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In this chapter are assembled the statistics regarding financial institutions and
transactions, other than those pertaining to insurance which are dealt with separately
in Chapter X X I I I . The important subject of currency and banking is treated in
Part I of the chapter, while trust and loan companies, sales of Canadian bonds,
corporation dividends, and foreign exchange, constitute sections of the miscellaneous
commercial finance covered in Part I I .


Section 1.—Historical Sketch.
The early history of the currency of Canada, both of the central provinces and
of the maritime colonies, from the time of the first settlements to Confederation, is
the story of a polyglot currency and the involved difficulties of determining exchange
rating for the various coins and pieces.
The salient influences of early political and commercial affiliations upon the
types of currency in use are reviewed below.

T h e D e v e l o p m e n t of Currency in New France.

So long as trade remained in the hands of a few private traders, barter was the
rule. Beads and other trinkets which appealed to the Indians, blankets and other
useful articles, were traded directly for furs. With the further development of
the colony during the French regime, while barter still remained, the growing com-
plexity of social organization and trade emphasized the need for a convenient mone-
tary unit, which was met by the adoption of French currency, but, in order to retain
in the colony the gold and silver coin which arrived there, it was "over-rated" to
the extent of about one-third of its value in France. Thus there was a dual valuation
of the same coinage, officially recognized as "money of France" and "money of the
country". Copper coins were given an even higher over-rating. In spite of this,
money remained very scarce and at one time wheat a t current market rates was
made legal tender in spite of the difficulties and hindrances to trade inherent in
fluctuating values. The illicit fur traffic with English fur traders resulted in the
introduction of Spanish silver dollars as well as various worn and mutilated coins
to help fill the need. In 1681 foreign coin was officially recognized but it was stipu-
lated by ordinance that it should pass by weight; it was given the one-third increase
in value which custom had established for French currency.
One of the earliest forms of fiat paper money in the western world was introduced
into New France in 1685. This "card money", as it was termed, was not intro-
duced primarily to meet the lack of circulating media (although, incidentally, it did
relieve the prevailing scarcity) so much as an official expedient to meet the pay
of soldiers until the annual Royal supplies were forthcoming. The first issue was
backed by such annual supplies and was duly redeemed when the supplies arrived,
but five years later another issue was made without such backing. This was the
beginning of an inflationary move. By 1713, the amount of such unbacked currency
outstanding was such as to reduce trade to a chaotic condition and confidence was
seriously undermined. Later, card money was again resorted to, but on a sounder
basis. The expanding needs of the Treasury, however, unforturntely brought about

the introduction and unlimited use of ordonnances and billets which quickly under-
mined the financial structure again, and at the time of the cession, the total amount
of paper money outstanding was estimated at 80 million livres. It was because
none of this paper money in its later issues was paid in full, and much of it was not
redeemed in any manner, that the people of Old Canada resisted so firmly the efforts
made in 1792, 1807 and 1808 to establish banks of issue under the authority of
In 1721 the first effort was made to establish a special currency for the colony,
but this was limited to copper coins and was not successful.

The British Period to Confederation.

The period of military occupation (1759-1763) was marked by conditions of
chaos in the matter of currency, but with the revival of the business activity of
Montreal and Quebec with Nova Scotia and Massachusetts the currency standards
of the latter were adopted and the Spanish dollar again made its appearance. It
became the medium by which exchanges were balanced with Britain. Normally,
the Spanish dollar was valued at 4s. 6d. sterling, but the tendency was to over-value
it, and in colonial ratings it varied between 4s. 6d. to as much as 7s. or 8s. In Nova
Scotia, for instance, the customary rating for the Spanish dollar was 5s. while in
New York colony it was 7s. 6d. to 8s. Corresponding margins of value prevailed
in regard to other coins in the different colonies. The former of these two standard
ratings, known as the Halifax currency, was accepted by Quebec, and Montreal
adopted the latter, known as the York currency. Of course, there was much con-
fusion and hindrance to trade between Montreal and Quebec as a result of the
adoption of the dual standard.
In order to iron out the difficulties, Governor Murray passed an ordinance
which established an official rating for the Province of Canada. The Spanish dollar
was rated at 6s., the French crown at 6s. Old., and the British shilling at Is. 4d. The
custom of cutting up larger coins to make small change, which had grown up in the
past, was prohibited. To meet such urgent needs for small coin, the merchants
themselves issued bills due or "bons" good at their face value for merchandise.
Such "bons" were the true forerunners of the bank note. The ratings given by
Governor Murray were a compromise which was not permanently acceptable and
proved unsatisfactory.
After the outbreak of the American Revolution in 1775, Quebec influences
prevailed and Halifax currency became standard, although the use of York currency
persisted in Upper Canada (where the United Empire Loyalists supported its use)
until 1821, when it was deprived of legal recognition by an Act of Upper Canada.
In order to pay the expenses of the War of 1812, army bills issued against the
credit of the United Kingdom were circulated. These, in the main, bore interest and
were convertible into bills of exchange on the United Kingdom; they were redeemed
within the ensuing four or five years. These army bill issues tended to renew
confidence in paper money and familiarize the people with its use, thus paving the
way for the note issues of the early banks after 1817. These first banks were
created in Lower Canada, at first as private corporations but obtained charters a
few years later. The charters granted to the early banks in Lower Canada are the
foundations upon which subsequent improvements have been built.
In the early days of banking, one of the chief functions of banks was to issue
promissory notes payable to the bearer on demand; where the banks' credit was

good these notes passed freely from hand to hand, and were the chief circulating
media in the Canadas. In some cases bank notes were preferred to those issued
by the colonial governments.
The Bank of Montreal began business towards the end of 1817 as a private
institution. In the following year the Quebec Bank was established as well as the
Bank of Canada at Montreal. These three Lower Canada institutions obtained
their charters in 1822. In Upper Canada the Bank of Upper Canada was established
at Kingston in 1818, but the first bank to receive a charter was the second Bank
of Upper Canada established at York (Toronto) in 1821. In Nova Scotia, un-
successful efforts were made as early as 1801 to form banks, and in 1812 the Govern-
ment began to issue treasury notes not bearing interest and re-issuable, sometimes
redeemable and sometimes not. This policy was continued down to Confederation.
It seems to be in part because of these treasury issues of notes that no bank was
started in Nova Scotia before 1825, when the Halifax Banking Company (private)
commenced business. The Bank of Nova Scotia received a regular charter in 1832.
A bank, the Bank of New Brunswick, was incorporated in New Brunswick in 1820.
Before the union of the two Canadas, the privilege of issuing paper money had
been enjoyed almost entirely by the banks alone. Lord Sydenham now proposed
a provincial bank of issue with the chartered banks gradually relinquishing the right
to note issue, and Hincks,* a young financier of promise, became chairman of the
Joint Committee on Currency and Banking established in 1841. This Committee
supported the provincial bank idea in principle. The chartered banks, of course,
opposed it, and the bill was ultimately defeated, but the principle re-appeared in
subsequent measures and ultimately became the basis of the Dominion note issues.
Lord Sydenham and Hincks did much, nevertheless, to strengthen and control the
banking system.
A period of crisis in 1848-49 forced the adoption of a policy which led to the
withdrawal from the banks of the right to issue notes of lower denominations than
five dollars. The Government also now issued provincial debentures to the amount
of one million dollars payable on demand. They were made acceptable in all pay-
ments due the Government and were re-issuable. This is often regarded as the intro-
duction of government paper into the currency system of the country, although,
as already noted, Nova Scotia had issued government paper in 1812. Its success
led to the revival of the project for a provincial bank of issue and in 1850 the
Free Banking Act, designed to restrict note issue privileges and so reduce the number
of different media of exchange, was passed, but the chartered banks would not agree
to avail themselves of its provisions, nor were conditions in Canada altogether r'pe
for a change from the elastic system of note issue which had now become established
in spite of the fact that, from the point of view of the note-holding public, the pro-
posed system would have been safer.
Between 1840 and 1867 the problem of establishing a uniform metallic currency
standard for united Canada was also dealt with. The majority of Canadians
strongly favoured the United States decimal system and Hincks declared in its
favour. Authorities in the United Kingdom, on the other hand, pressed for the
sterling system. In 1853 and in 1858 the decimal system was adopted in the Canadas
and thus duplication of sterling and decimal systems was removed and the Canadian
dollar, equivalent to the United States dollar, was established with the sovereign
as legal tender. After 1860, the official accounts in Nova Scotia and New Brunswick
were kept according to the decimal system.
* Later, as Sir Francis Hincks, he was Dominion Minister of Finance (1869-73). His influence on the
development of Canadian banking was very marked until his death in 1885.

The Development of Currency and Banking after Confederation.

