BANKING IN CANADA

Evening Post, Volume CXIX, Issue 32, 7 February 1935, Page 14

BANKING IN CANADA

REVISION OF STATUTES

A SOUND STRUCTURE

Some interesting comments on banking in. Canada, with special reference to the relationship between the trading banks and the Bank of Canada (Reserve), were made by Sir Charles Gordon,' president of the Bank of Montreal, at the annual meeting of shareholders- towards the end cf hst j ear.

"Following upon the report of the Rojal Commission on Banking and Cmrency presented some fourteen months ago, the pist jeai has witnessed the deLsnnial revision ot our Bank Act by Parliament and the passing of the Bank of Canada Act, with the piomise ot the commencement ot business by the new-ly-lorrned Cential Bank eaily in the coining jear," said Su- Chailes "The revision of the Bank Act was most thoiough and the net result was largely an endoisement ot past legislation and banking piactices. The most important innovations were those necessitated by the decision ot the Government to pioteed with the establishment of a Cential Bank. 'In consequence of the establishment of the Bank of Canada, the note cucula tion of the charteied banks will be curtailed as fiom January 1, 1036, by piogressive annual j eductions over a period of ten jeais until the amount of notea of the chaitered banks outstanding is l educed to 25 per cent, of the paid-"up capital of each bank The. legislation also provides that gold holdings, with the exception of those required to cany on foreign busmen, are to be tiansfeued by the commercial banks to the custody of the Bank of Canada.

Under wise management we may hope that the B-ink of Canada will piove useful and constructive, but in respect to its operations it would be as, unfair ns it would be unwise to expect muacles to be performed. Your bank, in common with other banks, has pledged co operation with the Central Bank, and I think it not unreasonable to expect equal cooperation from that institution.

"The effect on the commercial banks of the banking legislation of the yeai will in the main be to lessen then earning power by the curtailment of their note circulation privileges and by the opeiation of interest-limitation features. Any move which tvould v futther curtail the" earning powei of our commeitial banks would :be highly unwise.. .That, our banks should be maintained in a sound position, both in respect of the character or then assets and of their earning power, is. a matter. of supreme importance to the country and particularly, I may say, to every depositor. Depositors in Our banks throughout the Dominion have a very direct, interest in the maintenance of a sound banking structure, and it is to be expected that their influence will make itself felt-to:that end.

"Now that we aie upon the subject of banks and banking in Canada, I might touch 'upon a ; few points particularly which I should like to bring to the attention, of, our own stockholders and depositors and'also of the whole Dominion. Such a" mass of evidence has been produced ■with, regard to banks during the past year that it js a question whethei or not the public, or our own stock-, holders, have found time to read it, or," if they did read it, whether or not they concentrated on the most essential points I should like, therefore, to present a few figures which can be understood, aud eairted away. 1, The total of assets under admwistiation by our chaitered banks is neaily thiee billions of dollars

2. In the banks of Canada there aie some 4,700,000 depositors, oui own bank having over a million.

3. Depositors received during last jeai some 37,000,000 dollars in inteiest

4. The interest which shareholders in the banks received was 12,000,000 dollars "I think we may therefore consider that this vast body of depositors, which outnumber the people who voted at the last General Election in Canada, aie vitally interested m the strengthening of our banks and'the' maintenance "of their earnings.. They may be considered as the preferred shareholders of the banks, whilst those who have supplied the capital of, the banks and who receive the.ir dividends only after the. 37,000,000. dollars to which I have referred have been paid, may be considered as the common shareholders. 1\

"In. addition to this, it must be borne in mind that no shareholder of; our chartered banks can receive one cent of his capital invested in shares imtil; all, the depositors have been paid in full. ,_ "Another matter which should be impressed upon the public is the nature of. the services, which the banks are perform-, ing. In a country as vast as this, with towns and-villages in remote districts, the value" of those services can hardly be estimated. , Within ' reasonable distance of nearly every point in the West where a farmer brings his-grain to a country ele.vator, he can get-his. cheque cashed, or make his'deposit, in a chartered bank, and he knows that- when he wants his money.and comes back to get it he will not find the bank door closed."