q. To have all the reserve?
A. I do not see any objections.
Q. In case it was needed?
A. I think it was a very wise act.
Mr. B onyng E. Have banks admitted exceeding circu­
lation limit?
A. Yes; unwittingly several banks have exceeded their
authorized circulation.


N at ion a l M o n et a r y Co mmi s s i o n
B y Mr. V r e EEANd :
Q. If it is not used it does not do any harm?
A. If we use the emergency circulation we pay the
government interest upon the amount made use of at
5 per cent. We do not want to use it unless we have to.
One bank helps another. If I found I was running up to
my limit, I would make an arrangement with some bank
that was not near its limit and get my requirements from
them, paying them for it in gold or its equivalent.
Q. I do not see any objection to the law, except that as
it is intended as a crop-moving measure, the rate of in­
terest would seem to be a little high?
A. Yes, the rate is high; but the privileges enjoyed of
being able to circulate up to the last dollar of the limit
without penalty are worth it.
Q. So the emergency act to which you referred is for a
totally different purpose?
A. Yes.
Q. It is not intended to move crops?
A. It is intended to assist the movement of the crops.
Q. It is purely an emergency measure?
A. Yes.
Q. About what is the average rate of dividends that
the chartered banks pay ?
A. The average rate is about 8 ^ per cent, but the
public is very much astray on that point. The pay­
ment of 8 ^ or 8 ^ on the capital stock of a bank that
has a reserve fund of ioo per cent is only an investment
of about 4 per cent. If such a bank is paying 12 or 16
per cent, you have got to divide it up as a return upon


Ba n k i n g and Cur r e nc y Systems
the capital plus the reserve fund, because the bulk of the
capital of the banks has been subscribed for at a premium
equal to the proportion that the reserve fund bears to the
capital at the time of the issue of the new capital, or has
been bought in the open market at the current premiums.
Q. What would you say the net earnings of banks are,
as a whole?
A. The net earnings on capital?
Q. Yes; the net earnings based upon capital.
A. Not capital, but on capital and reserve?
Q. No.
A. I think about 1 5 per cent.
Mr. W e e k s . Has not this reserve generally been earned ?
A. Not always. I have not made up the figures, but a
large part of the reserve funds has been paid in by share­
holders, a very large proportion.
By Mr. V r e e e a n d :
Q. Has been paid in ?
A. Has been paid in by shareholders. New stock issued
from time to time. We started our bank on a paid-up
capital of $500,000 and we have now $5,000,000. A mil­
lion dollars, I think, was the original authorized capital, so
that all the $4,000,000 has been new stock allotted to exist­
ing shareholders from time to time at a rate of premium
equal to the proportion that the reserve fund then bore
to the capital.
Q. Do they ever declare stock dividends?
A. No; never. It is the other way. Shareholders
have to pay up the capital as well as the premium at which
it is issued.


N a t i o n a l M o n e t a r y Co mmi s s i o n
Q. And the reserve you mean ?
A. So as not to impair the reserve—not to impair the
proportion the reserve bears to the capital.
Mr. B onyng E. They have to pay for the new stock
issued what the stock is actually worth?
A. Less than that, as a rule, because the stock is
generally worth more than what the reserve would rep­
resent. Our reserve is ioo per cent of our capital, but
our stock is worth in the market 229 per cent to 230 per

B y Mr. W e e k s :
You pay what dividend?
About 5 per cent upon capital and reserve?
Yes; something over 5 per cent.

B y Mr. V r EEKANd :
Q. It would be your opinion that a considerable por­
tion of the seventy-odd millions of reserve of the char­
tered banks had been paid in instead of earned?
A. A considerable proportion has been paid in.
Q. Would you say a quarter of it had been paid in?
A. More than a quarter.
Q. A half?
A. I should think a half; yes.
Mr. K n igh t . I thought about a third.
Mr. W i l k i e . You can get the exact figures. I should
not be surprised if it was 50 per cent.
Q. Any agitation in Canada for a guaranty of deposits
under government supervision?
A. No; we couldn’t stand that.


Ba n k i n g and Cur r e nc y Systems
Q. You have not noticed perhaps that Texas is adopt­
ing that?
A. Yes; I saw that. Oklahoma has adopted it.
B y Mr. W e e k s :
Q. If I remember correctly, you have about 20 banks
less than you had twenty-five years ago in Canada.
A. I do not think 20.
Q. You had 48 banks at one time?
A. No; I do not think so. We may have had 36
or 37.
Q. What I wanted to ask was whether the capital
was distributed enough; if there were not enough agencies
for the business, whether there would not be an outcry
some day that banking in Canada was a monopoly
which would be injurious to the existing banks to some
A. They can not charge that at present. I have just
come back from a village in the northwest and I dis­
covered three banks in a place where there was not busi­
ness enough for one. At the present moment the branch
idea is being carried on to excess.
B y Mr. V r EEEANd :
Q. I hat would not affect the question, because you
do not require additional capital where you put in ad­
ditional branches?
A. No.
Q. A thousand different branches would not require
any additional capital?
A. No; I think the banks are only too willing and
ready to open branches wherever there is an opportunity
22561°—10---- 10


N at i o na l M o n et a r y Co mmi s s i o n
of doing business; but bear in mind that without our
system of currency, without the inducement of being
able to supply the currency required from the banks’
own issues we could not keep the bulk of our branches
open. If our currency laws were changed and we are not
permitted to issue our own notes, nine-tenths of these
branches would be closed. It would not pay us. It
is only because we have unlimited till money always
available. It is only because we have power to issue
our own bills that we are opening branches. That is
the crux of the whole matter. It is not only the starting
point of our banks, but without our banking system
we could never have developed the country to the con­
dition it is in to-day. It could not be done.
Q. What per cent of profit do you figure you can make
on your notes? The profit on notes in the States was
modified very much by having to have government bonds
and the loss of the premium on them, and also they have
a tax on circulation, although it is not large, but still they
make little profit.
A. It is very hard to say, because one element is inter­
woven with the other. Our bank has a circulation of
$3,422,000 (August 31), but under our system we are
holding $6,000,000 of government bills from which we get
no interest whatever.
Q. Why are you obliged to hold that amount of Domin­
ion notes?
A. Because we allow ourselves to hold a larger propor­
tion of them than necessary. We might hold gold for
about half of that amount.


B a n k i n g and Cur r e nc y Systems
Q. The law says whatever reserve you do hold you
must have 40 per cent actual cash reserve in government
A. Yes.
Q. How much do you hold?
A. Six millions.
Q. Is that only 40 per cent of your actual cash reserve?
A. No; it is about 80 per cent. What I mean to say is
this, that the profits that we make upon circulation can
not be calculated directly, because the advantage of till
money, which costs us nothing to carry, is of considerable
Q. It takes the place of cash?
A. Yes; it takes the place of cash.
Q. It is a fictitious capital?
A. It is a fictitious capital if you put it that way; yes.
Q. Here is your report, which shows a cash reserve of
$8,481,000; you have to have 40 per cent of that in
Dominion notes?
A. Yes.
Q. That would be a little over $3,000,000?
A. Yes.
Q. I understood you to say you had $6,000,000?
A. That depends upon the particular month to which
you refer.
Q. You actually did have $7,300,000?
A. Yes; on the particular date to which you refer.
Q. But you did not have to have that amount?
A. No; we did not have to.


N a t i o n a l M o n e t a r y Co mmi s s i o n
Q. Your actual circulation was $3,115,000; I do not see
that it has anything to do with your holding of Dominion
notes as a part of your reserves. Suppose you had to
have gold?
A. Suppose we had a large part of that in New York
bearing interest on deposit with banks, or had it in London
bearing interest; supposing we had the gold on deposit in
New York, that would be counted as gold on hand.
Q. As I understand, you fully agree that a large cash
reserve should be kept?
A. Yes.
Q. I think you put it at 20 per cent or better?
A. Better.
Q. Or more?
A.. More.
Q. Didn’t I understand you thought you had 20 per
A. I said more than 20 per cent.
Mr. B o nynge . In your own vaults?
A. In our own vaults.

B y Mr. V r e e l a n d .
Suppose the law was that you should be obliged to
20 per cent?
Of the deposits on hand.
In gold coin.
Yes; in gold coin.
You have to have that amount on hand?



B a n k i n g a nd C u r r e n c y Systems
A. We might keep the gold on deposit in New York,
and we could use the excess beyond the 20 per cent from
time to time.
Q. You could not keep it in New York and count it as
a cash reserve?
A. Yes; certainly; actual gold on hand with our agents.
We do not do it, but it can be done.
Q. I should not think it would be a proper cash reserve
if it is in New York.
A. You have the same thing in the United States—you
have your reserve cities.
Q. But central reserve banks have to keep 25 per cent
actual cash on hand?
A. It would be just as much a million of gold in New
York as a million of gold here.
0 . There would be no object in keeping it there?
A. No; except that we could use the surplus amount
on hand from time to time.
Q. Your reports say that the average amount of circu­
lation is $7 5,000,000.
A. Yes.
Q. The moment that is in the bank it is out of circula­
A. Yes.
Q. That is the amount which is in circulation?
A. That is the amount which is in circulation.
Q. Presumably loaned out?
A. Presumably loaned out or paid out to depositors in
the ordinary course of business.

14 9

N at ion a l M on et a r y Co mmi s s i o n
Q. On that $75,000,000 what would you say the profit
is to all of the banks that own it?
A. I would not like to say.
Q. Suppose the cost of issuing and redemption amounts
to 1 per cent, what other expense would you charge
against it?
A. The tellers’ salaries.
Q. Who?
A. The tellers, the men who look after the notes and
separate them from notes of other banks.
Q. That would be small in the small banks ?
A. Yes; but the proportion of expense to circulation
would be the same.
Q. You would not have to employ extra help in order to
separate the notes?
A. Yes.
Q. The ordinary teller would have ample time to keep
them separated?
A. It would take up time that would otherwise be de­
voted to some other duty, necessitating a larger staff.
Q. We will assume there is some additional help needed
on account of the notes; what other expense?
A. I do not know that there is anything else beyond the
custody of the notes, and their sorting up every day, and
the sending in of the other bank notes for redemption.
Q. That is included in the 1 per cent I have allowed for
issuing and redemption. I think that would cover the
issuing and redemption.
A. Yes; the issues have to be renewed, of course. I
would not be prepared to say, Mr. \ reeland, what the

i 5°

Ba n k i n g and Cur r e nc y Systems
profit would be, because I do not think it can be worked
out that way. You can not work out the direct profit on
O. You say that the value would be 4 per cent upon the
amount actually in circulation to the issuing banks?
A. Less the actual outlay connected with the manage­
ment of the circulation and a proportion of the cost of the
management of the branch banks.
Q. What do you figure the profit is to a bank on money
that you pay 3 per cent for and loan at 6 per cent?
A. We give our branches 4 per cent on the auxiliary
capital furnished head office; that would be 1 per cent be­
yond what they pay to their depositors.
Q. Would you figure 2 per cent?
A. Two per cent would be an excessive rate when allow­
ance has to be made for the expense of head office manage­
ment and the proportion of the amount which has to be
held as a reserve. From 1 per cent to 1 l/ 2 per cent net over
the cost of the deposit to the branch is a fair allowance.


Statement for the half year ended A p ril jo , 1909.
B a la n c e o f p rofit and loss account, O ctober 3 1 , 19 0 8 __________________
P ro fits fo r the h alf y e a r ended A p ril 30, 1909, afte r deducting charges
of m anagem en t an d m akin g full provision fo r all b ad and doubtful
d e b ts.................................................................................................................................

$ 2 1 7 , 628. 56
8 6 0 .6 8 2 .4 9
1 ,0 7 8 , 3 1 1 . 0 5

Q uarterly dividend, 2'A per cent paid M arch x, 19 0 9 ___ $ 3 6 0 ,0 0 0 .0 0
Q uarterly dividend, 2 % per cent p ay ab le Ju n e 1, 19 0 9 ___ 360, 000. 00

7 2 0 .0 0 0 .0 0
B ala n c e o f profit and loss carried forw ard

3 5 8 .3 11.0 5

N o th .— M a rk et price o f B a n k o f M on treal stock, A p ril 30, 1909, 250
per cen t.