Currency Acts.—At Confederation, jurisdiction over currency passed to the
Dominion Government. By the Uniform Currency Act of 1871 (34 Vict., c. 4),
the decimal currency was extended throughout the Dominion; the British sovereign,
rated at $4-86f, became the standard coin and the United States eagle was made
legal tender for $10, while authority was given to coin a Canadian S5 gold piece.
No Canadian gold coinage was issued, however, prior to the establishment of the
Canadian branch of the Royal Mint in 1908, the first coins struck being sovereigns
similar to those of the United Kingdom, but with a small "C" identifying them as
having been coined in Canada. In May, 1912, the first Canadian $10 and $5 gold
pieces were struck, but the Canadian gold coinage has so far been limited in amount,
since Canadians have generally preferred Dominion notes to gold for use within
the country, and, when gold is needed for export, bullion or British and United
States gold coin serve the purpose equally well.
The currency system established by this Act was very little changed until the
Currency Act of 1910 which made the standard a fixed weight of fine gold instead of
the British sovereign, the latter becoming legal tender.
In respect to paper currency, the provisions of the Provincial Note Act of
1866 were extended to the new Dominion in 1868, and "Dominion" notes came into
being. After 1870 such notes could be issued to the amount of $9,000,000 against a
20 p.c. specie reserve ($2,000,000 reserve was required for the entire $9,000,000)
and notes in excess of this were to have 100 p.c. specie reserve. Dominion notes
which were legal tender were in circulation side by side with bank-note issues which
were not legal tender. In 1880 the basis of the present system was definitely es-
tablished (see below, p. 877, and under heading Chartered Bank Notes, pp. 890-891).
The ]Bank Act.—After tentative legislation in 1867, the Bank Act of 1870
provided that new banks must have a minimum paid-up capital of $200,000; at
least 20 p.c. of the subscribed capital had to be paid up in each year after the com-
mencement of business. A proposal to limit the liabilities of banks in relation to
capital and specie and Government debenture holdings was not translated into legis-
lation. Bank notes in circulation were not to exceed the amount of paid-up capital.
The right to issue notes under $4 was withdrawn, largely in consideration of the
abolition of the tax of 1 p.c. on note circulation. If possible up to SO p.c, but in no
case less than one-third, of a bank's cash reserves were to be held in Dominion notes.
Dividends were limited to 8 p.c. until or unless the bank's reserve fund was the equiv-
alent of 20 p.e. of its paid-up capital. In case of the failure of a bank, double liability
of shareholders became enforceable without waiting for the realization of the bank's
general assets. Banks were required to transmit certified lists of shareholders an-
nually, to be laid before Parliament. Any existing bank was permitted, on the
authority of the shareholders, to apply for an extension of its charter, and the
Governor in Council, upon the recommendation of the Minister of Justice and the
Treasury Board, was empowered to extend such charter to 1881. Any suspension
by a bank of payment of its liabilities for a period of 90 days would constitute in-
solvency, and operate as a forfeiture of its charter.
In 1871 the first comprehensive Banking Act of the Dominion was passed.
A large part of the statute was devoted to the re-enactment and consolidation of
legislation already in force, although the measure of 1870, contained the main
features of the Government's policy. The procedure relative to extension of charters
laid down in the preceding year was superseded by this Act, which became the

charter of the banks until July 1, 1881, that date being set in contemplation of
regular decennial revisions. No new bank was permitted to commence business
with less than $500,000 capital bona fide subscribed and $100,000 similarly paid
up, with the further proviso that at least $200,000 must be paid up withm two years
after commencement of business. The sections respecting loans against warehouse
receipts, etc., were thoroughly revised and difficulties of procedure removed. Banks
were permitted to take security on commodities in store pending marketing, and
also while undergoing conversion from the raw to the finished state. Advances
were allowed upon security of shares of other banks. It was provided that the
rate of interest or discount charged by a bank should not exceed 7 p.c. and that no
higher rate should be recoverable. Monthly returns of assets and liabilities were
required. Certain technical amendments were made to the Bank Act in 1872,
1873, and 1875. In 1879 the power to lend upon the security of shares of other
banks was repealed.
At the first general revision of the Bank Act in 1880 (effective 1881), a note
holder was definitely recognized as a preferred creditor, claims of the Dominion
and Provincial Governments, respectively, ranking next in order of preference. Banks
were prohibited from issuing notes under $5, higher denominations to be multiples
of this sum. Dominion notes were now to constitute not less than 40 p.c. of the
bank's cash reserves. Monthly returns of a more detailed character were to be
made. The Act was amended in 1883 to enforce more effectively the prohibitions,
restrictions and duties already imposed upon the banks. The use of certain titles
by private bankers not operating under the provisions of the Act was prohibited.
At the revision of 1890 (effective 1891), it was stipulated that not less than
$250,000 capital must be paid up before a certificate permitting a bank to com-
mence business could be issued by the Treasury Board. A period of one year from
the date of the charter was allowed for the payment of the capital and the carrying
out of other preliminaries. Dividends were not to exceed 8 p.c. until or unless the
reserve fund was the equivalent of 30 p.c. of the paid-up capital. A fund known as
the "Bank Note Circulation Redemption Fund" was established, consisting of
deposits made by the banks with the Minister of Finance of amounts equal to 5 p.c.
of their average note circulation, such deposits to be subject to adjustment annually,
and to constitute a guarantee of the payment of all notes of a suspended bank with
interest at 6 p.c. from the date of suspension until the date when their redemption
was undertaken by the liquidator. Failing action by the liquidator within two
months, the Minister of Finance was authorized to redeem the notes out of the
fund, and such outlay, if not made good out of the assets of the failed bank, was
to be re-imbursed by the contributing banks pro rata to their contributions. Another
major change gave the banks, in certain classes of loans, the same legal power to
take security over the borrowers' goods as had previously been granted by ware-
house receipts. This enactment served to make general and more clear principles
already recognized by previous legislation and practice. Directors' qualifications
were set out more clearly and it was now provided that a majority only of directors,
instead of all, need be British subjects. Penalties for excess note circulation
were made more severe.
The revision of 1900 (effective 1901) recognized the Canadian Bankers' Asso-
ciation as an agency in the supervision and control of certain activities of the banks.
It was charged, under the Treasury Board, with the responsibility of supervising
the printing and distribution of notes to the banks and their issue and destruction;
also with control over clearing houses and the appointment of curators to supervise

the affairs of suspended banks. The amended Act also included provisions per-
mitting one bank to sell its assets to another. More detailed monthly returns were
required and the interest on notes of failed banks was reduced from 6 p.c. to 5 p.c.
In 1908, after the financial crisis of 1907, provision was made for emergency circula-
tion during the crop-moving season from October to January, when banks were
allowed to issue excess circulation up to 15 p.c. of their combined paid-up capital
and rest or reserve funds, this emergency circulation to be taxed at a rate not ex-
ceeding 5 p.c. per annum. In 1912, the period was extended to the six months
from September to February inclusive.
At the fourth revision of the Bank Act in 1913 provision was made for an
audit of each bank's affairs by auditors appointed by the shareholders. There
was also provision for the establishment of Central Gold Reserves in which banks
might deposit gold or Dominion notes for the purpose of issuing additional notes
of their own there-against. Annual reports to the Minister of the fair market value
of real and immovable property held by the banks for their own use were required.
Banks were empowered to lend to farmers upon security of their threshed grain.
As a war measure the provision for emergency circulation was extended in 1914 to
cover the whole year and banks were further authorized to make payments in
their own notes instead of in gold or Dominion notes.
The fifth revision of 1923 (13-14 Geo. V, c. 32) resulted in numerous important
changes. The qualifications of provisional directors were re-defined, while pro-
vision was made for keeping records of attendance a t directors' meetings and bring-
ing them to the notice of shareholders. Annual and monthly statements were given
further attention and more complete returns required, including statements of
controlled companies in the names of which any part of a bank's operations were
carried on. Other or special returns were to be made if called for by the Minister.
Two auditors were now to be appointed b y the shareholders instead of one, and the
qualifications, duties and responsibilities of auditors were more clearly defined.
The personal liability of directors in case of distribution of profits in excess of legal
limits was also more definitely expressed. Regulations regarding loans were amended
and advances to any officer or clerk of a bank could not, in any circumstances,
exceed $10,000. Registration of security for loans under Sec. 88 was provided
for. I t became necessary for guarantee and pension funds to be invested in trustee
securities. The punishment of directors and other bank officials for making false
statements of a bank's position was provided for in Sec. 153. In 1924, as a result
of the failure of the Home Bank of Canada, provision was made for periodical ex-
amination of the chartered banks by an Inspector-General of Banks, who was to
be an officer of the Department of Finance.
The sixth revision of the Bank Act was postponed from 1933 to 1934 (c. 24),
for adaptation to the establishment of the new Bank of Canada, and most of the
alterations were to provide for the relations of the chartered banks with the Bank of
Canada; these are given on pp. 879-880 in the resume of the legislation under which
the Bank of Canada was set up.
E a r l y D e v e l o p m e n t of C e n t r a l B a n k I n s t i t u t i o n s . — S o m e of the features
of a central banking system became evident before the establishment of the Bank
of Canada, providing more centralized control and flexibility of cash reserves.
In chronological order with their origins these were:—
I.—Central Note Issue, permanently established with the issue of Dominion
notes under legislation of 1868.

2.—The Canadian Bankers' Association, established in 1900, and designed to

effect greater co-operation among the banks in the issue of notes, in credit control,
and in various aspects of bank activities.
3.—The Central Gold Reserves, established by the Bank Act of 1913.
4.—Re-discount Facilities, although originated as a war measure by the Finance
Act of 1914, were made a permanent feature of the system by the Finance Act of
1923, which empowered the Minister of Finance to issue Dominion notes to the banks
on the deposit by them of approved securities. This legislation provided the banks
with a means of increasing their legal tender cash reserves at will.

Section 2.—The Bank of Canada.

