Evening star., 1932-12-18
BY JAMES MONTAGNES.

'
in Canada since the start of the
present economic depression. In
Il fact, there have been no bank
failures in the Dominion since
1923. The one before that was in 1914.
While developments in the United
States usually reflect themselves in SIM
liar developments in Canada, the Do
minion has not followed the path OF
bank failures which have been men
toned in the Canadian press.
Canada has 10 banks with more than
$500 branches throughout the Do
minion, Newfoundland, Mexico. West
Indies, Central and South America. The
only outward sign of depression in
the banking business has been the clos
ing of some of these branches In large
cities where individual banks operate
as many as 40 branch banks, this move
necessitating little inconvenience on the
part of depositors and being merely the
transference of accounts from one
branch to another in the same neigh
borhood, entailing only clerical work.
The Canadian banking system is a
product of evolution, having grown up
gradually, with changes made from
time to time as experience directed. 1t
is unlike the system in use in England
and most European countries, where a
strong central bank stands IN close
relation to the government treasury. 1t
differs from the United States banking
system in that it is decentralized
system. whereas regional centralization
prevails in the United States. 1t is
made up of a number Of large joint
stock, commercial and industrial banks,
privately owned and managed, operat-
ing under a uniform law and subject
to the supervision of the Dominion
government Competition is allowed be-
tween the banks and takes the form
of the establishment of many branch
banks. The largest bank, the Royal
Bank of Canada, has nearly 9oO
branches, while the smallest, Barclay S
Bank (Canada) has 2 branches. -.
The branch banking system is well
adapted to the needs of Canada with
its large area and small population,
especially to the requirements OF the
grain and cattle trade of the West. The
system makes for ready method OF
shifting funds from one part OF the
country to another and from one in
dustry to another as the occasion may
demand, and insures fairly uniform
rates over wide areas.
Eight Mergers in Decade.
The present 10 charter banks in the
Dominion represent a larger number OF
banks which have amalgamated with or
been taken over by the stronger banks.
Eight banks have merged in this way
like other banking changes, must be
approved by the Dominion government.
Most of these mergers took place short
" after the last bank insolvency in
Canada in 1923. the move eliminating
some of the weaker banks.
While 1928 saw the last Canadian
bank failure to date. there have been
other failures resulting in changes in
the banking act, which have made the
Canadian banks sounder in the public
mind. Runs on banks are few in re-
cent years, and these have not resulted
in failures. In all, since 1867, when
the present Dominion was formed into
one country, there have been only 26
bank failures, and of these there were
nine since the beginning of this CEN
tury.
Canadian banks are allowed to
issue their own notes for denominations
Of S5 and upward, the notes being in
multiples of five. The total amount of
bank note issues is limited to the paid
up capital of the bank These bank
notes are the chief means of earning
profits for the banks and are the chief
circulating medium in use in Canada.
Holders of bank notes have priority in
the case of bank failures. and banks
which have been declared insolvent
during the past so years have honored
their notes 100 per cent.
The Dominion government also issues
notes of denominations of 81. 50, 81 and
SIS, as we'll as higher notes. from $50 to
$4,000. these latter being used exclu-
sively between banks. The Canadian
bank act demands that banks carry at
least 40 per cent of their cash reserves
in Dominion notes, the government
holding the equivalent amount in gold
as custodian for the banks. Between
go and 70 per cent of the bank reserves
are carried in Dominion bonds, other
reserves taking the form of gold. cash