C apital s to c k . , _________________________________________________________$ 14 ,4 0 0 ,0 0 0 .0 0
R e s t __________________________________________________ $ 12 ,0 0 0 ,0 0 0 .0 0
B ala n c e o f profits carried fo rw a rd ___________________
3 5 8 .3 110 5
U nclaim ed d ivid e n d s_________________________________
Q u arterly dividend, p a y ab le Ju n e 1, 19 0 9 ___________

1 2 ,3 5 8 ,3 1 1.0 5
2 ,4 4 3 .0 1
3 6 0 ,0 0 0 .0 0
-------------------------12 ,7 2 0 ,7 5 4 .0 6

27, 12 0 , 7 54 .0 6
N otes of th e b an k in c irc u latio n _____________________
1 0 ,4 5 5 ,5 3 7 .0 0
D eposits not b earin g in te re st________________________
5 1 ,6 2 0 , 3 7 3 . 3 5
D eposits bearin g in te re st_____________________________ 1 1 8 , 6 1 7 , 8 0 1 . 5 3
B ala n c es due to o th er b an k s in C a n a d a ______________
12 4 , 529. 80
-------------------------1 8 0 ,8 1 8 .2 4 1 .6 8
207. 938, 995. 74

G old and silve r coin c u rre n t__________
G overn m ent dem and n o te s___________
D epo sit w ith D om inion governm ent
required b y a ct of p arliam en t for
secu rity o f gen eral b an k note circu­
la tio n _______________________________
D ue b y agencies o f th is b a n k and
oth er b an k s in G re at B r it a in _____
t. 839, 298. 23
D ue b y agencies o f th is b an k and
oth er b an k s in foreign co u n tries___ 7, 10 9 , 409. 64
Call and sh o rt loans in G re at B rita in
and U n ited S t a t e s _________________8 0 ,6 5 8 ,4 9 7 .0 0
D om inion and provin cial govern m en t secu rities_____
R a ilw a y and o th er bonds, debentures and sto ck s____
N otes and checks o f o th er b a n k s _____________________
B a n k prem ises a t M ontreal and b ran c h e s-----------------Current loan s and discounts in C an ada and elsewhere
(rebate in terest reserved) an d o th er a sse ts-----------D ebts secured b y m ortgage or o th erw ise----------- ----O verdue debts not sp ecially secured (loss provid ed
fo r ) ________________________________________________

6, 2 8 7 ,3 7 0 . 53
12 , 9 2 5 ,8 0 6 .2 5

6 0 0 ,0 0 0 .0 0

92, 607, 204. 87
530 , 15 2 . 88
8, 567, 0 1 1 . 26
3 ,6 8 2 ,0 8 6 .4 1

1 2 5 ,1 9 9 , 6 3 2 .2 0
6 0 0 ,0 0 0 .0 0

8 1 , 9 1 4 , 9 8 1 .4 9
1 18 ,4 2 1 .1 1
10 5 ,9 6 0 .9 4

__82, I 39 . 363 - 54
2 0 7 ,9 3 8 ,9 9 5 .7 4

E . S . C lo u st o n ,
General M anager.

B ank of Montreal,

M ontreal, A p r il 30, lo o p .


Ba n k i n g and Cur r e nc y Systems
Interview with Sir Edward Clouston, General Manager of the Bank of

B y Mr. V r EEEANd :
Q. This statement, Sir Edward, which you have pro­
duced, is an older statement than your annual, the one
that you publish?
A. Yes; we publish ours every six months. We are
the only bank that does.
Q. The law requires you to publish it once a year?
A. That is all.
Q. You publish it voluntarily again?
A. Yes.
Q. At the end of six months?
A. Yes.
Q. Your capital is now $14,400,000, and surplus
and undivided profits $12,358,000, making a total of
$27,120,000. The Bank of Montreal, if I remember
right, for a good many years was the largest bank on
this continent?
A. Yes; it must have been. The only bank I know of
larger now is the National City. Is there any other?
Q. I think perhaps the National Bank of Commerce of
New York is just about your figures.
A. Has it as much as that?
Q. Yes; you can issue your notes to the amount of
your capital; I see on this statement that you have about
$4,000,000 of notes unissued?
A. Yes; that is the period at which our issue is lowest.
Q. Your deposits not bearing interest seem to bear a
considerably larger proportion to the whole deposits
than the other banks that we have noticed so far?


N at ion a l M o n e t a r y C o m m i s s i o n
A. Yes; we have so many government and railway ac­
Q. That is accounted for by government accounts and
other accounts of large corporations?
A. Yes.
Q. And other large accounts?
A. Yes.
Mr. Week s . Do you have all the government business?
A. We have the most of it, but a number of the other
banks have small deposits. The principal account is kept
with us. In fact, we are the government bankers.
Mr. B onyngE. Y ou act as the official agent of the
government ?
A. Yes; here and in London. We issue all their loans.
Mr. Week s . That is because you are the largest bank;
it has nothing to do with your charter conditions?
A. No; simply because we have the government busi­
By Mr. V r EEEANd :
Q. When was the bank of Montreal originally chartered ?
A. In 1817. I do not think we got our charter properly
until 1818.
Q. That would also account for your having the gov­
ernment business; you were really the first large bank?
A. No; the government business was held by the bank
of Upper Canada for a number of years.
Q. That was before confederation of the Provinces?
A. Yes.
Q. Government demand notes are simply government
loans without interest?

i 54

B a n k i n g a nd C u r r e n c y Systems
A. No; they are Dominion notes.
Q. You carry a much larger proportion of Dominion
notes than the law requires you to?
A. Yes.
Q. Forty per cent the law says it shall be?
A. Yes.
Mr. B onynge . You are carrying one-fifth of all the
Dominion notes that are issued, are you not?
A. The total amount of Dominion notes is about
$70,000,000—$69,000,000. I am speaking from memory.
Mr. VREEEAND. Y ou carry a cash reserve; these two
items gold and silver and government demand notes, that
is the cash reserve carried in your own banks or branches ?
A. Yes; in our own safes. It does not really represent
our position, because we carry gold in other places. We
carry gold in Newfoundland and Chicago and Mexico.
That is, outside of the Dominion. This only refers to the
Dominion. In fact, at times we could not insert our total
gold holdings or we would get beyond the 40 per cent.
Mr. B o n yn ge . When you speak of carrying gold outside
of the Dominion you mean with your own branches outside
of the Dominion?
A. Yes; our own branches.
B y Mr. V r e e e a n d :

Q. At the date of this statement you give 10 per cent
of actual cash in your safes besides the amounts due you
from your own outside branches and from other banks?
A. Yes.
Q. This deposit with the Dominion government would
be under the 5 per cent deposit for note issue ?
A. Yes.

1 55

N at ion a l M o ne t ar y C o m m i s s i o n
Q. And you have due you in agencies of this bank and
other banks in Great Britain—those are cash balances due
A. Yes.
Q. Either from your own agencies or other banks in
Great Britain?
A. Yes.
Q. Due by your agencies and other banks in other for­
eign countries?
A. That would be in the United States and Mexico.
Mr. B o n yn ge . H ow many branches have you, sir?
A. They change. About 1 50 I should think. One was
opened the other day, and one will be opened in a few days.
B y Mr. V r e e e a n d :
Q. The cash in your own safes and cash due you from
other banks, including your own branches abroad, would
amount to something like $30,000,000?
A. Yes, about that.
Q. Your deposits, liabilities, and notes would amount to
about $186,000,000?
A. Yes.
Q. Then you have practically a cash reserve of some­
thing like 16 per cent?
A. About that.
Q. At the date of this statement?
A. Yes.
Q. Then your quick assets in call and short loans, what
time would you call a short loan ? Say ten or fifteen days ?
A. A short loan represents only the small amount we
loan in London, what we call “ stock-exchange” loans.


B a n k i n g and Cur r e nc y Systems
These loans are not callable every day, as in New York.
From settlement to settlement, taking place every fortnight.
The rest of it is all call money.
Mr. B onyngE. Y ou loan in New York principally?
A. Principally in New York.

By Mr. We e k s :
Q. I suppose you carry such a large sum in that way
to protect your gold in case of emergency and to keep
the money employed?
A. To protect any heavy demand.
Q. You have a much larger proportion of your assets
loaned in that way than any other bank I have noticed?
A. Very much larger.
B y Mr. V r e e e a n d :
Q. The purpose of your carrying so large an amount of
foreign loans would be for the purpose of putting you in
a position to realize quickly upon assets for any demands
which might be made upon you and not, I judge, for the
same purpose, for instance, that the banks of Belgium
and France and Germany keep a considerable amount of
foreign bills, to protect them from withdrawals of gold?
A. Yes.
Q. Or shut it off?
A. Yes.
Q. Gold, as far as I have noticed, does not play any
great part in your banking system?
A. No; it does not enter into it to any great extent.

By Mr. We e k s :
Q. Do you think that the gold carried in your reserves
is sufficient to form a basis for the future development


N a tio n a l M onetary Commission
of Canada? It seems low to me. I would like to have
your judgment on that.
A. We do not carry much gold. If we were dependent
upon this gold entirely it would not be anything like
sufficient to form a basis, but we practically look upon
all these gold loans out of the counLy as gold that we
can put our hands on within twenty-four hours. There
is nothing to prevent us calling all the loans we have in
United States and England to-day, and we could have
the whole of them called in in New York within twentyfour hours, and the gold thus realized in Canada as soon
as the express companies could bring it here.
Q. You ship very little gold to the United States; you
are in a position of loaning your money in New York
and drawing gold against those loans if you wish to?
A. Yes; we ship gold occasionally, but not very largely.
Q. You wouldn’t consider your reserves of gold suffi­
cient unless you had these demand loans and short loans
in London and New York for the general banking pur­
poses of the country?
A. We should increase our gold very much if we did
not have them. We have to carry a rather larger reserve
than the other banks because in case of trouble we are
apt to be the ultimate source of supply.
B y Mr. V r EEEANd :
Q. You really act as the central bank here, do you not?
A. We do not wish to claim the position, but we are
forced into it very often.
Q. I was inquiring if, in your opinion, inasmuch as the
government does not heed them especially, it would not


B a n k i n g and Cu r r e n c y Systems
make the banking system stronger if you could substitute
gold in place of the 40 per cent of Dominion notes?
A. Yes; it would, except that the Dominion notes are
always supposed to be backed up by gold, or means of
acquiring gold. They are practically receipts for gold.
Q. If they actually called for gold on demand, that
would mean that your Dominion government must keep
a large reserve of gold useless for the purpose of protect­
ing it?
A. They have to keep that gold against it. They do
not actually keep the gold, because they have a certain
amount of debentures which they hold. They only keep
15 per cent in gold up to $29,000,000.
Q. Your Dominion act provides: “ The minister of
finance shall always hold as security for the redemption
of Dominion notes up to and including $30,000,000,
issued and outstanding at any one time, an amount
equal to not less than 25 per cent of the amount of such
notes in gold, or in gold and securities of Canada? ”
A. Yes.
Mr. B onynge . Above the $30,000,000 you have dollar
for dollar?
A. Dollar for dollar.
By Mr. V reeeand .
Q. The amount so held in gold shall not be less than 15
per cent of the amount of such notes so issued and out­
standing ?
A. Yes.
Q. I assume the other 10 per cent would be Dominion


N at ion a l M o n et a r y C o m m i s s i o n
A. Yes; securities of Canada, the principal and interest
of which are guaranteed by the Imperial Government.
Q. You say the amount of Dominion notes now issued
is about $69,000,000?
A. $69,000,000, I think.
Q. What is the present law as to the redemption of
them? They are supposed to be redeemable on demand?
A. On demand.
Q. Is the law unchanged that I have just read saying
25 per cent, 10 per cent of which may be in securities?
A. Yes; that is up to $30,000,000, I think you said?
Q. Yes.
A. Beyond that they have to hold dollar for dollar in
Q. And it is now carried out?
A. Yes.
Q. Above the $30,000,000 they would have an equal
amount of gold on hand?
A. $35,000,000 in addition to the 10 per cent.
Q. Makes it something like our gold certificates in the
States ?
A. Yes.
Mr. B onyngE. That gold is held by the Dominion
A. Dominion treasurer. The receiver-general we call
B y Mr. V r EEEANd :
Q. Where, besides the Dominion treasury, are they
redeemable ?
A. Only at the Dominion treasury.


Ba n k i n g and Cur r e nc y Systems
Q. No other part of Canada?
A. There are several assistant receivers-general in
Canada—Montreal, Toronto, Winnipeg, etc.
Q. Redeemable at any of those places where there is a
receiver-general ?
A. Yes.
Q. The money received through your postal banks, I
understand, is treated as current funds, turned into the
general treasury?
A. Of the Dominion government.
Q. No reserve is kept against them?
A. Yes; they have to keep a reserve, io per cent, I
think; they established it recently.
Mr. B onynge . In gold?
A. Yes; or in gold and Canada securities guaranteed
by the Imperial Government.
Mr. V r EEEANd . One gentleman said yesterday that
they had to keep a small reserve against the postal
receipts, but reduced it on Dominion notes ?
A. No; I do not think they reduced it on Dominion
notes. It is a small reserve.
B y Mr. We e k s :
Q. I would like to ask you, Sir Edward, if you think
that the organization of the postal savings bank system
is an advantage to the people of Canada, or would be of
advantage to the people of the United States ?
A. It enables the government to say that they have a
safe place for the savings of the people. If they are doubt­
ful of any bank they can go to the government and deposit
it there and it is supposed to be safe, but they do not
22561°—IO-------- I I


N a t i o n a l M o ne t a r y C o m m i s s i o n
interfere with our deposits much. We do not believe
they are competitors, because anything connected with
the government necessarily carries a certain amount of
red tape. I do not think the deposits of the government
have increased materially for quite a number of years.
Q. Is not the government paying too high a rate of
interest on these receipts?
A. We think so. They are paying the same rate of
interest the banks are paying, 3 per cent; but we say if
they insure security, as they say they do, they should
reduce the rate.
Q. If they had to reduce the rate of interest the proba­
bilities are the receipts would not be as great even as they
now are?
A. No; they possibly feel they would have to meet
Q. Do you think they might reach a condition, sir,
practically where enough money will be drawn out of the
banks and deposited in the postal savings banks to be
embarrassing in a critical situation?
A. No; practically not. The practical working would
be, if they withdrew it from the banks and deposited it
with the government, the government would redeposit
it with us, and that would assist the banks from which it
would have been withdrawn. It would really make no
difference to the country.
Q. Having a small number of banks you could do that?
A. Yes.
Q. Very easily?
A. Yes; the government redeposits with us immedi­
ately. All the departments deposit it, and it passes into


B a n k i n g and Cu r r e n c y Systems
the bank where it can be immediately used for the good
of the community. During the period in 1907 and 1908,
when money loaned for 100 per cent in the United States,
the rate for money from here to the Pacific did not ad­
vance more than 1 per cent, and that was more in the way
of bringing pressure on the people to reduce their bor­
B y Mr. B onyng E:

Q. As I understand, the postal receipts are deposited
by the government where they are needed for govern­
ment purposes?
A. We know nothing about it. It passes into the
general balances of the government. They do not
segregate it, so far as their accounts with us are concerned.
Q. Nor do they keep separate the money that is ac­
tually received from the postal receipts?
A. No.
Q. The Dominion treasurer does not retain that money?
A. No; if there were any danger at all it would be
owing to withdrawals from the government postal savings
bank. Then they would have to get the money to
meet them, and it would mean they would draw on us
very heavily, and we should probably have to issue loans
for them. It is not a very serious contingency.
Mr. V r e e l a n d . The burden then really rests upon
the banks ?
A. It comes back to them, chiefly to the Bank of
Mr. B onyng E. The bill proposed for us provides for
loaning that money from the treasury to the banks


N at ion a l M on et a r y C o m m i s s i o n
n the locality from which it is collected and banks pay­
ing a small rate of interest for the money redeposited
with them by the Government.
A. That would improve it to a certain extent.
Mr. V r EELAND. I see that you have notes and checks
of other banks amounting to $3,682,000. I think that
you treat that as part of a reserve. You would be en­
titled to call that a cash reserve, because you could take
it to the clearing house and get the money for it?
A. Yes.
Mr. B onynge . A s against that, aren’t your checks
also outstanding?
A. Yes; we do not treat that as an important part
of our reserve, because there would be about the same
amount coming in against us from other banks.
B y Mr. V r e e e a n d :
Q.. I notice that you carry bonds and pledges for stock,
$8,500,000. What sort of stock do you carry?
A. We haven’t very much in stock just now. We have
some Canadian Pacific stocks, a small amount.
Q. I suppose the bulk of that is in bonds?
A. Bonds, yes; largely in government bonds.
Q. Railway bonds?
A. And railway bonds. We have also Great Northern
stock, and Northern Pacific to a limited extent.
Q. Do you carry bonds, government or otherwise,
first-class bonds, with any idea of using them as a sec­
ondary reserve?
A. No.
Q. To sell?