Subsection 1.—The Bank of Canada Act and its Amendment.
Chapter 43 of the Statutes of 1934, "An Act to incorporate the Bank of Canada",
provided for the establishment of a central bank in Canada. The capital of the Bank
was originally $5,000,000, divided into shares of $50 par value. These shares were
offered for public subscription by the Minister of Finance on Sept. 17,1934, and were
largely oversubscribed. The maximum allotment to any one individual or cor-
poration was 15 shares. Shares of the Bank may be held only by British subjects
ordinarily resident in Canada, or by corporations controlled by British subjects
ordinarily resident in Canada. The maximum holding permitted one person is
50 shares. Directors, officers or employees of the chartered banks may not hold
shares of the Bank. The Bank commenced business on Mar. 11, 1935.
By an amendment to the Act passed at the 1936 session of Parliament, the
capitalization of the Bank was increased to $10,100,000 by the sale of $5,100,000
Class " B " shares to the Minister of Finance. The original shareholders are now
designated Class "A"
The Bank is authorized to pay cumulative dividends of 4j p.c. per annum from
its profits after making such provision as the Board thinks proper for bad and doubt-
ful debts, depreciation in assets, pension funds and all such matters as are properly
provided for by banks. The remainder of the profits will be paid into the Con-
solidated Revenue Fund of Canada and to the Rest Fund of the Bank, in specified
proportions until the Rest Fund is equal to the paid-up capital, when all the re-
maining profits will be paid into the Consolidated Revenue Fund.
The Bank may buy and sell securities of the Dominion, the provinces, the
United Kingdom and the United States of America, without restriction if of a
maturity not exceeding two years, and in limited amounts if of longer maturity.
It may also buy and sell securities of British Dominions and France without re-
striction, if maturing within six months. Short-term securities of the Dominion or
provinces may be re-discounted. The Bank may buy and sell certain classes of
commercial paper of limited currency, and if endorsed by a chartered bank may
re-discount such commercial paper. Advances for six-month periods may be made
to chartered banks, Quebec Savings Banks, the Dominion or any province against
certain classes of collateral, and advances of specified duration may be made to
the Dominion or any province in amounts not exceeding a fixed proportion of such
government's revenue. The Bank may buy and sell gold, silver, nickel, and bronze
coin and gold and silver bullion, and may deal in foreign exchange.
The provisions regarding the note issue of the Bank of Canada are dealt with
on pp. 889-890.

The Bank of Canada must maintain a reserve of gold equal to not less than
25 p.c. of its total note and deposit liabilities in Canada. The reserve, in addition
to gold, may include silver bullion, balances in pounds sterling in the Bank of Eng-
land, in United States dollars in the Federal Reserve Bank of New York, and in
gold currencies in central banks in gold standard countries or in the Bank for Inter-
national Settlements, treasury bills of the United Kingdom or the United States of
America having a maturity not exceeding three months, and bills of exchange
having a maturity not exceeding 90 days, payable in London, New York, or in a
gold standard country, less any liabilities of the Bank payable in the currency of the
United Kingdom, the United States of America, or a gold standard country.
The chartered banks are required to maintain a reserve of not less than 5 p.c
of their deposit liabilities within Canada in the form of deposits with and notes of
the Bank of Canada.
The Bank acts as the fiscal agent of the Dominion of Canada and may, by
agreement, act as banker or fiscal agent of any province. The Bank may not accept
deposits from individuals and does not compete with the chartered banks in com-
mercial banking fields.
The head office of the Bank is at Ottawa, and it has an agency in each province,
namely, at Charlottetown, Halifax, Saint John, Montreal, Toronto, Winnipeg,
Regina, Calgary, and Vancouver.
The Governor of the Bank is its chief executive officer and Chairman of the
Board of Directors, and he is assisted by a Deputy Governor and an Assistant Deputy
Governor. The first appointments were made by the Government. Subsequent
appointments are to be made by the Board of Directors subject to the approval
of the Governor in Council.
At the first meeting of the shareholders on Jan. 23, 1935, seven directors were
elected for terms to run as follows: one until the third annual general meeting (1938),
two until the fourth (1939), two until the fifth (1940), and two until the sixth annual
general meeting (1941).
By the 1936 amendment the number of directors elected by the Class "A"
shareholders will be eventually reduced to three who will hold office for three-year
terms. The six directors appointed by the Class " B " shareholder with the approval
of the Governor in Council, were announced on Sept. 11, 1936. These directors are
appointed for terms to run as follows: two until the annual general meeting in 1940,
two until 1941 and two until 1942. Thereafter the Government directors, each of
whom shall hold office for a term of three years, will be appointed by the Class "B"
shareholder with the approval of the Governor in Council, two as of the day of the
annual general meeting in 1940 and two at the day of each annual general meeting
thereafter. In the transaction of the business of the Bank each director has one
vote except that prior to the annual general meeting in 1940 each of the directors
appointed by the Class " B " shareholder shall be entitled to two votes.
There is also an Executive Committee of the Board of Directors consisting of the
Governor, Deputy Governor, and one member of the Board, which must meet once a
week. This Committee has the same powers as the Board but every decision is
submitted to the Board of Directors at its next meeting. The Board must meet at
least four times a year. The Deputy Minister of Finance is an ex officio member
of the Board of Directors and of the Executive Committee, but is without a vote.
The Governor, or in his absence the Deputy Governor, only has the power to
veto any action or decision of the Board of Directors or the Executive Committee,
subject to confirmation or disallowance by the Governor in Council.

Subsection 2.—The Bank of Canada and Its Relationship to the Canadian

Financial System.
The position which the Bank of Canada occupies in the financial system is one
of great importance and one which should be widely and properly understood in
these days of increasing public interest in national finance.
It is true that prior to the establishment of a central bank on Mar. 11, 1935,
the chartered banks operated satisfactorily in normal times, for considerable periods,
almost without control, and that expansion, but not contraction, was rendered easy
by the Finance Act. Canada has indeed been fortunate in the possession of a strong
banking system—ten banks with a large number of branches—as has been demon-
strated during the critical years of the depression. But such machinery of control
as existed prior to 1935 lagged behind that of most other countries. The student of
Canadian banking, however, can recognize certain steps towards the development of
a unified control. The excess circulation privilege (the right to issue bank notes
during a certain part of the year above the amount of the bank's paid-up capital)
was a device adopted in 1908 to enable the banks to meet an important annually
recurring seasonal demand for currency. The central gold reserves, authorized in
1913, made it possible for any bank at any time to increase its note issue beyond
the amount of its paid-up capital by means of what has been called the "mobiliza-
tion" of cash reserves. But this system—the deposit of gold or Dominion notes in a
central fund in Montreal under the supervision of three trustees—was not really
equivalent to the flexibility which a central bank provides. The Finance Act of
1914 (re-enacted in 1923) provided for a method of performing in Canada one
important service of a central bank, that of "rediscounting" (or turning into cash)
certain paper or securities held by member banks, but the equally important function
of contraction was not provided for. The Canadian Bankers' Association may also
be said to have assisted in providing a measure of unity that would not otherwise
have existed.
Functions of the Bank of Canada.—The preamble to the Bank of Canada
Act says that the Bank is "to regulate credit and currency in the best interests of
the economic life of the nation, . . . to mitigate . . . fluctuations in the general level
of production, trade, prices and employment, so far as may be possible within the
scope of monetary action, and generally to promote the economic and financial
welfare of the Dominion" The qualification is important.
There are, of course, limitations to what a central bank can do as will be seen
later; nevertheless, a central bank can undoubtedly have a most important and
beneficial influence in many ways. In the enormous complexity of modern economic
life, there is a number of things which can be more or less exactly measured and a
number of things which cannot be measured. There may be a tendency to think
that those influences which can be measured must be the controlling ones, such as
the volume of deposits and cash reserves and changes in interest rates, etc. This is
not necessarily the case.
The first main function, viz., that of regulation of credit and currency, is really
the distinguishing feature of a central bank, and the other functions are for the most
part resultants of the first, combined with such influence as the Bank can bring to
bear by means of impartial and skilled advice.
The Mechanism by which the Control is Exercised.—How does a central
bank exercise this power of regulation and control? It attains this power by being
the bankers' bank. (It is also the Government's bank, and this fact may assist the
Bank's control from time to time.)

It is the duty of the Bank of Canada to exercise a regulative influence over the
total volume of purchasing media in the country, and this is done through the
medium of the commercial banks, whose reserves, which the central bank controls
directly, consist of their balances with the Bank of Canada or of Bank of Canada
notes. The method of control is either through what are known as "open-market"
operations, or by changes in the bank rate, or both.
Commercial banks are accustomed to keep a certain proportion of cash as
reserves against their deposit liabilities. In Canada, speaking of the banks as a
whole, that proportion at present is about ten per cent and by law must be at least
five per cent. The banks have the power to vary their cash proportion, as they wish,
down to five per cent, but this does not matter very much from a control point of
view because pronounced variations are infrequent and the central bank will have a
good idea of what to expect.
The central bank can expand or contract these collective reserves at will, always
provided that it can buy and sell securities or other suitable assets when it wants to.
It is the buying and selling of securities for this purpose that are commonly known as
"open-market" operations. Suppose, for example, that the central bank buys two
million dollars worth of securities; then no matter from whom it buys these securities,
the reserves of the combined chartered banks will rise by that amount; for if it
buys from a commercial bank or banks their accounts at the central bank will be
credited and those accounts are part of their reserves, and if it buys from someone
not a bank then that seller pays the money into his account with some bank and it
swells that bank's reserves at the central bank when the cheque is presented by it to
be paid by the central bank. Obviously, if each commercial bank has some propor-
tion at which it thinks it should maintain its reserves, the bank or banks which
eventually are credited with the additional cash, finding themselves with their
proportions increased, will wish to reduce them again. Otherwise they are losing
an opportunity of increasing their earnings. Consequently, although they are not
obliged to expand, they will usually take steps to increase their own assets and
deposit liabilities by amounts sufficient to reduce their cash proportion to near the
customary level again. As has been said, the average of that level is at present
approximately ten per cent and, in the case of the purchase of the two million dollars
worth of securities above mentioned, they would seek to expand their assets and
deposits by approximately twenty million dollars. Thus it is that an operation by
a central bank tends to have ten times the effect on total purchasing media that an
operation by a commercial bank has. If the banks can find good borrowers, i.e., if
the character of the borrowers, and the purposes for which they want the funds, are
satisfactory, the commercial banks will be glad to assume the deposit liabilities
contingent on making advances of an additional twenty million dollars in the case
given, since this is the most profitable way of employing their money. Otherwise
they may buy investments, which will usually earn them a lower return (but perhaps
at less risk) or they may expand partly in the one way and partly the other. Either
method will increase their collective deposits pari passu. Moreover, they will all
expand more or less in proportion to their relative size, otherwise some will lose cash
reserves to others and find their proportions dropping too low. They tend to move
together, maintaining the existing relationship at a higher level, through their own
actions and those of their depositors. Conversely, if the central bank sells securities,
or contracts its advances and discounts, there will be a corresponding fall in the cash
of the banks, a reduction of the collective cash proportion and the eventual need
for a collective contraction of deposits. Where the market for government securities,

