New-York tribune., 1896-11-29
CANADA'S BANKING SYSTEM.
SOME FEATURES WHICH ARE OFTEN
HELD UP AS MODELS FOR THE
UNITED STATES.

Canadians
larly strong for gold standard and thousands o'
them deserted the Democratic party in order TO sup
port OF neither French nor Enslish speak
ing Canadians know any more OF the currency ques
ton than most other people II they voted righ' IL
was not because they had mastered the difficult prob
lens invol, ed in the controversy but merely because
Canada has had pretty rough experience ooth with win
a deprecated paper and with a fraudulent silver
currency and tho lessons then learned nave not Dee"
forgotten. 49,.
The first bank was established in Canada IN fi
and from that time TIL 1861 when the various prov
nces were united as the Dominion OF Canada all the
bank charters issued were provincial Tnen the panh
ing question was taken hold of at Ottawa, anu III
1871 the first general banking act was passed i'o'
10 1867 private banks were established IN cosueaoo
numbers being authorized among other thhss 10
issue notes upon deposlting with the Government
provincial debentures to the amount or the coi''e'
plated Issue This was much like the National BANK
system in vogue in the United States to-day win
the adoption Of genera! banking ac'-a feaera' ao'
supersedng the old provincial ac's-pa"h no'.' "io
not secured by deposits Of securities OF any Kihd WIN
the Government but are simply credit instruments
n, cod non the general OF the BANK ISSUING
,ba,p A chartered bank may issue notes TO thc
amount OF its unlmpaired capital. and the notes De-
come a first charge on the whole OF It's "e'e''' a'N
are further guaranteed by the Bank Circulation Re
dempton Fund consisting of per cent upon 'ie CIT
culation Of all the banks which is placed IN 'he
dator of bank which has failed Is unable 20 reoee'n
the note issued in full. Notes Of insolvent banks
hear per cent interest from the date or tho SUB
pension OF the bank til they are redeemed
Lastly TO avoid the notes of bank. say. In TORONTO
being shaved" or subjected discount when pre-
scented at the other end OF the Dominion, each pahh
is obliged 10 arrange for the redemption IN gold OF us
notes at all the chief commercial centres oi '"c
country The first bank charter fssued III ioi', po'
vided that any bank officer making away with the
funds Of the bank should be deemed guilty OF leiohy
and should suffer death without benefit or clergy
Nowadays defaulting officials are not so severely
dealt with. although their punishment is usuai'y
swift: So too heavy penalties are inflicted upon BANK
officers or directors who overssue notes or commit
any other fraud in respect of the circulation.
LIABILITY OF BANK SHAREHOLDERS.
Another guarantee. and an important ohe' WIN"
the noteholder has is the double liability OF panN
shareholders Tho law says: in the event Oh '"o
property and assets Of the bank being insuncieh'
10 pay its debts and liabilities. each sharehoiucr
NJ the hank shall be BILE for the deficiency 10 an
amount equal to the par value or the SHARES "'''
by him. In addition to any amount not pa'u "i y"
such shares" Altogether the notehoider IL per
fecly secure. even II the bank falls Fourteen
banks have suspended since 1861. and OF these all
but one paid their notes in full The circumstances
which in 1880 prevented that one from redeeming
Its notes In full brought about change In the
law and II IL next TO Impossible Tor note
holder to suffer At the end Of 1895 the bank notes
in circulation amounted 10 s3l.W"O and were Sc
cured by assets amounting to Sle'""oo. Plus
double liability OF over sso 10000 more: IN other
words there was over So Of assets for every dol
lar In circulation
The elasticity Of this system Of issuing bank
notes commends II to many Americans First OF
all there can be serious nfation for the reason
that every bank seeks 10 keep out Its own notes
and therefore sends back daily for redemption the
notes Of all other banks that have come into It's
nossession of" says Mr. Walker general mana
ger OF the Canadian Bank OF Commerce. our cur
| rency were secured by Government bonds. as IN
the United States. the volume In existence al any
| time would be determined by the proht 10 De
gained BY the issue of such bondsecured currency
| II would therefore be necessary 10 fix
| maximum beyond which no currency could
| be issued but. such an arbitrary hmi'
would be legislative guesswork. II woulu
| be productive Of the evils incident 10 all ef-
| forts 10 curb natural laws by legislation. In the
I-nited States the currency wants OF the country
| increased with the great increase In popuaton'
| but the volume Of National bank currency ne
creased befauss by tne ~ tbe %aona credit
| the bonds which remained outstanding yieided SO
low si,oua L"5e bank I notes unprofabc On the
| hand, 1t always pays Canadian banks TO issue cur
| rency when trade demands IT, In the autumn ana
| winter when the crops are moving and numbering
is going on, there Is sudden demand I1r m NOR re-
| the spring the demand as suddenly drops on put
asaS is each nS bank or pr Tor the
redemption Of the notes of every ether that come
into iis hands The rise and falI OF me amount III
circulation thus goes on automailcaily
THE BRANCH SYSTEM
THIS elasticity is greatly promoted by the branch
system The National banks in the United States
are local institutions. having no branches. All
| the chartered banks in Canada have branches.
some forty or MY sc1terod over the cUr'rE T.
the older provinces are lent TO people in the newer
fE'Vs bi very TfH little capital NY own Bank SAYS Mr
| Walker. gathers money In the quiet, unenerpris-
! where it is called for. the net result being that
forty fifty business centres. in no case having
able TO balance the excess or deficiency Of capital,
economizng every dollar the deposor obtaining
money at lower rate ate, ihan IN me Onited S,aes
sScfn ,s 1 srbon she c's of sap I e mad hat as b
tween the hghest-class borrower in Montreal or
| Toronto and the ordinary merchant In the North
'of of per- Mr. d'' watsr u IN
an Improvement the system OF the United
States. where Eastern banks often seeking in
vestments in vain. while the banks OF the West
customers. There Is no machinery for transferring
capital from where 1t happens to be a drug & to
needed The banks In canada. with their ,1a nu,
| 1t is exaggeraton to describe az national-can-
not be idle or Indifferent in time Of trouble can
| farmer in the prairie provinces any more than to
those Of the manufacturer and merchant in the
Of a nation. not of town or city. and supply the
| borrowing of a nation
SATISFACTION WITH THE SYSTEM.
Such are the distinguishing features Of the Cana
dian banking system. 1t suits the community so
well that nobody thinks OF attacking it. All the
bank charters expire together every ten years. and
such amendments to the Fcncral banking act
experience has suggested are adopted. The old
fashioned private banks are fast dying out. being
unable to compete with the biz concerns. Every
town village of 1000 inhabitants has its branch
with Il power behind II many times greater than is
possessed by the National banks in places Of the
same size IN the United States
II will have been observed from what has been
isaid that Canadian banks pay interest on deposits
this of course, does not mean that they pay inter
est current accounts or the temporary balances
I...o 4 -