B a n k i n g and Cur r e nc y Systems
A. No; we do not. Any bonds that come to us are
generally in connection with special operations. For
a reserve they are not a very good banking proposition,
but then, as an immediately available reserve the best
securities are not the best reserve. We had an experience
once in old days in the United States when there was
a crisis there; we held very high-class bonds and these
bonds returned a low rate of interest, but we found
that we were not able to sell them, because the class of
people who invested in such bonds had practically with­
drawn from the market. That is why I say for purposes
of a reserve gilt-edge bonds are not the best reserve.
Q. The great trouble with some of the best securities in
times of widespread crises is that you can not sell them
except at a sacrifice?
A. Exactly. Some of the heaviest losses have been
made by English banks holding English consols.
Q. The English Government through her postal depart­
ment suffered severely?
A. Yes.
Q. I think over $500,000?
A. Some of the banks also suffered very heavily.
Q. To return to your Bank of Montreal statement, you
show loans and discounts about $82,000,000?
A. Yes.
Q. What you call commercial paper in its widest sense,
including all sorts of time paper upon which you receive
interest or discount, does that follow or run along about
the same lines as ours does in the States?
A. I think so.


N a tio n a l M onetary Commission
Q. Rather than the English and French lines of paper;
that is, trade bills, drafts upon time?
A. Commercial paper, that is, paper given by a merchant
to a customer who banks with us. Commercial paper
with us is negotiable paper given by a merchant in settle­
ment of his purchases from one of our customers. That,
I take it, is what is understood by commercial paper all
the world over. Outside of that we have no other security.
Q. What is the practice with your Montreal merchants,
for example, merchants here of first-class credit, how do
they pay their bills? Do they make their banking
arrangements with their home banks and pay their bills
by check, availing themselves of cash discounts, and
would such commercial firms but rarely give notes or
accept drafts?
A. They sometimes accept drafts or give notes for their
foreign purchases, but they usually settle their domestic
accounts by check, taking advantage of cash discounts.
Q. They would go to their local banks and make satis­
factory arrangement to procure the money to pay their
A. Yes.
By Mr. B onynge :
Q. Do you own your buildings for your branches
throughout the Dominion?
A. Very largely. We have in Montreal this building
and seven other buildings.
Q. You own seven other buildings in this city?
A. Yes.
Q. How many branches have you in Montreal?

1 66

Ba n k i n g and C u r r e n c y Systems
A. Seven. We have subagencies in other centers, such
as Toronto and Winnipeg.
By Mr. W e e k s :
Q. Are all these buildings carried at $600,000?
A. Yes; and we are just about to erect a building in
Winnipeg; I do not know what it will cost, but it is to be
a fine building. We have also recently bought a build­
ing in Wall street, but your laws will not allow us to hold
it in the name of the Bank of Montreal.
Q. Because you are a foreign corporation?
A. Yes.
Mr. V r e e l a n d . That is the law in the State of New
Mr. We e k s . That is the law of the United States.
By Mr. B o n yn g e :
Q. It is a law of the State of New York.
A. Probably each State makes its own laws in that re­
Q. You maintain a branch in New York?
A. Yes.
Q. How many branches have you in the United States?
A. Three, Spokane, Chicago, and New York.
Mr. We e k s . Do you think it would be wise to permit
a bank like the Bank of Montreal, or our national banks,
to do a trust-company business as part of their charter
A. That is a question which has only arisen quite lately
in my mind. The manager of an English bank was here
the other day and he told me that they have got permis­
sion to act as trustee, or executor, trustee for estates,


N a t i on a l M on e t a r y C o m m i s s i o n
trustee for bonds, and in fact to transact the business we
do through a trust company because we can not do it un­
der our bank act. I should not think there would be any
very great objection to it.
By Mr. V r e EEANd :
Q. If it can be done indirectly as you are doing it?
A. The bank has nothing to do with it. It is done by
another corporation very closely allied to the Bank of
Montreal, with different shareholders and a separate
board of directors.
Q. I can not see any reason why if they can conduct it
successfully indirectly they could not do it just as well
directly under their own executive officers; the bank s
large enough to employ men skilled in that line to attend
to it?
A. Yes.
By Mr. B onyngE:
Q. How much of your deposits bearing interest repre­
sents savings accounts and how much time deposits,
approximately, can you tell us?
A. I could not without looking into it. In the directors’
statement we do not separate them in that way. They
are separated into deposits bearing interest and deposits
not bearing interest.
Q. For the savings accounts you issue a savings-bank
book ?
A. Yes.
Q. To the depositor?
A. Yes.

Ba n k i n g and C u r r e n c y Systems
Q. Do you follow the same rule as the other banks, in
not segregating the savings deposits from the other de­
posits but treating them all alike?
A. Yes.
Q. You have not any certain assets that you set aside
for the savings accounts ?
A. No; none whatever. I think our bank statement
is already too voluminous, because it gives so many differ­
ent items of information. If we gave a short statement
as they do in England, so many deposits, so many dis­
counts and our reserves, it would serve all practical pur­
poses. They were carried away, at our last revision of the
bank act, in drawing up the form of statement, and I do not
know whether we can get it reduced now. It gives a great
deal of information that is practically of no service, and it
is very difficult sometimes for a general manager, with the
best intentions in the world, to make a correct statement
in each column, because he is uncertain what column to use.
What one wants to know is the liability of the bank and
the available assets.
B y Mr. We e k s :
Q. Do you think it wise for your banks to invest the
savings deposits as other deposits are invested?
A. Suppose a bank fails, we can not keep the savings
deposits separate from the others.
Q. You do not, but you might?
A. We could not. Each is a liability of the bank.
Q. Under your laws?
A. Yes; unless we alter our laws. There is a bank
that says all its savings-bank assets or deposits are invested


N a ti on a l M o n e t a r y C o m m i s s i o n
in first-class securities, or Dominion loans, but that is
nonsense, because if the bank stopped payment it could
not apply those to the savings bank. They would have
to go to the general assets of the bank. It is a catch
with the public.
By Mr. V reeeand :
Q. Under your law, there are no government examina­
tions of banks?
A. No.
Q. What examinations do you have of your banks; for
instance, the Bank of Montreal, what is your system of
examinations ?
A. We have a regular staff of inspectors.
Q. Who are on the road constantly?
A. Yes; the rule is generally two weeks out and two
weeks in, and every one of the branches has to be in­
spected once every year.
Q. What system do you have in your head office here;
is it treated the same as any other branch? And what
about your city branches here?
A. The branches in Montreal are inspected by the in­
spectors, but the loans are not specially reported on
because they are directly under my own eye. The head
office is inspected by the directors.
Q. In what form do they inspect it?
A. The board of directors takes our balance sheet at
the end of the year and compares it with our head-office
Q. What means have you for the prevention of defal­
cation in your clerical force?


Ba n k i n g and Currency Systems
A. In the head office there is no chance of defalcation.
They deal entirely with figures. They do not handle any
securities or cash.
By Mr. We e k s :
Q. Do the directors ever go through the securities or
notes physically and examine them and count them?
A. No.
Q. Or anything of that sort?
A. No.
Q. Is a report made to the directors?
A. The report of the inspectors?
Q. Yes.
A. They make a report to me as general manager,
and T report it to the directors. The inspector reports on
the state of the various accounts, and he generally reports
on the country in the vicinity of the branch and what the
business and agricultural prospects are.
Q. Do you think it would be of advantage from your
standpoint if you had a public inspection conducted by
the government?
A. I do not see how the government could conduct such
an inspection. It would be almost impossible to get a
staff to do what we do. To get a proper inspection you
would have to have all the branches inspected simulta­
neously, so that they could not make any changes among
Q. Do you think such an inspection could be confined
to the main offices with any advantage?
A. I do not think so.


N a t i o n a l M on et a r y C o m m i s s i o n
B y Mr. V reeean d :
Q. Have you increased the capital stock of your bank,
say, since 1900?
A. Yes.
Q. The surplus has been increased?
A. The surplus is being increased steadily. We have
increased the capital from time to time as necessity re­
quired. In the year 1819 the capital was increased to
$650,000, and in the following year to $750,000. In
1829 the capital was $850,000; in 1841, $2,000,000; in
1845, $3,000,000; in 1855, $4,000,000; in i860, $6,000,000;
in 1873, $12,000,000; in 1903, $14,000,000; in 1905,
Q. Have you established a considerable number of new
branches during the last ten years?
A. Yes.
Q. In the West?
A. We are adding all the time to our branches in all
parts of the Dominion.
Q. Your cash deposits are mainly kept, I suppose, at
the head office and sent wherever needed?
A. The cash?
Q. The cash beyond the amount of till money that
they need.
A. We distribute it as much as possible. We have
certain centers, so if there is any trouble at any branch
we can supply that branch within twenty-four hours.
Some of our branches are seven or eight days’ travel away
from the head office.

B a n k i n g a n d C u r r e n c y Systems
B y Mr. V reeea n d :
Q. These reports that come in are all boiled down,
collected together, and then they go to the general man­
A. This report will probably be examined by two men
before it comes to me.
Q. Will this individual report come to you as it is?
A. Yes; it will be examined by them and then I go
over it and approve. If there are any accounts weak we
write about them, or inquire into them, and the report
then is submitted to the directors. In that way we have
our finger on the whole country. That is what makes
banking somewhat more interesting in Canada than in
the -States.
Q. What authority do you give to the managers of
your various branches about loans? I suppose you give
them a limited authority without consulting your head
A. Yes; their conduct of business is regulated on cer­
tain lines, and a certain latitude is allowed to managers.
If they do not produce good results we can change them
and put someone else in.
Mr. We e k s . Do you have any cases of dishonesty?
A. Very few. The claims on the guaranty company
are very, very few, extending over quite a large number
of years.
Mr. B o n yn ge . Your officials are all bonded?
A. All bonded. We bond every official to the extent
of $2,000. We bond them ourselves in addition, accord­
ing to the position each is in. One man handling a large


N a t i o n a l M o n et a r y C o m m i s s i o n
amount of cash would be bonded for $10,000 or $15,000,
and the premium on that would be set aside to a fund,
and that fund is growing steadily. It is quite a large
By Mr. We e k s :
Q. How many employes has the bank?
A. About 1,300.
Q. Are they all bonded?
A. All bonded; every one. Our staff is growing
steadily, because every branch opened means three more
clerks, even for a small branch.
By Mr. V r e e k a n d :
Q. Rates of discount in the various parts of Canada in
your branches, I suppose, differ somewhat according to
the sort of business presented?
A. Yes.
Q. More risk in one part than another?
A. There is not only more risk in certain parts of the
country, but the cost of doing business there is very much
in excess of what it is in other places. We have to allow
all our men when they leave for the West extra allowances,
and that helps to make business there more expensive.
A. Are the rates of discount made larger in these sec­
tions, or are they uniform?
A. Made larger.
Q. In the West.
A. Y e s; they are a trifle larger in parts of the West than
they are in the East.


B a n k i n g and Cu r r e n c y Systems
B y Mr. B o n yn g e :

Q. Who fixes the rate of discount, does the head office
or the branch office ?
A. The head office.
Q. Is any change made in the rate without consulting
the head office?
A. No; they can put it up as much as they wish but
they can not put it down.
Q. They can raise it?
A. They can raise it.
Mr. W e e k s . Suppose money conditions were strained
and you did not wish to make any new commitments out­
side of those which the bank has to make to its own custo­
mers in Montreal, would you instruct your managers all
over the country to refrain from any new commitments
because the local conditions demanded it?
A. Yes; we would in large places. We do not disturb
small places. In a big center like Winnipeg, or Toronto,
or Vancouver, or Halifax, we would instruct them to keep
their business well in hand and not make any further com­
mitments without consulting us, but it is no use interfer­
ing in a small place. If you called in the loans in the
smaller towns you couldn’t get them.
By Mr. V reela n d :
Q. They would not understand it?
A. No.
Q. Rates of interest are pretty uniform throughout the
country ?
A. Yes; fairly uniform.