treasury bills and commercial bills is undeveloped, a central bank must do what it
can to develop such a market so that it may be sure of being able freely to buy and
sell the kind of assets it is allowed to hold in the volume requisite for control. Control
can also be assisted by buying and selling gold and foreign exchange. In the case of
Canada, operations in foreign exchange are limited by the Bank of Canada Act, and
of course all central banks have to take into consideration the stability of any cur-
rencies they may be permitted to hold.
Though their action is more indirect, changes in the bank rate have a similar
effect, especially where there is a well-developed market sensitive to such changes
and where it is the custom of the commercial banks to alter their rates when the
central bank alters its own. High rates tend to contract business enterprise and
low rates tend toward expansion. But, if a country is on the gold standard, high
rates tend to attract gold and low rates to encourage its outflow, thus providing
some limitations on contraction and expansion, and normally causing the requisite
adjustment to take place more automatically.
Expansion and Contraction of Credit.—As pointed out, the deposits of
the commercial banks should vary more or less in accordance with the Bank of
Canada's operations, the variations being about ten times as great as the variations
in the cash basis.
A central bank creates cash when it increases its assets and therefore also the
bankers' balances which it holds. The commercial banks create credit. They cause
deposit liabilities to come into existence by making advances and buying securities,
etc. Of course none of the "creations" mentioned takes place without co-operation.
Co-operation in the case of advances is clearly seen to be necessary. Again it may
be easy to buy and sell bills and securities, but even so there must be two parties
to the transaction. In any case, of course, the central bank cannot control the
direction in which new credit is extended any more than it controls the choice of
assets to be liquidated when contraction takes place. That function is in the hands
of the commercial banks and other financial institutions, although the central bank
may conceivably be able to influence such use indirectly. Still less can it control
the use made of credit by the public. Once undesirable use of credit is made to any
important extent, in excessive speculation for instance, the central bank may be able
to exercise control only by contraction, which might affect other and more legitimate
uses of credit as well. Again, a central bank may create additional cash and the
commercial banks may follow the lead given them and expand deposit liabilities by
an amount ten times as great, but additional purchases and sales of goods or services
may not follow. The money may not be spent by the owners of the deposits. Of
course, if additional advances are made, one can be sure that the borrower will use
the money, but for a long time expansion may not take that form during a depres-
sion. When it does, it may be a sign that the depression is nearly over. If securities
are bought, the seller may keep his money unspent until some favourable opportunity
occurs for its investment, or its expenditure in some other way. At the bottom of a
major business depression, the prevailing lack of confidence may make any expansion
undertaken by a central bank slow in bringing about a revival by increased spending.
Moreover, an excessive creation of cash with a view to hastening recovery may lead
to the central bank losing control if and when such action begins to take its effect.
The turnover of deposits may then become too rapid. For it is the rapidity of move-
ment of deposits (and notes)—the> "velocity of circulation"—which is the important
factor—the National Income, not the amount of money in existence. This velocity,
unless an inflationary expansion has taken place, is much more responsive to control

in the early stages of the upward movement of the business cycle than during its
downward phases or at the bottom of a depression. Incidentally, if the habits of
the people are unchanged, the volume and rate of turnover of notes circulating is
fairly closely related to the volume and rate of turnover of the deposits. The total
deposits of commercial banks in various countries are, during a depression, often as
great as or greater than in a boom period, but their velocity will be very different.
The deposits in the English banks, for example, at June 30 in 1929 were £1,861,000,000;
at the bottom of the depression in 1932 they were £1,813,700,000, and in 1935 they
were £2,044,800,000 or actually £183,800,000 greater than 1929.* In Canada the
average deposits of the chartered banks in 1929 were about the same as in the spring
of 1936, but their turnover in 1929 was very much higher. The national income of
Canada was about $5,690,000,000 in 1929 and in 1934 only about $3,613,000,000,
though this was an improvement on some of the intermediate years. This reduction
in national income is what would be expected in the light of the fall in turnover
since 1929.
But while an easy money policy may not easily promote spending, it will cause
a fall in the rates of interest, assisting the refunding of fixed interest obligations on
favourable terms and the flotation of new capital issues. This is often its most
important result.
Mitigation of General Economic Fluctuations.—Thus the ability of the
central bank to appraise the economic situation and to act at the proper time is
important, especially by way of seeking prevention rather than cure. The fluctua-
tions which the central bank has to mitigate are not only cyclical, they may also be
seasonal and secular. It should always try to offset the seasonal fluctuations, for
these are of short duration and their elimination or modification should present no
difficulty if the normal mechanism of open-market operations is functioning.
Secular fluctuations, due to increase in population, production and trade, over
a long period of time, are difficult to distinguish, but require attention. Seasonal
and cyclical movements may call for opposite treatments, in which case the central
bank will take care of the net effect it wishes to produce. ,
It is most important that the central bank should not act too early or too late
on the cycle. It will not wish to stop a business revival, but, equally, it must not
let it get out of hand. In order to know when to act and to what extent, the bank
must constantly watch carefully all barometers of economic activity—foreign trade,
employment, production, capital movements, etc. The more skilful and well-timed
the Bank's operations are, the less jarring their effect on the economic system will be.
In a depression, the central bank lays the foundation for economic expansion by
making money cheap and plentiful, within the limits of safety.
Control Over Exchange Operations.—The Canadian dollar is at present off
gold and unstabilized, and no statutory duty has yet been laid upon the Bank to
maintain the exchange at any particular rate or level. On the gold standard, or
any other standard, such maintenance is, of course, a primary duty of the central
bank and it defends the exchange mainly by the same weapons which it uses for
internal purposes, having, it may be, foreign exchange assets to help it. As the Royal
Commission on Banking and Currency in Canada pointed out (p. 63, paragraph 208
of the official report), "Whatever additional influences may affect the level of
exchange, . the long-term factor of decisive importance is the credit structure of
* Figures of deposits of English banks given here are from the Banting Supplement of The Economist
for Oct. 12,1935, and include undivided profits, etc.

The chart given below showing Bank of Canada assets and liabilities covers the
short period since the Bank was established, but illustrates the relationship between
the central bank's balance sheet and chartered bank cash reserves. The expansion
of Bank of Canada assets and liabilities has provided for increased Bank of Canada
notes in active circulation as the chartered bank-note issue is limited and gradually
retired under Bank Act regulations, and somewhat enlarged the cash reserves of
the chartered banks. The principal changes in Bank of Canada assets have been
those due to revaluation of gold holdings required by the Exchange Fund Act
of July, 1935, and the rise in investments, variations in which have been due in
part to seasonal variations in cash reserves and active note circulation.

B A N K OF C A N A D A '

'37 !935 1936 '37

Reproduced from the Bank of Canada's "Statistical Summary"

legislation by which the issue was expanded with the growth of the country was
given in a footnote on p. 952 of the 1934-35 Year Book.
Prior to the taking over of the note issue by the Bank of Canada when it opened
on Mar. 11, 1935, Dominion notes were issued under any one of three statutory
authorities: (1) the Dominion Notes Act (Statutes of 1934, c. 34), which required
a gold reserve of 25 p.c. to be held against the first $120,000,000 of notes issued and
full gold coverage against any issue in excess of $120,000,000; (2) the Finance Act
(R.S.C. 1927, c. 70), Part II of which authorized the Minister of Finance to advance
to any chartered bank or to the savings banks of Quebec, Dominion notes to any
amount on the pledge of approved securities deposited with the Minister. These
advances bore interest and no gold coverage was required to be held on Dominion
notes so advanced; (3) Chap. 4 of the Statutes of 1915, authorizing the Government
to issue Dominion notes to the amount of $26,000,000 without gold coverage, but
partly covered by the deposit of $16,000,000 of railway securities guaranteed by
the Dominion Government.
The Dominion note issue was therefore partly gold-backed and partly fiduciary.
Dominion notes were legal tender and, in normal times when Canada was on the
gold standard, they were redeemable in gold.
Dominion notes were of two types, those for the purpose of general circulation,
and "special" notes. The latter were used only by the banks for inter-bank trans-
actions and clearings, or for cash reserves or deposit in the Central Gold Reserves.
They were mainly of $5,000 and $50,000 denominations. Dominion notes for
the purpose of general circulation were of the denominations of 25 cents, $1, $2,
$4, $5, $50, $500 and $1,000, although for a considerable time no $4, or $50 notes
had been issued. Since the minimum denomination for chartered bank notes was
set at $5, Dominion notes of lower denominations naturally were largely in circulation
among the general public, but there was nothing to prevent any of these Dominion
notes from being included in the reserves of the banks, and it was provided that at
least 40 p.c. of the banks' reserves were to consist of Dominion notes.
Bank of Canada Notes.—The Bank of Canada, when it commenced opera-
tions, assumed the liability for Dominion notes outstanding, which were replaced
in public circulation, and partly replaced as cash reserves, by its own legal-tender
notes in denominations of $1, $2, $5, $10, $20, $50, $100 and $1,000. Deposits of
chartered banks at the Bank of Canada completed the replacement of Dominion
notes as cash reserves.
The chartered banks were required under the Bank Act of 1934 to reduce
the issue of their own bank notes gradually during the following ten years to an
amount not in excess of 25 p.c. of their paid-up capital on Mar. 11, 1935. Bank of
Canada notes are thus replacing chartered bank notes as the issue of the latter is
In Table 5 are shown the denominations of Dominion or Bank of Canada notes
in circulation in 1926, 1929, 1932, and in the three latest years. In the denomina-
tions under $5, which have, for many years, been used for general circulation, there
has been little change. In the denominations from $5 to $1,000, where Bank of
Canada notes have partially replaced chartered bank notes or Dominion notes,
there has been a large increase. On the other hand, the special Dominion notes
in denominations from $1,000 to $50,000 which were used almost exclusively for
inter-bank transactions or bank reserves, are no longer in use.

