page_title: History of the Canadian dollar
section_title: Chartered bank notes
hierarchical_section_title: History of the Canadian dollar / Confederation, 1867 / Chartered bank notes
caption_attribution_description: English: Exhibit in the Château Ramezay - Montreal, Quebec, Canada.
context_page_description: Canada has an extensive history with regard to its currencies. Prior to European contact, indigenous peoples in Canada used items such as wampum and furs for trading purposes, which continued when trade with Europeans began.
  Wampum and beaver pelts were considered currency. During the period of French colonization, coins were introduced, as well as one of the first examples of paper currency by a western government. During the period of British colonization, additional coinage was introduced, as well as banknotes. The Canadian colonies gradually moved away from the British pound and adopted currencies linked to the United States dollar. With Confederation in 1867, the Canadian dollar was established. By the mid-20th century, the Bank of Canada was the sole issuer of paper currency, and banks ceased to issue banknotes.
  Canada began issuing its own coins shortly after Confederation. In the 20th century, Canada has issued many commemorative coins into circulation, temporarily replacing current coinage designs. There also exists a long history of numismatic coin issues.
context_section_description: Under the new Bank Act passed in 1871, the chartered banks were limited to issuing notes in denominations of four dollars and over. To avoid using the one- and two-dollar notes issued by the government, some banks took to issuing notes in odd denominations, such as six-dollar and seven-dollar notes. This meant that they could carry out transactions without having to obtain the government notes, and maximize the circulation of their own notes.
  The government closed off this loophole in 1880. By an amendment to the Bank Act, Parliament provided that the banks could only issue notes in denominations of five dollars and higher, and also only in multiples of five dollars. The amendment Act also provided, for the first time, that the bank notes were a first charge on the assets of a bank, in case of insolvency. In 1890, the banks were required to operate redemption offices for their notes across the country, which meant that bank notes no longer traded at a discount if they were far from a branch of the bank.
caption: Four dollar banknote issued by the Bank of Montreal, 1870, featuring bank officials
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