N a t i o n a l M o n e t a r y Co mmi s s i o n
Q. About 3 per cent seems to be the average amount
A. For deposits?
Q. Yes.
A. Yes.
Q. Rates of interest on deposits ?
A. Yes; 3 per cent is the maximum.
Q. Banks adhere to that pretty closely?
A. Pretty closely.
Q. Do not your trust companies pay more than the
banks ?
A. The Royal Trust Company does not take deposits
in the banking sense. It takes deposits of a certain class
but they are not subject to check.
Q. Along what lines do your banks compete in an en­
deavor to get business, from the reputation of the managers
and the reputation of the bank? Do they offer more favor­
able terms upon exchange, or upon loans, or pursue those
plans of obtaining new business ?
A. Sometimes a concession is made for the purpose of
obtaining an account, probably a lower rate of discount is
Q. You have then sharp competition?
A. Yes.
Mr. We e k s . One of our methods is in paying so much
interest on a certain part of a deposit, a free balance,
or something of that sort; with your uniform rate of
interest that is impossible.
A. We have the same arrangement. Very often a
company or individual wishes to have his checks made

B a n k i n g and C u r r e n c y Systems
payable at par in different provinces, wherever we have an
agency, and in order to get some profit out of that conces­
sion we make him keep so much at his credit free of interest.
Mr. B onynge . In the case of an ordinary depositor
with an account with the bank at Montreal and desiring
to make a payment at Vancouver, would you charge him
for the draft?
A. Yes; charge him a commission for it. That is a
proper and legitimate part of the business of the bank.
B y Mr. V reeean d :
Q. What amount of deposits would you consider as
justifying the opening of a branch, Sir Edward?
A. That depends. In a country like the West, which
is growing all the time, we have to take a chance of not
doing any business for a year.
Q. Prospects would also enter into it largely?
A. Yes; we have just issued instructions to open at a
place where there will not be any deposits at all, but the
place is a good point; it is on the bank of a river and a
divisional point on a railway.
Q. What amount of deposits in a branch would you
consider, from the standpoint of the profit, justified
establishing it?
A. That is a very difficult question to answer, because
a minor branch or subagency might be useful in other
ways than securing deposits. Where we open a subagency
out in a manufacturing district, that is done very often
to protect our business at the head office, because other­
wise the different manufacturing concerns might be mak­
ing banking arrangements elsewhere, and we give them


N a t i o n a l M on e t a r y C o m m i s s i o n
the convenience of paying their checks close at hand. In
a country place, for a country branch, anything from
$350,000 upward.
Q. There is no implied understanding as to interest,
discounts, rates, and loans among the banks?
A. None at all; no. .
Q. How about the interest on deposits?
A. It is an agreement among ourselves that we shall
not pay more than 3 per cent.
Q. It is not considered good banking to pay more than
A. No; 3 per cent half-yearly.
Q. The statements indicate that banks generally, tak­
ing them all together, pay interest on about two-thirds of
their deposits; your bank runs less?
A. Yes; I dare say they do.
Q. About two-thirds seems to be the average according
to the condensed report?
A. Yes.
Q. The checking system has come to be very generally
used in Canada, the system of checking upon accounts?
A. Yes.
Q. How about your large manufacturing corporations
here and the railroads; how are their pay rolls paid, by
cash or by check?
A. Check, chiefly. That is, at any rate, the practice
of railroads.
Q. All the large manufacturing concerns in the city
here, do they pay usually by check or cash?



B a n k i n g and Cur r e nc y Systems
A. They generally get the money. We consider that
one of the profits in connection with the account is the
circulation that it gives us.
Mr. We e k s . Does the government pay checks or cash?
A. They pay checks.
B y Mr. V reeean d :
Q. There is nothing in the Dominion law, as I under­
stand, relating to reserves?
A. Nothing.
Q. That is entirely----A. Subject to the judgment of each general manager.
Q. Under the laws, also, does the Banking Association
endeavor, as a matter of good banking, to keep a mini­
mum amount of cash reserves among the banks ?
A. Yes; there is an arrangement among ourselves that
a bank will keep a minimum of 8 per cent in actual cash
and 7 per cent in readily available securities, making 15
per cent in all, but there is no law about it.
B y Mr. We e k s :
Q. Do you consider that sufficient, taking everything
into consideration?
A. Yes.
Q. There is always a great difference of opinion among
bankers about the necessity for keeping a reserve and
the method of handling a reserve?
A. Yes; there is always a difference of opinion.
By Mr. V r EELAND:
Q. To what extent have there been runs on banks in
years gone by in Canada? Were there runs upon the
Ontario Bank?

* Ofr-.


N a t i o n a l M on e t a r y C o mmi s s i o n
A. Yes; and the Sovereign Bank.
Q. At their head offices and branches also?
A. Yes.
By Mr. B onynge :
Q. At that time did it cause runs on the other banks?
A. No.
Q. No runs on any of the other banks?
A. No; the run on the Ontario Bank hardly commenced
when we stopped it by taking the bank over and putting
up a sign “ Bank of Montreal” over the “ Ontario Bank,”
and that stopped the run.
Mr. V r EEEAND. Any amount they wanted you paid?
A. Yes.
Mr. WEEKS. Was that a quiet run?
A. Yes.
B y Mr. V r EELAnd :
Q. I notice in the case of the Sovereign and Ontario
they were taken over and liquidated by the chartered
banks or a combination of them?
A. In the case of the Ontario we took the bank over
ourselves and liquidated it ourselves. In the case of the
Sovereign Bank there was a partition of all the offices in
the districts, and each bank looked after its own district.
Q. Would you say that has become the policy of the
chartered banks in case of a weak bank, or one that is
about to suspend?
A. No.
Q. It is left with each individual case to deal with it as
you see fit.


B a n k i n g a n d C u r r e n c y Systems
A. Yes; in the case of the Ontario Bank and Sovereign
Bank it was a very ticklish time, and if that run had been
allowed to continue it might have spread, and it was done
partially in self-defense.
Q. That was when we were having our panic across the
border in 1907?
A. Yes.
Q. But it is the practice of your chartered banks, is it
not, Sir Edward, to support each other where you con­
sider them solvent?
A. There is no regulation to that effect, but if a bank
should come to us in trouble and show us reasons for doing
it, we should help it over.
"By Mr. B onynge :
Q. Much the same as our clearing houses?
A. Yes; probably the same as the clearing house in
New York. In the panic of 1907-8, during the crisis in
the United States, two or three banks came to us for help,
but it was not generally known. They were perfectly
solvent and perfectly good and only needed temporary
assistance at the time.
Q. You know our clearing houses do that quite fre­
quently ?
A. Yes; we are members of the clearing house in
B y Mr. V reeean d :
Q. You say that your cash reserves in proportion to
your deposits are increasing, say, in the last ten years ?
A. Yes.
Q. That is the general policy of the banks?


N a t i o n a l M o n et a r y C o m m i s s i o n
A. Yes. Just at present I imagine they are about as
strong as they ever have been.
B y Mr. B o n yn g e :

Q. During the panic of 1907 in the United States, did
you call your loans in in the United States, or did you
loan money then?
A. We kept our balance pretty even all the time.
Q. Your money was largely on call in the United States
at that time?
A. Yes.
Q. And you got higher rates of interest for the money
that was out?
A. Yes.
By Mr. V r EELANd :
Q. The note issues of banks, I think, we have been well
over. In the end all of the banks are behind them?
A. Practically.
Q. The notes are issued and the expenses paid by the
individual banks?
A. Yes.
Q. Of note issues?
A. Yes.
Mr. B o n yn ge . There is double liability of stockholders
A. Yes.
B y Mr. V r EELANd :
Q. And also stockholders would be liable----A. Not liable beyond the double liability.
Q. They would be liable to the amount of the subscribed
capital that had not been paid in?
A. Yes; anything unpaid.


Ba n k i n g and Cur r e nc y Systems
B y Mr. B onynge :
Q. If you had an authorized capital of $20,000,000 and
had issued stock for $14,000,000 there would be no liability
on the excess?
A. No; suppose the shareholders had not paid in
full their calls on account of stock they would be liable
for the balance, but not for the authorized issue.
Q. Not for the difference between the authorized issue
and what was actually outstanding?
A. No.
Mr. We e k s . Do you think the possibility of fraud in
issuing circulation is as carefully guarded as it can be?
A. Very nearly. We have never found in any bank
that came to grief or got into trouble the slightest error
in circulation. The only improvement that could be
made would be if the banks made their own notes. At
present it is done by the American Bank Note Company,
and by the British-American Bank Note Company, and
some are made in England, so we can not follow them
Mr. B onynge . Y ou think it would be better if the
notes were made by the Dominion government?
A. Or made by the banks. We have several times
talked about having a note bureau of our own in the
Bankers’ Association which would manufacture the notes
and distribute them to the banks.
By Mr. V reeean d :
Q. Superintended by the officers of the association?
A. Yes; so that the note would be under our control
from the birth until the death.

18 3

N at ion a l M on et a r y Co mmi s s i o n
Q. To what extent can you get reports from these
different bank-note companies as to their shipments
to banks?
A. They are obliged when they deliver notes to a
bank to notify the association. If a bank-note company
failed to do that the association would not let the banks
get their notes there.
B y Mr. We e k s :
Q. Do you keep a record of your individual notes?
A. We do. It is not generally done in banks.
Q. I should imagine that about the only chance of
an overissue of notes would be by some bank which was
in pretty hard straits ?
A. Yes; there is the chance in a case of a run that
they would keep paying out their notes, and an over­
issue might occur in that way.
Mr. B o n yn ge . Might it also occur at the branches
before they had notice?
A. It might, possibly.
By Mr. V r e e e a n d :
Q. It would occur when the bank is pretty well up to
its limit of note issue?
A. Yes; but there is not the same danger now, because
we have a new regulation.
Q. The law of 1908?
A. Yes.
Q. Has that been used by any of the banks?
A. Yes.
Q. It was used last year ?
A. We had notice within two days of two banks that
wanted to use it.


B a n k i n g and Cur r e nc y Sy stems
B y Mr. B onynge :
Q. This year?
A. This year.
Q. Was this regulation passed at the suggestion of
the bankers?
A. It was under discussion at one time.
Q. Did the Canadian Bankers’ Association take any
action before the passage of the bill, either in its favor
or against it?
A. No; but they had no objection to it. On the other
hand, I do not think they made any application for it.
Q. Did it originate with the Canadian Bankers’ Associa­
A. It was the result of a discussion between some of the
bankers and the minister.
Mr. We e k s . Do you see any objection to it now if it is
used strictly for emergency purposes?
A. I do not see any great objection to it. It is only
used for four months during the grain season, and the
grain movements are over by the 31st of January. By
that time most of the grain is sold.
B y Mr. V reeean d :
Q. I should think that it might be of advantage to the
banks of smaller capital?
A. Yes.
Q. To those having a very small issue and which run
pretty close to the limit?
A. Yes.
Q. And which have quite a good many branches?
A. Yes.

> .OS' V

185 .

N at ion a l M o n et a r y C o m m i s s i o n
Q. And not as the Bank of Montreal, with a large or
much larger capital and consequently a larger note issue?
A. Yes; the pressure for circulation has been largely
relieved by the establishment of smaller branches through­
out the country, causing notes to come back from circula­
tion more promptly in consequence.
Q. What is the pocket money of the people generally,
Dominion and bank notes?
A. Yes.
Q. And silver?
A. And silver.
Q. Very little gold is circulated?
A. No gold is ever carried.
By Mr. B onynge :
Q. I suppose your method of circulation is a source of
profit to the banks?
A. To some banks it is. It is not of much profit to a
bank like this, because we have to carry such large re­
serves, and we expend a great deal of money in keeping
our circulation as clean as possible.
Q. What do you estimate the expense of keeping up
the circulation with the very frequent redemption which
you have; would i per cent cover it?
A. It is not far from it.
Q. Your redemption is very frequent?
A. Yes; the life of one of our notes averages three or
four years.
Q. Notes that are paid off and which are in good condi­
tion are put out again?
A. Yes.


Ba n k i n g and Cur r ency Systems
Q. As soon as they are in bad condition they are de­
A. Yes; and we try to keep our circulation clean.
Q. Would all of your circulation be payable at any one
of your branches if presented?
A. Yes; we are not obliged to pay it at any branch, but
we do.
Q. I mean legally?
A. No; but a bank must receive in payment its own
notes at par at any of its offices whether or not they are
payable there.
Q. Under the law are you obliged to pay or redeem
notes at the branches?
A. Each bank has to establish agencies for the redemp­
tion and payment of its notes at certain points designated
by the bank act.
By Mr. B onyngE:
Q. All of the notes of a bank that might be presented
at any one of its redemption points would have to be
redeemed there?
A. Yes.
Q. Even if all the outstanding notes of the bank were
presented at that redemption point they would have to
be redeemed?
A. Yes.
B y Mr. V reela n d :
Q. What are the functions of your clearing house; are
they anything beyond what would be indicated by the
name, the balancing of accounts as to checks and notes?
A. Practically that is all.


N a t i o n a l M on et a r y Commi ssi on
Q. Is there any agitation in Canada for any changes
in your banking laws by any class of your people, or by
bankers ?
A. Not by any particular class. There are always a
certain number of persons who think they know more
about your business than you do yourself, and who have
all sorts of suggestions to make. I have not heard of
any such agitation.
Q. Banks have no taxes so far as the general govern­
ment is concerned?
A. No.
Q. You have your provincial, city, municipal, and
school taxes?
A. Yes.
Q. All the provincial and municipal taxes, but nothing
from the general government?
A. No; not from the Dominion government.
Q. In what form does the provincial government tax
A. Chiefly on capital. It is a very unfair tax, because
we have always urged that they should tax us on the
amount of capital used in their province, but they say
it is a much simpler matter to tax as they do. We have,
therefore, to pay much more proportionately than any
other bank.
Q. What rate does the Province of Quebec charge upon
bank capital?
A. I do not remember. It is a graded tax.