Section 5.—Commercial Banking.

Subsection 1.—Historical.
Since one of the chief functions of the early banks in Canada was to issue notes
to provide a convenient currency or circulating medium, it has been expedient to
cover both currency and banking in the one historical sketch which will be found on
pp. 873-879. However, the function of note issue is no longer as important as it was.
Latterly, the services of the chartered banks in gathering deposits from innumerable
sources have emphasized the importance of deposit banking by which the savings
of the people are put to immediate productive and commercial use; with the de-
velopment of commercial banking, other necessary commercial banking facilities
have been given more importance. Included among these is the mechanism of
bills of exchange by which foreign trade is financed. The principal features of
this development of commercial banking facilities in the evolution of the Canadian
banking system may be summarized as follows: (1) its origin, closely related to the
Montreal produce and export trade and to the commerce of Halifax and Saint John;
(2) the development of the branch bank system in order to meet the demands of
a rapidly moving frontier of settlement; (3) the adaptation to the requirements
of the grain and cattle trade of the west; and (4) the consolidation during later
years of the features which tended towards its early success. The development
of a stable system has been accompanied by failures, particularly marked about
the middle of the 19th century, but progress has nevertheless been steady, based
on sound principles, and adapted as closely as could be to the particular needs of the
The branch bank is perhaps the most distinctive feature of the Canadian system
as it exists to-day, and for a country such as Canada, vast in area and with a small
population, the plan has proved a good one. A result of the growth of branch
banks was the development of a partially centralized system—centralized as to
banks, of which there are now ten, rather than as to districts as in the partially
centralized system of the United States. There were 28 chartered banks in existence
at Confederation. The elimination of weaker banks or their amalgamation with
more stable institutions has been a progressive move towards greater security and
confidence. The banks at Confederation were as follows:—

Ontario and Quebec. Union Bank of Lower Canada.

Bank of Montreal. Mechanics' Bank.
Canadian Bank of Commerce.
Quebec Bank.
Commercial Bank of Canada.
Nova Scotia.
City Bank.
Gore Bank. Bank of Yarmouth.
Bank of British North America. Merchants' Bank of Halifax.
Banque du Peuple. People's Bank of Halifax.
Niagara District Bank. Union Bank of Halifax.
Molson's Bank. Bank of Nova Scotia.
Bank of Toronto.
Ontario Bank. New Brunswick.
Eastern Townships Bank.
Banque Nationale. Bank of New Brunswick.
Banque Jacques-Cartier. Commercial Bank of New Brunswick.
Merchants' Bank of Canada. St. Stephen's Bank.
Royal Canadian Bank. People's Bank of New Brunswick.

Tables 8 and 9 show, respectively, the insolvencies and amalgamations since 1867.

8.—Bank Insolvencies
NOTE.—No bank that has failed since 1895 has paid anything to shareholders in respect of their capital
investment. There is no reliable information as to earlier dates. Information is not available from which
to compute losses with respect to liabilities other than deposits and circulation. In some instances these
liabilities would include liabilities to Governments (having preference) and to banks and others. Note-
holders have experienced no losses whatever since the inauguration of the Bank Circulation Redemption
Fund in 1890 or, in fact, since the failure of the Bank of Prince Edward Island in 1881. The amount of double
liability actually collected from shareholders of the banks which latterly became insolvent was as follows:—

Number Date of Capital Stock at Date of

of Suspension Suspension.
Name of Bank and Place of Branches Date of or
Chief Office. when Charter. Cessation
Operations of Normal Auth- Sub- Paid-
Ceased Operations. orized. scribed. Up.

Commercial Bank of N.B.,

Saint John, N.B Incorporated 600,000 600,000
1834 in N.B.
Bank of Acadia, Liverpool,
N.S.» June 14, 1872 April 1873 500,000 100,000
Metropolitan Bank of Mont-
real April 14, 1871 Oct. 1876 1,000,000 1,000,000 800,170
Mechanics Bank of Montreal Before Con- May 1879 1,000,000 243,374 194,794
Bank of Liverpool, Liverpool,
N.S April 14, 1871 Oct. 1879 500,000 500,000 370,548
Consolidated Bank of Canada
(City Bank and Royal Can.
amalgamated 1879) 16 Sept. 18, 1875 Aug. 1879 2,400,000 2,091,900 2,080,920
Stadacona Bank, Quebec 1 July 1879> 1,000,000 1,000,000 991,890
Bank of Prince Edward Is- June 14, 1872
land, Charlottetown, P.E.I. Nov. 28, 1881 120,000
Exchange Bank of Canada, Local
Montreal Sept. 1883 500,000 500,000 500,000
10 Maritime Bank of Dom. of April 14, 1871
Can., Saint John, N.B Mar. 18871 2,000,000 321,900 321,900
Pictou Bank, Pictou, N . S . . . . June 14, 1872 Sept. 1887 500,000 500,000 200,000
Bank of London in Canada,
London, Ont May 23, 1873 Aug. 1887 1,000,000 1,000,000 241,101
Central Bank of Canada,
Toronto, Ont May 25, 1883 Nov. 1887 1,000,000 500,000 500,000
Federal Bank, Toronto, Ont.
(Changed from "Superior May 25, 1883
Bank") May 26, 1874 Jan. 18881 1,250,000 1,250,000
Commercial Bank of Mani-
toba, Winnipeg 10 April 19, 1884 June 30, 1893 2,000,000 740,700 552,650
Banque du Peuple, Montreal. 7 June 27, 1884 July 15, 1895 1,200,000 1,200,000 1,200,000
Banque Ville Marie, Montreal 19 June 14, 1872 July 25, 500,000 500,000 479,620
Bank of Yarmouth, Yar
mouth, N.S 1 April 15, 1859 Mai. 6, 1905 300,000 300,000 300,000
Ontario Bank, Toronto 3 30 1857 Oct. 13, 1906 1,500,000 1,500,000 1,500,000
Sovereign 4 Bank of Canada, May 27,
Toronto 85 1901 Jan. 18, 1908 3,000,000 3,000,000 3,000,000
Banque de St. Jean, St. Jean, May 23,
P.Q 5 1873 April 28, 1908 1,000,000 500,000 316,386
Banque de St. Hyacinthe, St. May 3,
1 504,600 331,235
Hyacinthe, P.Q 6 1873 June 24, 1908 1,000,000
St. Stephen's5 Bank, St. Ste- May 23,
phen, N.B. 1 1836 Mar. 10, 1910 200,000 200,000 200,000
Farmers 6Bank of Canada, About
Toronto 27 1904 Dec. 19, 1910 1,000,000 584,500 567,579
Bank 7 of Vancouver, Vancou- July 18,
ver 10 1908 Dec. 14, 1914 2,000,000 587,400 445,188
Home Bank of Canada, April 3,
Toronto8 68 1903 Aug. 17, 1923 5,000,000 2,000,000 1,960,591
July 10,

Total. 340

i Suspension or cessation of operations was voluntary. This bank was only ini existence three
months and twenty-six days. It re-opened for a few days and redeemed a few thousand dollars wortn ol
i ts notes. This 'asted only a day or two, and the remaining noteholders with the exception of the Oovern-

9.—Bank Absorptions in Canada since 1867.'

Purchasing Bank. Bank Absorbed. D a t e .2

Bank of Montreal. Exchange B a n k , Y a r m o u t h , N . S . . Aug. 13, 1903

People's B a n k of Halifax, N . S June 27, 1905
Ontario B a n k Oct. 13, 1906
People's Bank of N e w Brunswick.. April 15, 1907
B a n k of B r i t i s h N o r t h A m e r i c a . . . Oct. 12, 1918
M e r c h a n t s ' B a n k of C a n a d a Mar. 20, 1922
Molson's B a n k Jan. 20, 1925
C a n a d i a n Bank of C o m m e r c e . Gore Bank May 19, 1870
B a n k of B r i t i s h C o l u m b i a . . Dec. 31, 1900
Halifax Banking C o m p a n y . May 30, 1903
M e r c h a n t s ' B a n k of P . E . I . . May 31, 1906
E a s t e r n Townships' B a n k . . Feb. 29, 1912
B a n k of H a m i l t o n Dec. 31, 1923
S t a n d a r d B a n k of C a n a d a . . Nov. 3, 1928
B a n k of N o v a Scotia. Union Ba-nk of P . E . I Oct. 1, 1883
B a n k of N e w B r u n s w i c k . . . Feb. 15, 1913
T h e Metropolitan B a n k Nov. 14, 1914
T h e B a n k of O t t a w a April 30, 1919
R o y a l B a n k of C a n a d a . . Union B a n k of Halifax Nov. 1, 1910
T r a d e r s ' B a n k of C a n a d a Sept. 3, 1912
Quebec B a n k Jan. 2, 1917
N o r t h e r n Crown B a n k July 2, 1918
Union B a n k of C a n a d a Aug. 31, 1925
I m p e r i a l B a n k of C a n a d a . Niagara District Bank June 21, 1875
T h e Weyburn Security B a n k . May 1, 1931
Banque d'Hochelaga B a n q u e Nationale April 30, 1924

