Five Mile Beach weekly journal., 1913-11-07
Canadian

III his fOluLut Oh r6tIOTm,
published by the National Citizens
League, j. Laurence Laughlin, who
has the chair of political economy at
the University of Chicago, describes
the Canadian banking system as the
best example Of the cooperative type
of banking. Our system, as disting-
uIshed from the cooperative type, is a
distinctly competitive or free banking
system. Mr.. Laughlin explains that
the popularity of Canada's system lies
In the fact that, although there lie no
single institution which possesses a
monopoly of note issue or OF any other
function, and although there is no gov
eminent bank holding public funds
and possessing the power to dictate the
use that shall be made of the cash re-
sources of the country, practically all
of Canada's banks are large ones.
There are twenty-nine or thirty big
central parent banks which have a
total of 2 200 to $500 branches. Each
of the big banks'must have a capital of
of least $500, 900. Notes are issued by
all the banks, aud these are protected
through a guarantee fund and other
wise. The parent bank, which is tech
nfcally known as the "head office"
never takes deposits or lends money.
All the banking business is done by its
branches.
The Canadian banking law does not
require that the banks shall carry a
cash reserve against either notes or de-
posts, nor does it make the notes legal
tender for any payments. One bank
need not accept the notes of other
banks. Despite these facts Canadian
bank notes are everywhere acceptable
at par. Every bank must redeem its
notes at its headoffice and in such COM
mercial centers as are designated by
the treasury board. Every bank must
keep on deposit with the minister of
finance a sum of lawful money gold or
Dominion notes. equal to 5 per cent. of
its average circulation. This creates a
fund for the redemption of notes of fail
ed banks, though not since 1890 has 1t
been necessary to go to this fund.
Bank notes are a first lien on the assets
of a bank and stockholders may be
assessed up to the par value of their
stock in case of failure. Monthly re-
turns in much detail are made to the
minister of finance. The notes Of a
failed bank draw interest at the rate of
5 per cent from the date fixed for their
redemption by the minister of finance,
who may redeemthem out Of the assets
OF the bank or out of the general re-
demption fund in his hands.
The amount of notes which a bank
might put out was limited until re-
Gently to the amount of its unimpaired
capital. By a recent act an increase Of
is per cent above that amount was
authorized. This restriction Of note
issues promises to cause some embar-
rassment, as the country's develop
ment is rapidly overtaking the circula-
ton limits. The remedy may be
either the establishment Of new banks
or q further increase in the authorized
issue above the amount of unimpaired
capital. The particularly admirable
feature Of the Canadian system thus
far hasbeen its great elasticity respond
ing to the daily needs of the people.
A thing which we absolutely insist
upon is a minimum reserve require
ment, but on this point the Canadian
law is silent, except that 1t requires
that the banks shall carry 40 per cent
of their reserve, whatever it may be, in
Dominion notes. What the reserve
shall be apparently depends entirely
upon the banker. There are adequate
reserves, however. To the Canadian
banker the word Preserve" means q