1 88

B a n k i n g and Currency Systems
Q. You mean graded by starting in with $1,000,000
A. Yes.
Q. And so on?
A. Yes.
B y Mr. We e k s :
Q. Does the general manager determine where circu­
lation shall be distributed, how much shall be at each
branch at any specified time?
A. No; that is regulated by the branches themselves.
Q. In accordance with their needs?
A. Yes; they apply for circulation as they require it.
Q. How frequently do your branches report to the main
office'the circulation which they issue?
A. We receive regular reports of the amount they have
on hand; daily reports from the leading branches and
twice a week from the smaller branches. That is our
own personal arrangement.
Q. I was led to ask that question, thinking, perhaps,
unless reports were made very frequently a bank that
was near its limit might, without any intent, have out
an excess of circulation.
A. When we get near our limit we are kept informed by


N a t i o n a l M o n e t a r y C o mm i s s i o n
Interview with H. V. Meredith, assistant general manager of the Bank of
Montreal, and director of the Royal Trust Company.
B y Mr. V reeeand :
Q. The trust company publishes a statement?
A. We prepare statements and furnish them to the
governments of the various provinces, but we do not give
them to the general public. We act under a provincial
charter in the different provinces where we are located, and
we have to give a statement to the government of each
province, and in some of the provinces they are much
more particular than in others. In some of them they ask
us for a deposit as security for acting as trustees.
Q. Ask for a deposit with the provincial government?
A. Ask for a deposit with the provincial government.
Q. In cash?
A. In cash, yes; or securities.
Q. Do they invest it in any way so you get interest on
it, or is that dead money?
A. In the province of New Brunswick they insisted on
our buying provincial bonds and depositing them.
Q. So that you get interest on the bonds?
A. Yes.
Q. In the other provinces don’t you get anything out
of the deposits?
A. They take securities, on which we collect the interest.
Q. Does the Dominion government authorize and give
charters for trust companies?
A. Yes; but we get local charters too, as Dominion
charters are subject to provincial trust companies’ acts.
Q. Do all the provinces give charters for the trust com­
panies ?


B a n k i n g a nd C u r r e n c y Systems
A. There is no reason why they should not. They have
all got the power.
Q. That does not give you authority to act outside of
the provinces ?
A. No, that would be local. For this company we had
originally a charter for the Province of Quebec, and when
we entered the other provinces we had to get a charter
from each of them or register under each of their provincial
trust-companies acts. We do business in all the provinces.
Q. You have to get authority from each province to
enable you to do business?
A. Yes.
Q. And you are required to make a deposit or give
security you say ?
A. We give a deposit, if asked for, as security for our
acting as trustees, executors, committee, guardian to
persons and to property. Some of the provinces do not
exact security.
Q. You have an authorized capital in your charter?
A. Yes.
Q. You have the right to increase if from time to time
if you wish?
A. Yes.
Q. How large a capital do you have?
A. Our capital now is $5,000,000 authorized, and
$ 1,000,000 fully paid up.
Q. You do not receive deposits in the ordinary way?
A. We have authority but we do not receive them.
Q. You have authority to receive deposits?
A. Yes, most of the trust companies have that au­


N at ion a l M o net a r y C o mmi s s i o n
Q. Do you have authority to buy commercial paper?
A. No, that is forbidden; or bills of exchange.
Q. What is the line of investment that you are author­
ized to make?
A. We are not restricted as to investments. Anything
that we like except commercial paper and bills of exchange
Q. As a matter of fact, how do you invest your money?
A. We buy securities, largely bonds.
Q. Do you invest it ever in real-estate mortgages?
A. Yes; we have invested a considerable amount
through our agencies in Winnipeg and the Northwest.
Q. Do you act as trustees and executors?
A. Yes.
Q. Administrators?
A. Yes.
Q. All of those trust functions?
A. Yes; that is how we make our money. We are un­
like trust companies of the United States; as I understand
it, they make their money out of deposits and the invest­
ment of them. In a majority of United States trust com­
panies there is very little distinction between trust com­
panies and banks, except trust companies have larger
powers. The feeling is here to disassociate trust com­
panies from banks altogether. We do not take any de­
posits from the public except for investment or something
of that kind.
Q. The deposits that you take from the public for in­
vestment are payable how? That is, are they payable on
demand or at some specified time?


Ba n k i n g and Currency Systems
A. We do not take demand deposits. The way this
money comes to our hands is principally from estates, and
the investments are the property of the estates, and the
moneys are only repayable when the investments can be
Mr. B onyngE. Do you exercise your discretion in what
securities you are to invest these trust funds, or are you
directed by the party?
A. We follow the instructions contained in the will or
other deeds governing the investment.
Mr. V reeeand . Y ou receive a commission for such in­
vestments ?
A. Yes.
B y Mr. B onyng E:

Q. Do you have an officer, a member of the trust com­
pany, who is a member of the exchange?
A. No; the trust company, as we understand it, and as
we wish it to be, can not be a member of our stock ex­
change. Under our banking laws there are many trans­
actions which a bank can not take up. If a business
comes in that the Bank of Montreal could not take, we
would turn it over to the trust company, and thereby we
keep the connection that we might otherwise lose.
Q. Do you pay a larger rate of interest than the banks?
A. On deposits?
Q. Yes.
A. No; we allow bank rates on moneys in our hands
awaiting investment. Our great idea is not to allow the
trust companies in Canada to be banking concerns in any
shape or form.


19 3

N at ion a l M o n e t a r y Co mmi s s i o n
Q. Upon what other deposits do you pay interest ex­
cepting those that are left with you for investment?
A. That is all. It occasionally happens that companies
which are accumulating funds for dividends would place
them with us to invest, and in that case we make an
arrangement by which we manage the investment for a
certain percentage, and in that way they get more than 3
per cent, if it can be invested to yield more.
Q. Is the practice becoming to any extent general here
by which men make wills appointing trust companies as
executors ?
A. Yes.
Q. And are they appointed as administrators by the
courts to any extent?
A. Most people now appoint trust companies. They
had a prejudice here under the French law, and for a good
many years we could not get them to look at anything
but private trustees; now they are appointing trust com­
panies very largely. If they go to the court, the court
will appoint a trust company. They will only appoint
companies that they are satisfied are absolutely safe.
Q. The tendency is rather the same as in the States
toward trust companies acting in fiduciary capacities?
A. Largely; yes.
Q. Trust companies being appointed?
A. Yes.
Q. Do you issue debentures?
A. No.
Mr. V reeland . Do you engage in the bonding business
at all, giving officers’ fidelity guaranty bonds?

19 4

Ba nki ng and Cur r e nc y Systems
A. No; there are separate companies here for doing
that business.
By Mr. H u b b e e e :
Q. Do you guarantee any loans at all?
A. We are not very anxious to give guaranties. We
rather restrict those. We have guaranteed mortgages up
in the West for people that wanted the Royal Trust
Company’s guaranty. We do not guarantee more than
4 per cent as a rule. We might go 4 X per cent.
Q. You make the difference between the rate guar­
anteed and the rate at which the loan is made?
A. Yes.
Mr. V reeland . How many regular trust companies are
there in the city?
A. I think there are five now.
Mr. H u bb ELE. Are you limited as to the amount of
debentures that you may issue, or the amount of guar­
anties that you may perform?
A. We do not issue debentures, and there is no legal
limit as to our guaranties.
B y Mr. B o n yn g e :

O. Are you limited as to the amount of money that
you may receive on deposit?
A. No; but we do not receive ordinary deposits.
Q. You differ in that respect from the mortgage com­
A. Yes.
Q- Are you organized under a general law of the
province, or is a special charter in each case furnished
to a trust company?


N at ion a l M o n e t a r y Co mmi s s i o n
A. There is a general law for trust companies. We
have a special charter besides.
Q. There is a general law?
A. There is an act in all the provinces. They are pro­
posing to enact a new one for the Province of Quebec.
Trust companies get special charters from the legislatures

Q. You have a safe-deposit department in connection
with the trust company?

B y Mr B onynge :
Q. How do you operate your safety-deposit boxes?—
.as we do in the United States, or do the depositors have
to notify you what they put in their boxes?
A. No; the same as you have.
Q. Each depositor has full control over the situation?
A. We have a master key and the depositor has a
key. Our master key does not open the box, but with­
out it the depositor can not get in.
Q. And the depositor can put in such securities as he
pleases without notifying you?
A. Yes.
Q. Without any notification ?
A. Yes; we work just the same as you do in that re­
Q. You do not assume any responsibility for the se­
curities except the safe-keeping of whatever is in there?


■ f

Ba n k i n g and Cur r e nc y Systems
A. No.
Q- If any of your own people were to extract any­
thing from the box, you would certainly be legally liable
for it?
A. I think we probably would, yes; although we gen­
erally disclaim that liability, but we do not have a key
to enable us to get in.
Mr. H u b b e l e . Y ou have restrictions as to your stock­
holdings, don’t you? They are not connected with the
Bank of Montreal?
A. The connection with the Bank of Montreal is under
a by-law of the company which provides that a majority
of the directors of the trust company shall also be directors
of the'Bank of Montreal, if there are such persons qualified
and willing to act.
Mr. V r e e e a n d . Nearly the same people are in both?
A. Yes; but we have people outside on the board, as
well as the bank directors.
Mr. H u b b e e e . The stock transfers are controlled in­
herently by the trust company?
A. The stock transfers are controlled by us.
Mr. V r e e e a n d . Do you know how many charters
there are issued in the Province of Quebec for trust com­
A. I think there are quite a number in the Province of
B y Mr. B onyng E:

Q. Do you deposit in the Bank of Montreal, pending
investment, money sent to you for investment?
A. Yes.
Q. You do not keep the cash that is deposited with you?


N at i o n a l M o n et a r y C o m m i s s i o n
A. No; we keep all the bonds and the securities.
Q. I mean the funds.
A. They are deposited in the Bank of Montreal to our
Mr. H u bb eel . Isn’t each trust fund that is intrusted
to you invested separately and accounted for?
A. Yes.
Mr. B o n yn ge . And pending the investment of the
funds you deposit them with the Bank of Montreal?
A. Yes.
B y Mr. H u bb EEE:
Q. Does the deposit of these funds go into a general
A. So far as the trust company is concerned they have
a general account with the Bank of Montreal and a trustfund account in which trust moneys are deposited.
Q. Supposing a man dies and $10,000 is deposited with
the trust company. This is invested in specific securities ?
A. Yes.
Q. And these securities are only used in the payment
of that deposit?
A. Yes.
By Mr. B onynge :
Q. Are you limited at all by charter or by any law of
the Province as to the character of securities in which
you can invest trust funds?
A. There is a provincial law that covers that, and it is
a very strict one. Principally government and munic­
ipal securities and mortgages in the Province of Quebec
up to 60 per cent of the assessed valuation.


Ba nk i n g and Cur r e nc y Systems
Q. And does the provincial law designate the particular
railroad bonds, for instance, in which you can invest
trust funds?
A. We could not invest trust funds in railroad bonds
unless specifically authorized by the will or deed.
Mr. H u bb ele . Y ou are subject to the same law that
an individual trustee would be subjected to, so far as
investing funds?
A. Yes; there are what we call trustees’ investments
here, the same as there are in England.
Mr. B onynge . And they are limited to government and
municipal securities, real estate, and mortgages on real
A. Yes.
B y Mr. H u bb EEE:
Q. Does the court have to approve that investment
in any case ?
A. If we are appointed by the court, do you mean?
Q. Yes.
A. As long as we stick to the act, that is sufficient.
Moneys deposited in court have to be invested with the
court’s approval.
Mr. V reeland . Do you know how many mortgage
banks that loan on real estate and issue debentures you
have here in the city?
A. We have very few. That is something that they
have very largely in the Province of Ontario and some of
the other provinces.
Mr. B onynge . Y ou do not have any savings accounts
in the trust company, do you?
Federal Reserve Bank of St. Louis


N at ion a l M o n e t a r y C o mmi s s i o n
A. No; loan companies do a large business in the
Province of Ontario in that way. They take deposits
largely there, and they also issue debentures and sell
them, in Scotland chiefly, and invest the money in mort­
gages here.
By Mr. V reeean d :
Q. Their deposits are limited to the amount of their
capital ?
A. Their deposits to the amount of their capital ?
Q. Yes. The president of quite a large concern there
told us that the deposits they could receive were limited
to the amount of their capital.
B y Mr. H u b b e e e :
Q. Do you have your board of directors or a special
committee approve of the investment, or is that simply
a matter that the manager has in charge?
A. We have an executive committee and they report.
Q. After the act?
A. Yes; after the act; we get the action of the execu­
tive committee confirmed at meetings of the board, at
which all the business that is being done is reported.
Mr. B o n yn ge . Y ou do not do any underwriting for
corporations, do you?
A. No; that is not our business. It would be the
exception to do anything of that kind.
Mr. V r EELAND. What would you think of the propriety
of permitting banks like the Bank of Montreal to do trustcompany business?
A. Well, I think it would be a very dangerous thing for
any of the chartered banks to go into trust-company

Ba n k i n g and Cur r e nc y Systems
business, and not to have their assets in liquid shape all
the time.
B y Mr. B onynge :
Q- If you segregated the trust funds and the savings
funds from the commercial deposits and had a provincial
law by which the trust funds were to be invested only in
certain securities and the savings funds in certain other
securities, and kept them absolutely distinct from your
commercial deposits, wouldn’t that overcome your objec­
tion, so that the depositors of the trust funds would look
to the particular security in which their funds were in­
vested and the commercial depositors would have no
claim upon those securities?
A. Then how would you realize, in time of panic, on
some of those securities?
Q. You wouldn’t have to realize on the trust funds.
A. You mean the securities would be held specially for
that business ?
Q. Yes; the trust funds and the commercial department
would be separate and distinct.
A. Yes; that could be done, but it would be a business
distinct and separate from ordinary banking business,
and it would be unusual in this country.
Q. It would be something new?
A. Yes; in Canada.
Q. But it would be feasible, would it not?
A. I think it would be feasible, but not desirable.
By Mr. V r e e l a n d :
Q. Of course, that would carry with it a right to notice,
the same as our savings banks. In our State they are
obliged to invest along trustee lines.