B a n k of N e w Brunswick Summerside Bank Sept. 12, 1901

M e r c h a n t s ' B a n k of C a n a d a . Merchants' Bank F e b . 22, 1868
C o m m e r c i a l B a n k of C a n a d a . . June 1, 1868
Union B a n k of Halifax.. C o m m e r c i a l B a n k of Windsor. Oct. 31 1902
N o r t h e r n Crown B a n k . July 2 1908
The Northern Bank 1908
July 2
Crown B a n k of C a n a d a
Union B a n k of C a n a d a United Empire Bank Mar. 31, 1911
H o m e B a n k of C a n a d a . . .. L a B a n q u e Internationale du C a n a d a . , April 15, 1913
S t a n d a r d B a n k of C a n a d a . Western B a n k of C a n a d a F e b . 13, 1909
Sterling B a n k of C a n a d a D e c . 31, 1924
The purchasing banks named in the latter part of the table are no longer in business.
Dates given since 1900 are those of the Orders in Council authorizing the absorptions.
The Banque d'Hochelaga after absorbing the Banque Nationale adopted the name Banque Canadienne

(Footnotes to T a b l e 8 continued.)—
This bank did not suspend payment, but when difficulties were encountered an arrangement was made
whereby all liabilities were taken over by the Bank of Montreal which, with certain other banks, assumed
responsibility for any loss which might result after realization of assets and double liability of shareholders.
Depositors and other creditors accordingly experienced neither loss nor delay. By winding-up order of
Sept. 29, 1908, the bank was placed in liquidation and shareholders proceeded against for double liability,
in respect of which 11,202,510 was collected but $601,534 of that amount subsequently returned. Winding-
up proceedings terminated in January, 1918.
' Thi s bank did not suspend payment. By agreement, certain other banks took over its var ious branches
and assumed all of its liabilities; accordingly depositors and other creditors experienced neither loss nor
delay. In 1911, when the assisting banks threatened to place the bank in liquidation for the purpose of
enforcing payment of double liability of shareholders, a corporation, named International Assets Limited,
was formed, which assumed all liabilities to the assisting banks and took over the assets of the Sovereign
Bank, upon which bonds were issued to the assisting banks for the amount owing them. Numerous share-
holders of the Sovereign Bank subscribed to preference shares in the corporation and to the extent that
they did so were released from their double liability on shares of the Sovereign Bank; as a result, in excess
of $2,000,000 was collected and paid over to the assisting banks. On Jan. 27, 1914, after it became apparent
that a number of shareholders would not subscribe, or pay their double liability voluntarily, the Sovereign
Bank (at a time when International Assets Limited was its sole creditor) was placed in liquidation.
In addition to realization of general assets, the President of this bank advanced sufficient to permit
of all liabilities being paid in full without resort to the double liability of the shareholders.
• A Royal Commission inquired into the failure of this bank in 1912 and its report, together with the
evidence adduced at the inquiry, are matters of public record. "
(Footnotes concluded at foot of p. 897.)

Subsection 2.—Combined Statistics of Chartered Banks.

In Table 10 are given summary statistics of Canadian banking business since
Confederation. In order to afford a clear view of the nature of banking transactions
in Canada, bank liabilities have been classified in two main groups, liabilities to
shareholders and liabilities to the public, only the latter group is ordinarily con-
sidered when determining the financial position of any such institution. Assets are
divided into four groups, 'other assets' being included in the total. As of interest
to students of banking practice, the relative rates of increase of capital and reserve
funds may be noted, also the great increase in the proportion of liabilities to the
public to total.liabilities, and the gradually increasing percentage of liabilities to
the public to total assets. The accompanying chart of ownership division of total
assets is of interest in this connection. The declining proportion of notes in circula-
tion to total liabilities to the public is also characteristic of the evolution of banking
in recent times. Holdings of Dominion and Provincial Government and municipal
securities were relatively insignificant prior to the Great War.

(Footnotes to Table 8 conclude!.)

As indicated, the liability to noteholders has been fully provided for. A preferred claim of the Prov-
ince of British Columbia for approximately 1103,000 was settled for (65,000, subject to the proviso that the
province might rank with ordinary creditors for the balance if or when such creditors had received a divi-
dend of 25 p.c. The assets, however, realized only sufficient to pay a first and final dividend to depositors
and other ordinary creditors of 7} p.c. and after allowing for set-offs, etc., the liquidator estimated the loss
to such creditors at $279,000 plus the loss to the province of British Columbia of $38,000, or a total of $317,000.
Interim dividend of 25 p.c. paid by the liquidator in December, 1923, and he anticipated that by
conserving the assets a further distribution of possibly 10 to 12 p.c. might be made eventually. Depressed
conditions.naturally affected the process of liquidation and the amount of the further dividend, if any, will
depend entirely on future developments. The Government of Canada, pursuant to investigation by a
Royal Commission into the responsibility for and causes of the failure, granted relief to the extent of 35 p.c.
of the claims of certain classes of creditors, namely, all those individual with claims of less than $500 as
well as those with larger claims who were found upon due inquiry to be in special need or straitened cir-
cumstances as a result of the failure. This involved a total outlay of approximately $3,460,000.

11.—Assets of Chartered Banks, 1939, 1932, and 1931-36.

NOTE.—The statistics in this table are averages computed from the twelve monthly returns in each year.
As the first two items have only been worked out to the nearest million, the totals are not the exact sum
of the items for the years prior to 1936.

Item. 1929. 1932. 1934. 1935.

Cash Reserve against Canadian

deposits (as per Table 7 ) . . 212,000,000 186,000,000 203,000,000 216,000,000
Secured bank note issue 25,000,000 2,000,000 1,000,000
Subsidiary coin I l l 5,795,547*
Notes of other Canadian banks 16,807,334 11,247,365 10,418,411 7,131,768
Cheques of other banks... 149,545,199 82,948,867 93,681,134 95,892,529
Deposits at other Canadian
banks 4,698,323 3,461,775 3,906,981 4,796,596
Gold and coin abroad. 24,797,260 19,089,489 10,040,895 9,703,723
Foreign currencies 19,468,671 16,022,766 20,377,395 21,713,478
Deposits at United Kingdom
banks 4,826,444 9,383,994 21,339,301 21,693,367
Deposits at foreign banks. 86,178,585 97,999,358 67,516,010 87,022,098

Dominion and Provincial
Government securities.. 341,744,572 489,709,241 683,498,403 860,942,292
Other Canadian and foreign
public securities 104,309,024 150,891,599 139,850,099 137,764,626
Other bonds, debentures
and stocks 52,961,542 55,157,961 43,377,456 45,644,735

Call and Short Loans—

In Canada 267,271,438 117,224,745 101,592,436 82,395,250
Elsewhere 301,091,053 84,227,574 106,698,437 71,554,988

Current Loans—
Loans to Provincial Govern-
ments 19,002,655 34,386,119 26,321,552 25,788,750
Loans to cities, towns,
municipalities, and school
districts 93,325,211 130,567,792 118,549,484 108,029,440
Other current loans and
and discounts 1,342,666,883 1,032,081,481 868,940,687 828,722,109
Elsewhere than in Canada... 248,367,887 171,861,621 137,640,771 145,719,541
Non-current loans 7,522,377 12,317,980 13,939,704 14,220,747

Other Assets—
Real estate, other than bank
5,618,820 7,141,708 7,810,619 8,419,183
Mortgages on real estate sold 5,456,314
7,221,774 6,244,908 5,941,288
by the banks 78,132,351 76,794,405
75,536,822 79,714,603
Bank premises
Bank circulation redemption 6,246,861 6,721,355 6,618,517 6,808,157
Liab ilities of customers under
letters of credit as per
contra 100,473,805 48,671,585 52,355,627 55,037,693

All other assets. 11,957,574 14,520,279 14,994,018 15,058,189

Totals, Assets. 3,528,468,025 2,869,429,779 2,837,919,961 2,956,577,704

1 1
Included in first item. Ten-month average,

16. -Amounts of Exchanges of the Clearing Houses of Chartered Banks in Canada

for the calendar years, 1932-36—concluded.

Clearing House. 1932. 1933. 1934. 1935. 1936.

Kitchener 43,540,055 43,365,053 50,268,751 50,414,984 54,834,963

Lethbridge 17,287,271 17,301,733 20,785,708 23,963,854 24,105,821
London 127,365,483 116,906,848 128,018,177 134,707,964 145,222,921
Medicine Hat 9,648,413 9,819,336 10,988,541 12,995,361 12,367,706
Moncton 35,040,759 31,577,841 34,991,249 35,753,000 37,250,494
Montreal ,971,576,104 4,249,531,044 4,653,226,857 4,582,416,573 5,386,188,857
Moose Jaw 27,706,507 25,548,000 24,740,854 27,283,900 31,587,919
New Westminster.. 23,366,543 21,278,157 25,028,251 27,463,691 32,166,195
Ottawa 227,999,793 196,686,205 219,698,923 1.076,864,472 1,132.979,446
Peterborough 30,253,664 27,848,985 30,920,440 31,325,062 32,347,673
Prince Albert 14,143,193 12,108,245 14,357,763 18,437,203 17,814,604
Quebec 210,822,180 191,774,625 200,669,727 207,012,322 222,901,251
Regina....- 176,858,737 170,858,649 181,277,356 191,995,407 218,683,823
Saint John 85,895,057 74,776,201 84,066,825 84,059,113 90,730,398
Sarnia 19,670,808 18,781,336 20,886,635 23,082,010 23,754,497
Saskatoon 73,353,023 59,500,613 65,343,280 74,956,723 77,033,722
Sherbrooke 29,246,459 27,452,934 28,628,148 28,659,155 29,959,127
Sudbury 24,215,334 26,470,130 34,881,455 38,895,230 46,340,527
Toronto ,071,710,500 4,916,531,044 5,643,522,459 5,720,065,081 6,465,263,740
Vancouver 637,132,962 667,955,703 755,532,352 781,264,535 953,566,363
Victoria 70,673,038 69,300,609 73,931,173 79,007,806 87,484,888
Windsor 117,006,345 106,323,870 104,459,995 115,902,542 142,249,058
Winnipeg ,974,922,067 2,807,734,669 2,676,160,032 2,622,557,766 2,925,627,890

Totals.. 12,911,154,710 14,720,611,033 15,063,570,498 16,927,186,132 19,202,526,601

