TRANSACTIONS OF SECTION F. 965 



Banking zmder the Present Act. 



Term of Charter. — Charters of all banks run concurrentl3\ Renewed every 

 ten years, when principles and conditions of banking are fully discussed, and 

 changes thought necessary in Bank Act <are made. 



Incorporatiun. — Terms under which new banks may be incorporated now care- 

 fully guarded. Minimum subscribed capital, 500,000 dollars. Minimum paid in, 

 260,000 dollars. This deposited temporarily, in cash, with Finance Department, 

 before permission is granted to do business. 



Working Regulations. — Provisions regarding rights of shareholders, powers of 

 directors, dealing with capital stock, holding of meetings, declaring dividends, &c., 

 are what would be expected in a well-regulated system, except in one interesting 

 particular: — No dividend or bonus, or both combined, exceeding 8 p.c. p. a. may be 

 paid unless net reserved profits exceed 30 p.c. of capital. No cash reserves required 

 by law. Of any reserves held, 40 p.c. must be in legal tender notes of Dominion. 



Business and Powers of a Bank. — Tendency has been to assume all powers 

 connected with banking unless expressly prohibited. There are three main prohi- 

 bitions. First two date from the earliest charter in Canada. 1. Must not engage 

 in any other business. 2. Must not lend on real estate. 3. Must not lend on ita 

 own shares. But bankers have powers of lending on pledges of material not 

 enjoyed by private lenders. Twenty-one sections of Act are devoted to the 

 subject. 



Statements to Government. — Elaborate monthly returns to Government. Pub- 

 Jished widely and freely criticised. Banks few in number. Weakness quickly 

 detected. Minister of Finance may ask for special returns. List of shareholders 

 and of unclaimed balances published annually in Blue Books. 



Insolvenci/. — Eight sections of Act devoted to subject, but the main feature is 

 the liability of shareholders to pay whatever calls are necessary to enable liqui- 

 dator to meet all liabilities, provided such calls do not exceed the face-value of the 

 shares held. Generally styled ' double liability.' Working of this liability in 

 the past. 



Penalties. — The Act describes many offences, and fixes penalties by fine and 

 imprisonment. 



Note Issues. — Power to issue expressed as follows : ' The bank may issue and 

 reissue notes payable to bearer on demand and intended for circulation.' This 

 power is subject to the following qualifications: No note maybe smaller than 

 five dollars. (Dominion Government provides smaller issues.) Larger notes must 

 be multiples of five dollars. Total issue must not exceed paid-up and unimpaired 

 capital. Enormous fines for breaches of this provision, whether intentional or not. 



Securiti/ fur Note-issues. — Notes are a prior lien upon enrire estate of bank. 

 To avoid discount for geographical reasons every issuing bank must have redemp- 

 tion agents in named cities of commercial importance. To avoid discount when 

 failure occurs, all banks must maintain 5 p.c. on their average circulation in a 

 guarantee fund held by the Government. Provisions as to how rapidly banks may 

 be called ou to replenish should drafts on fund occur. Notes o( insolvent banks 

 bear interest until liquidator announces readiness to redeem. If cannot redeem 

 after short period, recourse may be had to guarantee fund. How has system 

 worked ? Has it provided an absolutely safe currency to the holder, and a currency 

 bearing satisfactory relations in volume to the requirements of trade ? 



The Depositor. — His status as a creditor. Record of failures of banks. Pro- 

 portions of capital and double liability to deposits. Growth of deposits. Govern- 

 ment as competitors. Method of gathering deposits. Effect on development of a 

 new country. 



The Borrower and the Branch System. — Effect on the borrowing public of 

 machinery for accumulating deposits. Moderate rates of interest. Little variation 

 in rates over large geographical areas. Comparison with the non-branch system 

 in the United States. Support to business public in times of stress. 



Competition. ^^&i\ixe of service to public. Too many banks. 



Principles, — Statement of principles which underlie the Canadian Banking 

 System. 