N a t i o n a l M on et a r y C o mmi s s i o n
A. Yes.
Q. They can invest in certain railroad bonds specified
in the statutes. The savings banks of the State of New
York have very little cash on hand.
A. Yes; we understand so.
Q. It is invested along the lines which the law requires,
but of course that carries with it the right to demand
notice if they wish it?
A. Yes; for savings deposits, we understand.
Q. So, in times of excitement they can demand thirty or
sixty days’ notice?
A. But would they demand notice?
Q. Ordinarily, they would not demand it.
A. No; that would be a reflection on their credit at once,
if they demanded notice, wouldn’t it?
Q. Except as they would be forced to do so as they
were in 1907.
A. Canadian banks did not need to do this in 1907.
Q. In the State of New York the trustees of savings
banks, as they can under the law, required notice of thirty
or sixty days.
A. Yes.
Q. And tens of thousands of notices were given them
by depositors saying at the expiration of that time they
would withdraw their funds. At the expiration of that
time more money was put in than was taken out.
A. Yes.
Q. Showing simply the excitement had passed.
A. Yes


Statement of, November jo , 1908.

B ala n c e a t credit p rofit and loss account, N ovem b er
3 0 , 1 9 0 7 ------------------------------------------------------------N et profits fo r th e y e a r ending N o vem b er 30, 1908,
a fte r deducting costs o f m anagem ent, in terest a c­
crued on deposits, and provision s fo r b ad and
do ub tful d e b ts_____________________________________

D ivid en d p aid M arch x, 19 0 8 _________________________
D ivid en d p aid Ju n e 1 , 19 0 8 __________________________
D ivid en d p aid Septem ber 1 , 19 0 8 ____________________
D ivid en d p a y ab le D ecem ber 1 , 19 0 8 _________________
W ritten off b an k prem ises an d fix tu re s______________
Carried to officers’ pension fu n d _____________________
C arried to reserve fu n d _______________________________
B ala n c e a t credit profit and loss, N o vem b er 30, 1 9 0 8 ..

$ 2 0 ,4 7 7 .0 0

3 8 1 ,3 8 7 .0 2
------------------------ $ 4 0 1,8 6 4 .0 2

50, 000. 00
50, 000. 00
50, 000. 00
50, 000. 00
i s , 140 . 86
5 ,0 0 0 . 00
15 0 .0 0 0 .0 0
3 1.7 2 3 .16
-------------------------4 0 1,8 6 4 .0 2

B alan ce a t credit N ovem b er 30, 19 0 7 ________________
Carried fo rw ard , N o vem b er 30. 19 0 8 ---------

$2, 0 0 0 ,0 0 0 .0 0
15 0 .0 0 0 .0 0

B ala n c e a t credit of reserve fu n d N o vem b er 30, 19 0 8 -----.

2, 15 0 , 000. 00


C ap ital sto ck paid u p ________________________________
R eserve fu n d _________________________________________
P ro fit and lo ss________________________________________
U n claim ed d ivid e n d s........ ............................ ............................
D ivid en d p ay ab le D ecem ber 1, 1 9 0 8 . _____ __________

$ 2 ,5 0 0 ,0 0 0 . 00
2 ,15 0 ,0 0 0 .0 0
3 1 , 723. 16
1 , 2 0 3 .6 5
5 0 ,0 0 0 .0 0

Due to oth er b an k s in E n gla n d and in foreign coun­
trie s --------------------------- --------------------— ........... .........
N otes in circ u latio n __________________________________
D eposits not b earing in te re st________________________
D eposits bearin g in te re st........................ ......... ........... ............
O utstan ding d ra fts draw n b y agencies on head office

7 1 ,0 5 5 .4 4
2 ,0 5 8 ,7 6 2 .0 0
3 ,8 9 8 , 349. 98
9, 048, 989. 64
1 3 9 ,0 19 .0 1

£4. 7 32, 926. 81

15 , 2 16 , 17 6 . 07

19 . 949 . 10 2 . 88
S p e cie ________________________________________________
D om inion n o te s_________________________
N otes an d checks on oth er b a n k s . .................. ...................
D ue b y o th er b an k s in C a n a d a _______________________
D ue b y oth er b an k s in E n g la n d _____________________
D ue b y oth er b an k s in foreign co u n tries_____________
Consols, federal, and provincial governments, cities
o f N ew Y o r k and M ontreal d eb e n tu re s____________
O ther Can adian d eb en tu res__________________________
Call loans on bonds and sto c k s____ ______ ___________
D eposit w ith D om inion go vern m en t fo r secu rity of
circ u latio n _________________________________________

28 9 ,9 2 4 .9 4
1 ,4 9 5 ,2 3 9 .0 0
1 ,5 2 5 ,5 6 7 .4 4
19 3 .6 2 4 . 39
52. 6 3 5 .8 2
1 , 1 1 7 , 3 6 1.4 6
1 , 5 0 7 . 5 1 2 . 95
18 , 4 7 5 .0 0
5 9 5 ,7 6 1 .6 2
10 2 , 996. 00

N otes discounted and c u rre n t________________________$ 1 2 , 7 0 2 .3 3 8 . 87
O verdue debts (loss provided fo r ) ___________________
14 ,0 0 2 . 25
20, 5 9 2 .5 4
M ortgages on properties sold b y the b a n k ___________
R e a l e s ta te ___________________________________________
2 9 ,1 7 8 .6 7
B a n k prem ises, office fixtures an d oth er a ss e ts ______
2 8 3 .8 9 1 .9 3

6 ,8 9 9 ,0 9 8 .6 2

$ 1 3 . 0 5 0 , 0 0 4 .26

M. J . A . P r e n d e r « a s t ,


19 . 949 . 10 2 . 88
G eneral M anager.

N at ion a l M o u c t a r y C o mmi s s i o n
Interview with M. J. A. Prendergast, general manager of Banque
B y Mr. V reeea n d :
Q. What is the capital of your bank?
A. $2,500,000.
Q. And your surplus?
A. $2,150,000.
Q. What year were you chartered? How long has
your bank been in existence ?
A. 1874.
Q. You came in under the Dominion law?
A. Yes.
Q. The act of 1871 ?
A. Yes.
Q. How many branches do you have?
A. We have 33 branches.
Q. How many branches do you have in the city?
A. You call the city, I suppose, the suburbs?
Q. Yes.
A. In Montreal we have 12.
Q. You are establishing branches now farther west—out
in the grain fields?
A. The farthest we have is Edmundson.
Q. About the time of your last annual statement, as
near as you can remember, what amount of cash reserve
did you carry, or what per cent ?
A. Are you speaking of actual cash ?
Q. Yes; I mean actual cash.
A. That varies a great deal. So far as I remember, it
would be a little over $1,100,000. We hold federal and


B a n k i n g a n d C u r r e n c y Systems
provincial debentures, and hold a block of the city of New
York with our European correspondent, and against all
these bonds we can check, either by cable or sight draft, or
thirty or sixty days, by a special agreement with the bank.
We consider these as part of the cash reserves. I do not
include the million and some odd thousand dollars of actual
Q. What is the policy of the bank as to the amount, the
percentage of actual cash, which you find it necessary to
carry, or think it prudent to carry—as much as io or 8
per cent?
A. A good deal more than that.
Q. To your deposits?
A. A good deal more than that.
Q. Of actual cash on hand?
A. Yes, sir; you wouldn’t take the amount against
which we could check as part of the cash reserves, would
Q. We should consider that a very near cash reserve,
but not the actual cash in the safe ?
A. No.
Q. And yet of almost one value, but we were dividing
the account.
A. We always keep at least 20 per cent in actual cash.
Q. What amount in addition to that do you intend to
carry ?
A. As immediately available?
Q. With balances in New York and London?
A. Oh, couple of millions more, sir.
Q. What are your total deposits?

2 0 5

N a t ion a l M o n e t a r y C o m m i s s i o n
A. To-day they are, bearing and not bearing interest,
about $13,000,000—between $13,000,000 and $14,000,000.
Q. That would bring your reserves of actual cash and
cash immediately available up to something like 30 per
A. A little over that.
Q. Do you try to keep as a secondary reserve any invest­
ments in government or other bonds and securities?
A. We keep about $1,500,000 in federals and provin­
cials, British consols, and we hold a block of the city of
New York bonds.
Q. And that is under an arrangement against which
you can check?
A. And that is under an arrangement against which we
can check.
Q. So cash is more available?
A. So cash is more available.
Q. Do you have your money on call?
A. No, sir; we hold on call little over $1,000,000 at the
present time.
Q. What amount have you invested in real estate for
your own premises—yourself and branches?
A. We have between $275,000 and $300,000 invested in
our own premises.
Q. That is what you charge in your statement?
A. Yes, sir.
Q. Really you must have considerably more than that,
I suppose, actual value, selling value?
A. We put it down at what it cost us.


B a n k i n g and Cur r ency Systems
Q. You follow the usual banking expression and charge
off a portion of your real estate?
A. Invariably.
Q. As much as you can?
A. And not only that, but deposits through exchange
we reduce at least io per cent per annum.
Q. Upon what proportion of your $13,000,000 of de­
posits do you pay interest?
A. About $11,000,000—between $10,000,000 and
Q. Do you pay interest on current accounts subject to
check ?
A. Very seldom.
Q. Monthly balances?
A. They are the exception. That is so invariably for
minimum monthly balances.
Q. What proportion of your $13,000,000 is upon time;
that is, time notice required for withdrawal?
A. As I said just now, interest-bearing accounts amount
to a very small sum.
Q. Then about all of your $11,000,000 would be subject
to notice?
A. Yes, sir.
Q. To draw?
A. Yes, sir; but it is against our practice to enforce the
Q. You can pay interest upon current accounts?
A. We invariably pay whenever they present, although
we have a right to pay according to the contract with the


N a t i o n a l M o n e t a r y Co mmi s s i o n
Q. It is a very valuable right in ease of great excite­
A. Or in case of need; yes, sir.
Q. About what time do you have a right to require
upon these interest accounts, thirty days?
A. Yes, sir.
Q. Or longer?
A. Thirty days.
Q. You publish only one statement a year?
A. Only once a year; yes, sir.
By Mr. We e k s :
Q. Do you cater for any particular class of business,
except for business generally in Canada?
A. We do not cater for any special line of business.
Our accounts are usually commercial. We are not big
enough to go into large amounts for railways and things
of that kind, railway constructions; we do not consider
ourselves strong enough for that. We stick as much as
possible to our commercial accounts.
Q. Is there any method in Canada of distributing
loans? Does one bank take a very large loan and give
a piece of it to some other bank?
A. We are not in the habit of doing so, and we were
never asked by any other bank to do so.
Mr. K night . The banks are not allowed to divide
Q. What we call a participation loan. You know in
the United States we are limited in the amount we can
loan to any one concern?
A. Yes.


B a n k i n g and Cur r e nc y Systems
Q. For instance, a bank might be able to loan $400,000?
A. Yes.
Q. But it might be offered a loan of $1,000 000?
A. I see.
Q. It would take that and give other banks some
portion of it.
A. That is a practice that is not adopted in this country,
not to my knowledge anyhow. We have no limit. Pru­
dence must dictate the limit to the bankers themselves.
By Mr. V r EEEANd :
Q. If you could have the banking laws made just to
suit you, what changes would you make?
A. There is one change I would suggest. As you are
aware, the federal government does not tax our capital.
I had the pleasure of meeting the association of the
State of New York some three and one-half years ago
at Behoff, near Cleveland, and the statement that the
federal government, from which we get our powers,
does not tax our capital, was received with the greatest
astonishment. But it is a fact. Yet the provincial gov­
ernment, which has nothing to do with our banking, taxes
us briskly. It taxes us upon our capital, and we are
taxed in Quebec and Ontario and other provinces on the
same basis. I do not consider that just. I should like to
have that matter handled by the federal government,
which, I think, would proceed in a more rational way.
The provincial tax might be dispensed with, except, per­
haps, a specific tax. The question is—I have very often
heard it argued—whether the provincial government has
really a right to tax our capital; I doubt it very much.
2 2 5 6 1 ° — xo----- ' 1 4



N a t i o n a l M o n e t a r y Co mmi s s i o n
We hold our powers from the federal government, and
I think that government would be the best judge of the
way the taxes are to be levied on our capital. The
provinces might levy a special tax on us, and some do.
That is, an additional tax to the specific t a x .
Q. Are there any changes that you think could pos­
sibly be made that would improve matters?
A. The system seems to work very well, particularly
as compared with other systems.
Q. Works pretty well, indeed, it would seem.
A. I should not like to suggest any change. Some
other people, I suppose, are willing to do that, but this
has not been thoroughly discussed by those who propose
changes in the system. There have always been attempts
to curtail our circulation privilege. We think it is abso­
lutely necessary in a country of this kind to make it quite
Q. What would those who propose to curtail it substi­
tute in the place of it?
A. Oh, well, their main object is to secure the public
against the danger of holding valueless circulation,
but that is a thing which, under our present system, is
impossible. Not in one single instance has the 5 per
cent fund been touched. I believe those who want to
curtail our circulation have not a very clear view of the
needs of the country. Our branch system, which may
not be at all necessary across the border, is shown,
I think, to be indispensable here for the opening up of
the country, and it would be an impossibility for us to
open all of these branches and keep them prosperous

B a n k i n g and Cur r e nc y Systems
to a certain extent if we had not that privilege of circu­
Q. For you to open up the country?
A. Yes; the protection of the banks.
Q. All the banks seem to be hastening to organize
branches in the country that is being opened up in the
A. Take the case of the Eastern Townships Bank. Ac­
cording to public opinion the Eastern Townships has
opened up more country than any other bank.
Q. What portion of Canada?
A. The Townships?
Q. Yes.
A. From Sherbrooke east, right along your border.
Q. How has the bank opened it up; by putting in
branches in the villages as they developed?
A. There have been dairy and railroad and mining
points, the dairy industry and the grain industry. Thus
parts of the country that were comparatively poor have
been opened to the modern conditions that existed in
other sections.
Q. You think the local branches assisted in promoting
the wealth of these communities ?
A. Certainly. It is the same thing out in the newer
parts of the country.
Q. Unless you can tell us some other lines of improve­
ment, I do not know that there is anything more we wish
to ask you.
A. Of course, you know we take a certain pride in our
banking system, and we think it works well for the
country, and we generally desire to leave well enough
alone. We do not assume it to be perfect.