Bank Debits.—As the number of separate banks has in recent years been
steadily diminishing through amalgamations (see pp. 893 to 896), there being only 10
in December, 1936,* as compared with 18 in 1923, inter-bank transactions are a
steadily decreasing proportion of total business transacted, and bank clearings have
ceased to be a satisfactory measure of general business. The Canadian Bankers'
Association agreed to secure from January, 1924, the monthly aggregate figures of
the amount of cheques charged to accounts at all banking offices situated in the
clearing-house centres of Canada, and monthly and annual figures of cheques charged
to accounts (bank debits) have been published since that time by the Dominion
Bureau of Statistics. Further, in order that an estimate might be made of the
proportion of banking transactions outside the clearing-house cities to the total,
the Canadian Bankers' Association secured for the month of January, 1935, the
grand total of all cheques charged to accounts at all branch banks throughout the
Dominion. The results were published in the Bureau's Monthly Review of Bank
Debits for February, 1935, and showed that the aggregate of transactions outside
the clearing-house cities was in January, 1935, 12J p.c. of the grand total in the
clearing-house cities. The corresponding figures in the five economic areas were
as follows: Maritime Provinces 104-2 p.c, Quebec 6-9 p.c, Ontario 13-5., Prairie
Provinces 8-4 p.c, British Columbia 16-7 p.c Only in the Maritime Provinces
does the total of bank debits in clearing-house cities appear to represent inadequately
the grand total of business transactions throughout the whole area.
"Barclays Bank, established in 1929, was the latest addition to the commercial chartered banks in
Canada; the number has remained at 10 since 1931.

Alberta.—In Alberta the Provincial Treasury receives savings deposits and

issues demand savings certificates bearing interest at 2 p.c, or term certificates
for one, two or three years, in denominations of $25 and upwards, bearing interest
at 2 p.c. for one year and 2i p.c. for two or three years. The total amount in
savings certificates on Dec. 31, 1936, was $8,429,145, made up of $4,519,520 in
demand certificates and $3,909,625 in term certificates.
Other Savings Banks.—The Montreal City and District Savings Bank,
founded in 1846 and now operating under a charter of 1871, had on Dec. 31, 1936, a
paid-up capital and reserve of $4,500,000, savings deposits of $57,809,007, and
total liabilities of $59,125,542. Total assets amounted to $64,069,878 including
over $46,000,000 of Dominion, provincial and municipal securities. The Caisse
d'Economie de Notre-Dame de Quebec, founded in 1848 under the auspices of the
St. Vincent de Paul Society, incorporated by Act of the Canadian Legislature in 1855
and given a Dominion charter by 34 Victoria, c. 7, had on Dec. 31, 1936, savings
deposits of $13,587,855, a paid-up capital and reserve of $2,500,000 and total assets
of $16,843,332.
The co-operative people's banks of Quebec (202 reported to the Provincial Govern-
ment in 1935) are also an important element in promoting thrift and assisting
business in that province. Thus on Dec. 31, 1935, savings deposits in these banks
amounted to $6,865,477, while the amount on loan was $8,287,077. Loans granted
in 1935 numbered 12,175 amounting to $2,803,748. Profits realized amounted to
$472,543. (See also p. 7b8 of this volume.)
26.—Deposits in the Montreal City and District Bank and the Caisse d'Economie
de Notre-Dame de Quebec, as at June 30, for representative years 1868-1906, and
Mar. 31,1907-36.
NOTE.—Figures for all intermediate years will be found on p. 833 of the 1926 Year Book.

At June 30— Deposits. A t Mar. 31— Deposits. A t Mar. 31— Deposits.

S S $
1868 3,369,799 1911 32,239,620 1925 65,837,254
1870 5,369,103 1912 34,770,386 1926 67,241,344
1875 6,611.416 1913 39,526,755 1927 69.940,351
1880 6,681,025 1914 40,133,351 1928 72.695,422
1885 9.191,895 1915 39,110,439 1929 70,809,603
1890 10,908,987 1916 37,817,474 1930 68,846,366
1895 13,128.483 1917 40,405,037 1931 69,820,422
1900 17,425,472 1918 44,139,978 1932 68,683,324
1905 25.050,966 1919 42,000,543 1933 68,113,501
1906 27,399,194 1920 46,799,877 1934 66,673,219
19071 28,359,618 1921 53,118,053 1935 66,496,595
1908' 28,927,248 1922 58,576,775 1936 . 69,665,415
1909' 29.867,973 1923 59,327,961
1910' 32,239,620 1924 64,245,811

i At Mar. 31.


Section 1.—Loan and Trust Companies.
The Canada Year Book, 1934-35, presented at p. 993 an outline of the develop-
ment of loan and trust companies in Canada from 1844 to 1913.
The laws relating to trust and loan companies were revised by the Loan and
Trust Companies Acts of 1914 (4-5 Geo. V, cc. 40 and 55), with the result that the
statistics of provincially incorporated loan and trust companies ceased to be col-
lected. The statistics of Tables 2 and 3 refer only to those companies operating
under Dominion charter, except that, beginning in 1925, the statistics of loan com-
panies and trust companies incorporated by the province of Nova Scotia, and brought

by the laws of that province under the examination of the Dominion Department
of Insurance, have been included. Also, since 1922, provincially incorporated loan
and trust companies have made voluntary returns of their statistics to the Dominion
Department of Insurance, so that all-Canadian totals are again available for recent
years. As indicating the progress of the aggregate of loan company business in
Canada, it may be stated that the book value of the assets of all loan companies rose
from $188,637,298 in 1922 to $213,649,794 in 1931, although declining slightly to
$201,575,353 in 1935. The total assets in the hands of the trust companies increased
from $805,689,070 in 1922 to $2,726,207,098 in 1935. The latter figure included
$2,496,834,244 of "estates, trust and agency funds". (Table 1.)
Functions of Loan Companies.—The principal function of loan companies
is the lending of funds on first mortgage security, the money thus made available
for development purposes being secured mainly by the sale of debentures to the
investing public and by savings department deposits. Of the loan companies
operating under provincial charters, the majority conduct loan, savings, and mort-
gage business, generally in the more prosperous farming communities.
Functions of Trust Companies.—Trust companies act as executors, trustees
and administrators under wills or by appointment, as trustees under marriage or
other settlements, as agents or attorneys in the management of the estates of the
living, as guardians of minor or incapable persons, as financial agents for munici-
palities and companies and, where so appointed, as authorized trustees in bank-
ruptcy. Some companies receive deposits, but the lending of actual trust funds
is restricted by law. The figures of Table 1 are of particular interest in the case
of trust companies, which, on account of the nature of their functions, are mainly
provincial institutions, since their chief duties are intimately connected with the
matter of probate, which lies within the sole jurisdiction of the provinces.
1.—Summary Statistics of the Operations of Dominion and Provincial Loan and
Trust Companies in Canada, as at Dec. 31, 1935.

Provincial Dominion Total.

Item. Companies. Companies.
S $


Book values of assets 63,581,208 137,994,145 201,575,353

Liabilities to the public 29,096,415 101,578,778 130,675,193
Capital S t o c k -
Authorized 50,072,463 59,150,000 109,222,463
Subscribed 25,483,404 26,716,000 52,199,404
Paid-up 21,965,665 19,393,907 41,359,572
Reserve and contingency funds... 11.609,777 15,618,715 27,228,492
Other liabilities to shareholders. 939,394 1,391,473 2,330,867
Total liabilities to shareholders.. 34,514,836 36,404,095 70,918,931
Net profits realized during year.. 1,418,992 987,702 2,406,694


Company funds 64,669,497 15,970,895 80,640,392

Guaranteed funds 113,975,071 34,757,391 148,732,462
Estates, trust and agency funds. 2,254,239,934 242,594,310 2,496,834,244

Totals 2,432,884,502 293,322,596 2,726,207,098

Capital Stock—
Authorized 66,957,600 19,650,000 86,607,600
Subscri bed 30,462,551 11,636,770 42,099,321
Paid-up 28,197,873 10,590,333 38,788,206
Reserve and contingency funds... 18,818,716 3,744,068 22,562,784
Unappropriated surpluses 2,495,345 578,643 3,073,988
Net profits realized during year.. 2,540,945 562,669 3,103,614

Provincial bond issues have been on a much larger scale since the War than
formerly, probably due to the development of provincially-owned public utilities
and of improved highways. Sales of the bonds of Canadian municipalities, on
the other hand, were greater in 1913, toward the end of the "land boom", than
they have been in any other year, although sales in 1930 almost reached the record.
However, allowing for the increased population in cities and towns, there has not
been the same marked increase in the average annual sales of municipal bonds in
the period since the War, as compared with the period before the War, that is notice-
able in the case of provincial bonds.
Sales of corporation bonds, which from 1926 to 1930 had averaged over $257,-
000,000 per year, dropped to $10,550,000 in 1932, and to $4,385,000 in 1933, this
being largely due to the uncertainty of the industrial outlook. Railway bonds
also showed a precipitate decline to $12,500,000 in 1932, and fell to $1,000,000 in
1933. In 1934,1935, and 1936 substantial recoveries were shown in both classes.
A very striking change has taken place during the present century in the market
in which Canadian bond issues are principally sold. Prior to the War, a great part
of the capital required for Canadian development came from the United Kingdom,
and the major portion of Canadian bond issues was sold there. The outbreak of
war temporarily eliminated that market, and Canadians turned largely to the
United States for outside capital. However, the great increase in wealth during and
since the War has enabled a much greater proportion of public and industrial finan-
cing to be done at home, and beginning with the Victory Loan Campaigns, Canadians
not only learned how to invest their money in bonds, but had the necessary funds to
invest on a large scale in bond issues. These facts are reflected in the latter part of
Table 4 showing that since 1915 a greatly increased proportion of the total issues of
Canadian bonds has been sold within Canada. Thus, in 1936, 93-2 p.c. of all bonds
issued were sold in Canada, 6 • 7 p.c. in the United States and 0 • 1 p.c. in the United
4.—Sales of Canadian Bonds, by Class of Bond and Country of Sale, calendar years
( F r o m t h e Monetary Times Annual. F i g u r e s for 1904-10, inclusive, will b e found a t p. 921 of t h e
1933 Y e a r B o o k . )

Calendar Year. Dominion. Provincial. Municipal. Railway. Corporation. Total.

