Mexico weekly ledger., 1898-01-13

note currency based upon the general
assets of the bank and safeguarded
by legislation in such a name as to
make it at once secure, convertible
and elastic.
They reject the doctrine that gov
eminent bonds furnish the best basis
for a bank note currency. The Law
does not even require fixed reserves.
The only provision in the banking
act with reference to reserves is that
forty per cent of whatever reserves
are kept by bankers shall consist OF
Dominion notes. The amounG Of the
reserve 10 left entirely to the discre-
ton of the banks. The security Of the
note is the first and most important Of
all features to be considered in con
nection with its issue. 1t is a condi-
ton precedent to the circulation OF
the note at all. AS security of pos
session lies at the foundation of the
institution of private property, and to
guarantee it is one of the primary
aims of government, 30 security of
note issue is the very basis of the
structure of q banking currency, and
to establish it is the first concern of
the bank. In this matter the Canad-
ians have taken ample precaution. The
provisions of the law looking to this
end are:
First. The total amount of notes
issued and outstanding at any time
shall not exceed the amount of the
unimpaired paid up capital OF the
bank.
Second. The notes are q first lien
on the assets of the bank, taking pre-
cedence even of government claims.
Third. The stockholders are doubly
liable In the event all the other assets
are not sufficient to pay the note
holders.
Fourth. An additional security is
furnished by what is known as "The
Bank Circulation Redemption Fund"
This fund is deposited with the gov
eminent for the purpose of insuring
prompt redemption of the notes Of
insolvent banks. 1t is made up by
contributions from all the banks In
sums equal to five per cent of the
average annual circulation of each. If
it be depleted by operations of re-
demption, each bank is required to
make an additional contribution of
one per cent of it's average circula-
ton.
Furthermore, the notes of a sus-
pended bank begin at once to draw
interest at Six per cent until redeem
ed by the receiver of the failed bank.
So ample is the security thus furnish
| ed and such is the confidence of the
people In the solvency of the banks
that the notes of failed banks have
been very much sought after by per-
SONS seeking temporary Investments.
Experience hitherto has demon
strated that the security thus furnish
ed has been sufficient to cover all out
standing obligations. The total au-
thorized circulation on the 30th of
June, 1894, was sixty-one millions five
hundred Thousand dollars. The amount
actually outstanding was thirty mil
lions two hundred thousand dollars.
The bank note circulation has never
exceeded forty millions.
On the date above mentioned the
Canadian banks held assets, pre-
sumably good, averaging nearly nine
dollars for every dollar of their notes
in circulation. Since notes were first
made a preferred claim in 1880, there
have been four bank failures, and in
every case all notes presented have
been paid in full. There is no tax upon
| the circulation of the banks.
THE PRINCIPLE OF BRANCH BANKING
ELASTICITY.
1t is a generally accepted doctrine
that a currency should be secure and
easily convertible. The quality of
convertibility is necessarily associated
with that of security which we have
just discussed. If it were impossible
to exchange the note fog money the
creditors claims would not be secured.
But security and convertibility are
not the only desiderata in a circulate
ing medium, so like money and used
in substitution for it.
1t is also necessary that it be elastic,
that is to say, it should have the
capcity to contract and expand in re-
Spouse to the demand of trade. This
is accomplished in the Canadian sys-
tenn through the principle of branch
banking put in operation by large and
competitive banking institutions. The
thirty eight chartered banks in Cana
da operate 465 branches in 265 differ
ent localities.
Through this agency the collection
and distribution of loanable capital
from and to different parts of the coun-
try are accomplished at the minimum
of expense and with the maximum of
thoroughness. The same Canadian
bank that collects capital from the
older and weather. districts in the
form of deposits transfers it to the
newer and more enterprising district
where money is needed. 1t is con-
tended that local bankers have better
knowledge of the special districts and
consequently should serve the COM
munity better. But it frequently hap
pens that specialized knowledge lacks
the necessary funds. The banks OF
Massachusetts Q. g. have difficulty in
loaning money at 8 and A per cent,
while Colorado banks often have to
refuse good discounts at 10 per cent.
From one end of their broad domain
to another-from Montreal to Mani
toba-the extreme variations In inter-
est rates are not over one or two per
cent.
Mr.. E. B. Walker, general manager
of the Canadian Bank of Commerce,
thus describes the operations of this
principle:
SIN Canada we see the deposits OF
the saving classes applied directly to
the country's new enterprises in a
manner nearly perfect. The Bank of
Montreal borrows money from depos-