Answers by office of Canadian Minister of Finance.

1 . What is the total issue of Dominion notes at the present
September 30, 1909, $80,456,391:
Fractional notes______________________________________
$546,037. 25
Provincial notes______________________________________
Dominion ones and twos_______________________________ 16, 591, 139. 00
Dominion fours_______________________________________
145, 145. 00
Dominion large notes__________________________________ 5, 108, 600. 00
Legal tender notes for banks___________________________ 58, 037, 500. 00
80, 456, 39 1.0 0

2 . Are Dominion notes redeemable in gold upon demand
of holders?
Redeemable in specie on presentation at branch offices
established or at banks with which arrangements are made
for the redemption thereof. “ Specie” practically means
gold, as silver is legal tender to the amount of $10 only.
At the present time offices for the redemption of Domin­
ion notes, known as the offices of the assistant receiversgeneral, are established at Montreal, Quebec; Toronto,
Ontario; Winnipeg, Manitoba; Victoria, British Colum­
bia; Halifax, Nova Scotia; St. John, New Brunswick; and
Charlottetown, Prince Edwards Island.
3 . Does Dominion law direct redemption of Dominion
notes in gold or coin?
The act provides for redemption in “ specie,” which
practically means gold. (See “ An act respecting Domin­
ion notes,” section 2 (a) and section 4 (2); also “ An act
respecting the currency,” section 10 (3).)

B a n k i n g and Cur r e nc y Systems
4 . Could minister of finance redeem Dominion notes in
silver at his discretion?
No; the act provides for redemption in “ specie.”

5 . Is reserve carried against Dominion notes by Govern­
Yes; to the extent hereinafter stated.
6. Is percentage of reserve fixed by law?
The minister of finance shall always hold as security for
the redemption of Dominion notes up to and including
$30,000,000, issued and outstanding at any one time, an
amount equal to not less than 25 per cent of the amount
of such notes in gold, or in gold and securities of Canada,
the principal and interest of which are guaranteed by the
Government of the United Kingdom. The amount so
held in gold shall not be less than 15 per cent of the amount
of such notes so issued and outstanding.
As security for the redemption of Dominion notes issued
in excess of $30,000,000, the minister shall hold an amount
in gold equal to such excess. (See “ An act respecting
Dominion notes,” section 5.)
7 . What reserve is carried?
The full reserve required by law. At present the amount
held exceeds the requirements, as shown by the following:
Specie held by the receiver-general and the several assist­
ant receivers-general_______________________________ $62, 759, 800. 95
Guaranteed sterling debentures (£400,000')_____________
1, 946, 666. 67
Amount required:
25 per cent on $30,000,000_________$7, 500, 000. 00
100 per cent on issue in excess of
$30,000,000____________________ 50 ,4 56 ,39 1.0 0
Amount required for Dominion
notes______________________ 57,9 56 ,39 1.0 0


64, 706, 467. 62


N at ion a l M on et a r y C o m m i s s i o n
Amount required—Continued.
For reserve on deposits in savings
banks, being io per cent on bal­
ance ($57,859,530-89) on Septem­
ber 30, 1909 (see “ An act respect­
ing savings banks,” S. 47)---------- $5, 785, 953. 08
Total amount required for reserve for Dominion
notes and savings banks--------------------------- $63, 742, 344. 08
Excess reserve held September 30, 1909............

964, 123. 54

8. Where is reserve kept? That is, in possession of the
government or is it deposited to the credit of the govern­
ment with the banks?
In possession of the government.

9 . In what denominations are Dominion notes printed or
Twenty-five cents, $ i, $2, $4, “ $50, a$ioo, $500, $1,000,
and special notes for use between banks only—$500, $1,000,
and $5,000.
These special notes are negotiable between banks only.
10 . What is the total amount of Dominion bonded indebt­
March 31, 1909, $282,580,028.65. (See Public ac­
counts, Part I, page 5.)
1 1 . Total amount of guaranty by Dominion of railroad and
other bonds. (Please send any printed statistics showing
government liabilities.)
Eight million seven hundred and forty-five thousand
eight hundred and seventy-three pounds nineteen shillings
nine pence.
“ $97,75°

circulation; not issued now.


Ba n k i n g and Cur r e nc y Systems

1 . Authorized by law in what year?
In 1867. (31 Victoria, chapter 10, sections 62 to 75,
both inclusive. “ Post-office act.’’) Commenced opera­
tions April, 1868.
2 . How many such banks or offices now established?
October 28, 1909, 1,128.

3 . Rules for establishing the same?
Established under the authority of an act of Parlia­
ment (31 Victoria, chapter 10, sections 62-75) and under
regulations approved by the governor in council.

4 . Total deposits?
September 30, 1909, $43,616,850.

5 . Rates of interest paid?
P er cent.

1868___________________________________________________________ 4
1889----------- -------- ------- --------- -------------------------------------------- : 3 K
1897------------------ ------------- ------------------------------------------ -------- 3

6. Is money invested or treated as a current account by
the Dominion?
As a current account. Forms part of consolidated
revenue fund.
There is also a system of savings banks under the
control of the minister of finance, known as “ Dominion
government savings banks.’’ (See “ An act respecting
savings banks,’’ part 2.)
Prior to Confederation (1867), a system of savings
banks was in existence in the maritime provinces under
the control of the provincial governments. These banks


N a t i o n a l M on e t a vy C o mm i s s i o n
were taken over by the Dominion in 1867 and since that
time have been under the administration of the minister
of finance.
At one time there were 50 agencies, but, as the agents
die or resign, the system is gradually being transferred
to the “ post-office savings bank” system, and at the
present time only 18 offices remain, situated as follows:
Nova Scotia_____________________________________________________
New Brunswick__________________________________________
British Columbia________________________________________________
Prince Edward Island___________________________________________


The balance on deposit on September 30, 1909, was
$14,424,032.82 and the number of accounts 38,881.


Ba nki ng and Cur r e nc y Systems

A few years ago some experiments were made with
marked notes with a view to ascertaining the relative
value of the circulation afforded by different classes of
The average time for which the notes were outstanding
in the cases to which the test was applied was as follows:
D a y s.

Cheese buyers’ accounts____________________________________________ 63
Grain and milling accounts_________________________________________ 36
Cheesefactory accounts________________________________________ _ _ 34
Railway pay cheques_________________________________________ _ — 27
Loan company accounts__________________________________________

In the, most favorable case the notes were outstanding
for an average of sixty-six days. This was the circula­
tion afforded by a cheese account. In grain and milling
accounts the average varied from twenty-two to fifty
days. The tests made at Winnipeg showed more favor­
able results than at any other point.
The experiment can not be regarded as by any means
conclusive, for the tests made were entirely too brief, and
they would have to be repeated several times before any
reliable deductions could be made. Probably, however,
they may be regarded as a fair indication of the compara­
tive value of the circulation afforded by the different
classes of accounts.


O n tario _______________ ____ _________
Q ueb ec______________________________
N ew B ru n sw ic k ___________________ .
N o v a S c o tia _________________________
P rin ce E d w a rd I s l a n d ___
. . _____
B ritis h C o lum b ia - .
_____ ________
M an ito b a ____________________________




19 0 1.




















Y u k o n _____ ______________________ i .
A ll C a n ad a ________









7S °























1 ,454




I 17


1,0 4 9











1907 .


19 0 5.


19 0 3.





9 18

A u g u st

3 1.


3 ii



10 5










1,8 8 6

1 ,9 2 7

2,0 6 9


N a t i o n a l M o netary Commission



----------------------------------------------- - r r

Total note circulation of C anadian chartered banks.
Jan u ary.


M arch.

A p ril.

M ay.

Ju n e.

1 8 9 9 .............- .............................

36 .9 16 .5 7 9

3 7 . 5 2 5 .3 3 7

3 8 , 409, 227

37 ,36 9 ,8 8 7

3 7 , 0 1 2 , 9 14

1 9 0 0 ______________________

4 1 .3 2 0 . 083

4 1.6 9 9 . 231

4 3 ,8 14 ,9 18

4 3 ,9 0 8 , 432

4 2 ,8 5 6 ,7 6 2

1 9 0 1 ...........................................

4 5 .0 2 5 ,3 0 6

4 7 ,6 11,9 6 7

4 7 ,0 0 6 ,7 0 1

46, 14 8 , 234

1 9 0 2 ___________________

48 ,58 6 ,529

5 2 , 442, 982

50 ,6 9 1,5 8 8

5 5 ,0 4 0 .9 8 7

5 8 ,2 8 3 ,4 8 4

56, 949. 1 1 9

58 ,8 6 5 ,8 4 5

1 9 0 4 - - --------------- ------------

56 . 973. 273

55.8 7 7 .6 4 7

5° , 754, 7 J 6

1 9 0 3 . . . ....................................

4 S , 9 0 5 .9 4 2
4 9 . 4 5 0 .9 9 4
55.74 6 .4 9 8
5 7 . 7 36 . 2 4 3

3 9 , 0 9 7 . 708
4 5 . 5 7 7 .3 8 7
4 9 . 1 1 9 .4 7 9
5 3 . 9 5 3 .0 4 3

5 9 ,7 6 0 ,119

58 ,6 4 9 .8 7 0

57. 857,


1 9 0 5 --------------------------------

5 8 ,0 2 1,0 7 5

5 8 ,8 2 8 ,9 19

58, 7 2 1, 17 3

59. 9 4 1.6 4 8

Ju ly .

A ugust.

Septem ber.

4 0 ,2 7 0 ,10 0

4 1,4 4 6 ,3 9 9

46, 6 8 2, 0 28

46 ,0 0 7 ,9 0 6

4 7 ,4 2 1,2 7 7

5 0 ,3 8 7 ,0 7 0

O ctober.

49, 5 8 8 , 23 6

N ovem ber.

47. 839. 506

D ecem ber.

4 5 . 9 9 9 ,7 5 3

56, 0 2 7 ,4 0 7

5 2 ,0 7 0 ,0 6 5

5 1 . 3 5 2 ,3 0 9
55.0 3 5 .7 0 1

5 3 . 1 9 8 ,7 7 7
5 7 . 9 5 4 . 779

6 0 ,9 6 5 ,8 0 1

6 5 .9 2 8 ,9 7 3


497.6 4 1

60, 57 4 , 14 4

57 .5 6 3 .6 6 5

60, 4 1 4 , 740

6 3 ,7 4 1,2 7 0

70 ,4 8 0 ,6 11

6 7 ,4 2 5 ,5 8 6

62, 53 9 , 407

6 0 ,0 9 8 ,4 8 0

5 9 .9 7 9 .8 3 0

60, 2 2 7 ,0 7 4


795.9 6 2

7 2 ,2 2 6 ,3 0 6

6 9 ,4 2 6 ,9 31

58. 13 6 , 070

6 1,5 8 7 .5 6 0

6 1.2 7 7 .5 9 3

62, 497,

6 9 ,8 3 1,2 5 9

76, 8 9 0 ,8 6 3

4 8 ,9 4 7 .9 7 8


5 1 , 9 4 7 , 269

5 0 ,7 5 8 ,2 4 6

57, 7 4 1,5 6 6

54. 3 7 2 , 788


5 0 7 ,3 9 4
,5 7 4

1 9 0 6 .............