$ J 5 * S S
1911.. 11,375,000 30,295,838 85,611,265 139,530,885 266,812,988
1912. 25,000,000 25,639,700 47,159,288 45,014,925 130,124,069 272,937,982
1913. 34,066,666 36,850,000 110,600,936 65,895,880 126,381,813 373,795,295
1914. 48,666,666 56,100,000 79,133,996 59,719,000 29,315,405 272,935,067
1915. 170,000.000 48,105,000 67,393.328 33,675,000 15,933,000 335,106,328
1916. 175,000,000 33,173,000 93,977,542 22,240,000 32,492,000 356,882,542
1917. 650,000,000 15,300,000 24,189,079 17,700,000 18,850,000 726,039,079
1918. 689,016,000 18,605,000 43,570,361 19,600,000 4,565,000 775,356,361
1919 753,000,000 52,374,000 26,274,089 35,359,133 42,930,000 909,937,222
1920. 125,993,000 56,371,391 96,500,000 46,050,276 324.914,667
1921. 160,745,400 84,776,931 96,733,000 61,335,825 403,591,156
1922. 200,000,000 114,918,000 87,088,877 13,505,100 76,885,500 492,397,477
1923. 200,000,000 106,279.000 83,686,422 27,500,000 97,352,320 514,817,742
1924. 175,000,000 89,640,000 88,731,612 157,375,000 69,179,180 579,925,792
169,333,333 106,970,000 46,218,987 40,925,195 120,085,833 483,533,348
1925. 65,020,194
1928. 105,000,000 76,633,267 34,500,000 250,919,200 532,072,661
45,000,000 114,795,500 72,742,114 80,000,000 289,680,067 602,217,681
1927. 27,120.588
92,992.500 48,396,000 285,083,000 453,592,088
1928. 98,667,809 199,200,000
1929. 119,960,500 243,330,600 661,158,909
140,000,000 160,004,000 109,648,063 137,238,000 220,355,000 767,245,063
1930 85,290,066 121.750,000
1931. 858,109,300 126,239,205 59,432,000 1,250,820,571
226.250,000 128,217,000 95,600,632 12,500,000 10,550,000 473,117,632
1932 41,282,513 1,000,000
1933. 440,000,000 82,889,000 4,385,000 569,556,513
400,000,000 139,868,000 24,690,132 32,500,000 40,902,696 637,960,828
1934 44,793,200 48,400,000
1935 739,300,000 123,407,000 60,605,700 1,016,505,900
793,000,000 118,735,000 34,356,087 133,000,000 202,983,224 1,282,074,311

Section 4.—Foreign Exchange.

The Canadian dollar, adopted as our currency in 1857, was equivalent to 15/73
of the pound sterling; in other words, the pound was equal to $4-866 in Canadian
currency at par, and remained so, with minor variations between the import and
export gold points representing the cost of shipping gold in either direction, until
the outbreak of the Great War. During the first eleven years after Confederation,
the Canadian dollar was at a premium in the United States, as the United States
dollar was not, after the Civil War, redeemable in gold until 1878. From the
latter date, the dollar in the two countries was equivalent at par, and variation
was only between the import and export gold points or under $2 per $1,000.
At the outbreak of the Great War, both the pound sterling and the Canadian
dollar were made inconvertible into gold and fell to a discount in New York, though
this discount was "pegged" or kept at a moderate percentage by sales of United
States securities previously held in the United Kingdom, borrowing in the United
States, and, after the United States entered the War, by arrangements with the
United States Government. After the War, when the exchanges were "unpegged"
about November, 1920, the British pound went as low as $3-18 and the Canadian
dollar as low as 82 cents in New York. In the course of the next year or two, ex-
change was brought practically back to par, and the United Kingdom resumed gold
payments in 1925 and Canada on July 1, 1926. From then until 1928 the exchanges
were within the gold points, but in 1929 the Canadian dollar again fell to a moderate
discount in New York. The dislocation of exchange resulting from this discount
persisted, with the exception of a few months in the latter half of 1930, into 1931.
Dollar rates were below the gold export points, however, only for a few scattered
intervals. Fluctuations since September, 1931, are dealt with below.
Recent Movements in Canadian Exchange.*—Because of Canada's close
financial and commercial relationships with the United Kingdom and the United
States, Canadian exchange rates are influenced to a large extent by the London and
New York markets. The United Kingdom buys much more from Canada than
Canada buys from her, but the reverse is the case as regards the trade between
Canada and the United States. The result is that there is a supply of bills on
London in excess of the amount needed to meet current obligations in the United
Kingdom. By offering these for sale for United States funds in London or New
York, a triangular balance is approximated by book transactions and the amount
of gold transfers is thereby greatly reduced. The volume of sterling exchange on
Canadian account thus passed to the New York market does not greatly influence
New York rates of sterling exchange under normal conditions; on the contrary,
the volume of the New York-London transactions is sufficient to carry the Canadian
rates along with them.
In September, 1931, the equilibrium of international exchange was seriously
disturbed. This unfortunate turn of events followed a period of over six years
during which the nations of the world had worked steadily towards the stabilization
of their currency systems upon a gold basis. Within two months of the time when
the United Kingdom found it necessary to suspend free gold shipments, however,
only a very small number of countries, including the United States and France, were
left with currencies unshaken by preceding abnormal gold movements. The
decision of the United Kingdom to go off the gold standard (Sept. 21, 1931) resulted
in a sharp depreciation of sterling in New York. Canadian rates depreciated also,
"Revised by Herbert Marshall, B.A., F.S.S., Chief, Internal Trade Branch, Dominion Bureau of

and fluctuated broadly with sterling until the United States dollar dropped from the
ranks of gold standard currencies on April 19, 1933.
Since that time major adjustments have occurred in practically all currencies
of the world. The United States dollar was replaced on a gold basis, but was de-
valued at 59 • 06 p.c. of its former gold parity (13y grains or -^ oz. of gold to the dollar
as against 23-22 grains previously) on Jan. 31, 1934, with other countries following
suit at irregular intervals until the final break-up of the European gold "bloc" in
September, 1936. These countries, including France, Belgium, and Switzerland,
were the last to abandon post-war gold standards established between 1925 and 1927.
During 1936, the United States dollar and the Canadian dollar fluctuated narrowly
about par, while the £ sterling declined in the latter half of the year until it also
approached its old New York and Montreal parity of $4 • 866. With the exception of
the last three months of the year, when readjustments within the former gold "bloc"
were occurring, 1936 exchange fluctuations were unusually narrow.

6.—Monthly Averages of Exchange Quotations at Montreal, 1935 and 1936.

NOTE. - T h e noon r a t e s in Canadian funds upon w h i c h t h e s e averages are b a s e d h a v e been supplied b y t h e
B a n k of C a n a d a .

Australia. Austria. Belgium. Czecho- Denmark. Finland.

Pound. Schilling. Belga. slovakia. Krone. Markka.
Month. Krone.

Par. •1407 •1390 •2680 •0252

1935. 1936 1935. 1936 1935. 1936. 1935. 1935. 1936. 1935. 1936.

January 3-904 3-973 •188 •233 •169 •042 • 042 •219 •222 •022 •022
February.. 3-901 3-995 •188 •234 •170 •042 •042 •218 •223 •022 •022
March 3-853 3-983 •191 •231 •170 •043 •042 •216 •222 •021 •022
April 3-882 3-974 •189 •171 •170 •042 •042 •217 •222 •021 •022
May 3-910 3-984 •188 •170 •170 •042 •042 •219 •222 •022 •022
June 3-949 4-026 •189 •170 •170 •042 •042 •221 •225 •022 •022
July 3-969 4-022 •189 •170 •169 •042 •042 •222 •224 •022 •022
August 3-981 4-021 •190 •170 •169 •042 •041 •223 •224 •022 •022
September, 3-976 4-031 •190 •170 •169 •042 •041 •222 •225 •022 •022
October.... 3-982 3-918 •191 •171 •168 •042 •037 •222 •219 •022 •022
November 3-! 3-905 •190 •171 •169 •042 •035 •222 •218 •022 •022
December. 3-1 3-924 •189 •170 •169 •042 •035 •222 •219 •022

France. Germany. Holland. Italy. Norway. Spain.

Franc. Reichs- Guilder. Lira. Krone. Peseta.
Month. mark.

Par. •0392 •2382 •4020 •0526 •2680 •1930'

1935. 1936. 1935. 1935. 1936. 1935. 1936 1935. 1936. 1935. 1936.

January •066 •066 •400 •404 •085 •246 •249 •137 •137
February.. •066 •067 •402 •406 •685 •085 •246 •251 •137 •138
March •067 •066 •408 •405 •684 •243 •250 •139 •138
April •066 •066 •405 •404 •682 •244 •250 •138 •137
May •066 •066 •403 •404 •678 •083 •246 •250 •137 •137
June •066 •066 •405 •404 •679 •083 •249 •253 •137 •137
July •066 •066 •405 •404 •681 •083 •250 •253 •138 •137
August •066 •066 •405 •402 •679 •251 •253 •138 •137
September. •067 •065 •406 •401 •667 •250 •253 •138 •137
October •067 •047 •408 •402 •536 •250 •246 •139
November •067 •046 •407 •402 •539 •082 •250 •245 •138
December. •067 •047 •406 •402 •545 •082 •250 •246

F o r footnote see end of t a b l e , p . 920.