6 0 ,9 8 6 .6 10

6 2 ,4 3 4 . 893

6 5 ,9 9 1,8 18

6 6 ,5 3 0 ,6 7 7

64. 2 1 7 , 3 3 2

69. 366, 505

68, 18 2 . 979

7 0 ,10 8 ,5 11

77. 209, 346

8 3 .7 18 ,6 3 0

1 9 0 7 ______ ________ _______

6 8 ,2 19 ,7 17

70 , 5 4 7 . 759

7 6 ,3 4 6 , 0 13

72, 840 , 909

7 0 ,7 4 1,113

72 ,9 4 2 ,7 8 1

76, 5 6 2 , 8 1 1

8 4 ,28 9 ,9 8 3

84, 4 5 2, 899

7 7 , 5 ° 4 . 398

1 9 0 8 ______________________

66, 8 7 1 ,3 7 8

68, 548, 075


047,8 9 2

7 5 .5 10 ,4 0 2

7 6 , 4 5 5 .0 0 0

72 , 5 9 2 , 543
8 0 , 5 0 2 .3 5 7

6 6 ,7 12 ,8 9 9


6 6 ,6 9 7 ,2 5 5

7 0 , 3 8 9 , 897

7 6 ,2 4 6 ,2 3 7

8 3 ,0 3 6 ,7 6 2

8 0 ,2 8 7 ,7 2 4

7 3 .0 5 8 , 234

19 09--

6 5 ,8 19 ,0 6 7

6 7 . 3 4 8 .3 5 9

68, 708, 458

6 7 ,2 6 6 ,6 6 4

6 8 ,5 9 3 ,2 2 9

71,0 0 6 ,0 0 5

7 1.8 4 7 .5 5 2


770, 0 18

1 5 3 .9 9 4
7 0 , 170,4 91


6 9 .9 8 1

78, 4 1 6 , 780

Total loans of Canadian chartered banks.
Ja n u a r y .

F e b ru a ry .

M arch.

A p ril.

M ay.

Ju n e .

1 8 9 9 ------------

2 6 0 ,0 4 2 , 237

26 7,49 0,839

273,9 60 ,66 0

27 9 ,8 8 2 ,116

28 3,39 2,7 8 2

28 6,864,652

1 9 0 0 ___

3 0 3 ,0 4 8 , 526

30 5 ,0 51,0 6 6

3 1 1 , 7 21,9 8 3

315.50 5.30 2


360, 5 8 9 ,36 4

36 5,8 5 8 ,19 6

3 7 3 . 3 9 8 ,6 89

3 1 4 , 7 79.9 71
3 7 7 , 74 8 , 864

38 7 ,0 8 2,5 6 7

1901 ____
1902 ___

28 3 , 6 56 , 63 6

7 9 9 . 142

34 8 , 1 8 6 , 67 3

2 9 1, 7 6 1, 105

O ctober.

N o vem b er.

Decern b er.

3 0 3 .3 7 1.8 57
36 2 ,0 0 4,7 9 5

3 5 5 . I 7 i . 588

299, 2 5 0 , 9 1 9

30 1,7 10 ,9 6 5

36 1,17 6 ,2 8 1

36 4 ,5 7 6 ,14 9

400, 4 2 5 , 9 3 0

40 6,3 8 2,0 35

3 8 5 , 8 3 4 . 295

38 9 .3 8 2,35 5

39 1,6 6 8 ,118

4 2 5,112 ,3 6 5

4 2 6 ,78 3,333

435.9 9 0 ,89 2

4 6 8 ,8 14 ,57 4

4 7 2 . 2 94 , 787

467, 56 2, 081

47 4.889 ,5 03

505. 5 4 0 . 1 7 3

50 6 , 24 4, 8 5 0

508, 977,


469 , 2 7 9 , 1 6 4
5 1 0 , 8 3 8 , 25 4

50 9 . 7 8 1 .9 9 9

50 8 ,738 ,0 77

54 4.8 75,0 52

5 4 9 , 8 1 2 , 206

560,8 58 ,307

5 6 9, 9 5 0 , 668

6x8, 059, 362

6 2 8 , 5 7 5 , 9'o 6

5 4 1 . 6 7 5 .7 4 2
6 3 2 . 9 0 3 .3 9 2

4 4 7 . 1 1 2 , 09 2
4 7 9 . 4 5 3 .6 06
52 1, 547. 621
578.7 8 0 ,8 18

6 3 9 .0 9 5 .2 11

6 4 7 .38 5 . 172

6 50 .4 23.7 3 8

6 6 7. 7 1 9 . 3 5 6

6 9 8 ,846 ,480

7 1 1 ,5 2 8 , 041

721,6 56 , o n

7 19 ,0 0 5 ,9 8 5

7 17 ,2 4 6 ,6 15

668,4 47,0 4 5

67 3 . 3 9 4 .22 6


6 6 1,9 38 ,0 2 8

668 , 4 3 2 , 604

6 64 , 0 0 7 ,4 9 9

7 2 0 , 5 1 3 , 762
6 6 5,5 34 ,4 20


7 3 0 , 6 3 2 , 30 6

7 3 4 ,18 6 ,8 10

7 47 . 3 0 9 .4 28

0 4 3 .4 7 3
3 1 9 . 725

74 6, 0 99, 209

7 5 0 , 9 4 0 , Ol8

45 4, 4 3 6 , 08 2

4 1 1 , 0 9 3 .7 7 8
4 5 9 ,12 6 ,15 6

4 8 0 ,18 2 ,6 22

4 7 8 ,356 ,0 9 9

76 0 ,8 7 0 ,516

416, 96 9 .358

46 1,4 9 2,4 19

19 04.__

4 8 1 , 6 8 2 . 9 58

4 9 1 .2 7 9 .2 7 5

1 9 0 5 ____

5 2 2,4 7 0 .22 4

5 3 i . 9 3 i . 738

1 9 0 7 ..................................

5 i 9 . 70 3 .7 7 5
6 1 4 . 943. r 21

1 9 0 8 ............................
1 9 0 9 _____

2 8 2 ,6 7 1,2 2 1

S ep tem b er.

4 15,8 6 2 ,157

4 0 4 .5 2 7 .3 3 1

1 9 0 6 .......................

A u gu st.

419. 949.1 1 6
475. 349. 3 i 8

4 0 3 , 9 9 3 .9 5 9
4 5 4 . 4 7 7 . 550

1 9 0 3 ........................................

73 4 .4 3 5

Ju ly .

69 4, 0 1 2 , 746

5 2 i , 5 M , 687

5 1 8 , 1 0 7 ,433

4 10 ,134 ,4 56
45 8, 08 9, 202
4 8 1 .995. 152
5 2 3 ,9 4 1,13 1

593. 494. i n

6 0 0 , 9 4 3 .9 9 7

6 7 6 , 9 6 9, 906

6 8 7,321.320

7 0 1,0 0 5 ,0 8 4

706, 0 3 7 , 087

7 18 .59 1.14 2

71S, 2 7 2 ,3 2 1

7 0 8 , 7 0 5 .7 1 5

6 9 0.035,9 33

6 7 6 , 2 5 7 , 82 6

6 58 ,58 0 ,9 41

658 ,8 09 ,756

6 7 3 , 6 1 4 .541

68 6, 5 3 9 , 0 9 1

694 .

S e p te m b e r.

O ctober.

N o vem b er.

D ecem ber.

2 7 3 .5 8 4 .4 0 7
7 °4 , 19 2
3 6 2 , 26 7 ,8 0 4

3 15 .4 4 8 .3 3 8

3 20 , 788, 382

3 2 3 , 8 2 5 , 923

6 0 3,6 8 2,36 7



Total deposits of Canadian chartered banks.
F e b ru a ry .

M arch.

A p ril.

2 5 2 .3 0 5 , 4 3 1
2 7 8 ,9 4 1,6 6 8

275 .7 8 6 ,1 8 0

2 5 3 . 770 ,4 5 8
273 .2 9 4 .9 0 1

2 7 6 ,7 5 1.8 3 1

371 , 334.135

3 7 0 , 426, 646

Ja n u a ry 18 9 9 -----------19 0 0 _____________
1 9 0 1._ .
19 0 2 ._

1903 . . , ..........
1904 --------1905 ..........
1 9 0 6 ..
1907 ------19 0 8


19 0 9


5 0 1 , / 4 1 •986
6 5 3 .5 2 1 ,9 8 4
6 2 5 .7 8 5 .9 5 3
7 12 ,9 2 8 ,4 8 3

444 . 354 . 145
500, 16 4 , 000
579 . 5 0 7 ,5 1 8

3 7 8 .0 13 .4 7 3
4 18 ,3 1 0 ,7 1 9

506, 1 1 2 , 4 3 4
579 . 995.002

50 9 ,0 4 9 . n 6
5 8 3 ,5 10 ,18 7

6 5 3 .1 0 0 ,8 5 4
6 16 ,7 18 ,0 7 0

6 4 8 ,2 9 7 ,1 3 5
629, 7 3 2 , 826

6 5 7 , 6 1 1 ,0 4 6
6 3 0 ,0 5 6 ,6 3 6

_____ ________.__________

22561°— 10.

(To face page 218.)

Ju n e .

Ju ly .


2 8 7 ,5 0 8 ,5 2 9

3 0 3 . 795 .9 8 5

3 7 9 . 446, 246

389 . 579.979

2 6 2 ,4 3 5 ,6 6 4

369 , 173.330
414 . 399 . 704
454 .1 4 3 .6 6 7

4 10 , 0 7 3 ,8 9 3

M ay.

4 4 8 ,3 5 8 .2 1 5

343 . 557 .58 9
4 6 3 . 133.013
5 1 8 , 16 2 , 843
5 9 1 ,4 0 0 ,3 3 4
6 6 3 ,0 1 6 , 1 7 6
6 2 9 ,5 1 0 ,7 6 0

4 2 3 .1 7 8 . 1 9 9
468, 70 2, 447

3 9 4 .8 6 3 .3 3 0
4 2 5 ,2 8 3 .8 3 4

A u g u st.

3 0 5. 779 . 13 2 i
357 . 595 .8 3 2
3 9 6 ,8 4 8 ,5 7 7


403 , 375.691

374 .7 8 2 ,2 5 9

4x6, 9 28 , 209

4 8 5 ,3 0 8 .4 7 4

430, 10 7 . 461
487 . 774 . 8 i 5

435 .6 5 5 .0 3 6

442 , 173.398

499, 1 2 1 , 6 7 3

5 0 4 .8 8 3 ,6 8 3

6 4 0 .17 8 ,5 2 8

426, 3 3 8 , 192
475 . 34 i . o o 8

6 6 0 ,9 8 7 ,0 0 0

6 6 9 . 517,537
6 32, 0 6 1 , 12 4
7 2 2 ,7 6 9 , 15 6

5 6 7 ,8 4 6 , 794

5 2 3 .9 8 2 , 525
598 , 5 6 7 ,8 8 0
6 6 4 ,3 7 7 .9 8 1
6 4 5 ,5 6 6 ,7 9 6 '

280, 3 2 1 , 9 2 7

666, 0 47, 15 3
6 5 8 , i 16 ,6 8 6
7 7 5 . 5 3 2 .1 8 5

6 7 2. 839, 936

794 , 275.495

678, 8 4 5 ,0 9 5

655 . 774 . m
682, 464. °5 8

6 4 0 ,6 16 ,2 9 5
7 0 7 ,9 9 8 ,2 0 4

B a n k i n g and Cu r r e n c y


Chartered, banks in Canada which have gone into liquidation since 1867.
D a te o f com m ence­
m en t of
liq u id atio n .

H ead office.


P a id
L o ss to
d e­
n o te­
positors. holders.

Com m ercial of
B ru n sw ick .

N ew

S t.
Jo h n ,
B ru n sw ick .
L iv e rp o o l,

N ew
N ova

J u l y , 1 8 6 8 - ...............


A p ril, 18 7 3

(“ )


N il.
(“ )

Sco tia.
M ontreal, Q uebec____

O ctober, 1 8 7 6 _____

N il.
N il.

_____ d o ______________
L iverp o o l,

N il

N ova

(“ )

(“ )

Sco tia.
Q uebec, Q u eb e c_____
E x c h a n g e ............................

M ontreal, Q uebec____
S t.
Jo h n ,
B ru n sw ick .

Septem ber, 18 8 3 ___

N ew

6 6 /2 3
10 M

N il.
N il.
N il.

P icto u 6-,______ _______ _
L o n d o n in C a n ad a *____

P ictou , N o v a S c o tia
L ondon , O ntario_____

Septem ber, 18 8 7 ___


N il.

A u gu st, 1 8 8 7 . ____


N il.

C en tral o f C a n ad a -

T oro n to, O n ta rio ____

N o vem b er, 18 8 7 ___

W in n ipeg, M an ito b a .

J u ly , 1 8 9 3 ..................

Com m ercial
to b a.



M ani-

99 Vi

O ctober, 18 9 7 _____
1 7 J4
B a n k o f Y a r m o u t h ____

Y a rm o u th ,

N o va

M arch, 1 9 0 5 .



N il.
N il.
N il.
N il.
N il.
N il.

S c o tia .
N il.
N il.
C a n ad a.*
B an q u e de S t . J e a n -----B a n q u e de S t . H y a -

S t. Jo h n s, Q u e b e c___
S t. H y acin th e , Que-

A p ril, 1 9 0 8 ____
Ju n e , 19 0 8..................

( e)

B an k of

C h a r lo tte to w n ,



P rin ce

w ard s Islan d .


P rin ce
Isla n d .

N il.
N il.

E d w a rd s

“ N o in fo rm atio n .
* V o lu n ta ry liq u id atio n .
e L o c a l; no retu rn s; final d ivid en d , A p ril 28, 18 8 7 .
P rio r to 18 9 1 the loss to note-holders is on the assum ption th a t all n o tes w ere p re­
sented before the final w in din g up. A n y o u tsta n d in g w o uld then becom e w orth less.
T h e O ntario B a n k , So vere ign B a n k o f C an ad a, B a n q u e de S t. Je a n , an d B a n q u e de
S t. H y ac in th e are a t presen t in liq u id atio n .
T h e d epo sits o f th e O ntario B a n k w ere gu a ran tee d b y the B a n k o f M ontreal.
T h e depo sits o f the So vere ign B a n k o f C a n ad a w ere g u a ran tee d b y several b an k s—
M ontreal, C an ad ian B a n k o f C om m erce, R o y a l B a n k of C a n ad a , B a n k o f O tta w a, B a n k
o f N o va S c o tia, B a n k o f B ritis h N o rth A m erica, and others.