CENTRAL BANK

Evening Post, Volume CXIX, Issue 85, 10 April 1935, Page 11

CENTRAL BANK

OPENED IN CANADA

PRIVATE CAPITAL'

LIMITATION OX SHAKES

(From "The Post's" Representative.)

VANCOUVER, March 11,

The Central Bank of Canada opened its doors today, with headquarters in Ottawa and branches in the principal cities. There was no ceremony. The public took little, notice, as the bank will not deal with ordinary depositors or borrowers. The first Governor is Mr. Graham Ford Towers, aged 37, who was an inspector of the Royal Bank of Canada. The secretary of the Bank of England, Mr. J. A. Osborne, has been temporarily lent to the new institution. The initial capital of the Central Bank is £1,000,000, sold among 12,000 subscribers in 100,000 shares at £10 par value. It has seven directors, nominated by the Associated Chambers of Commerce and appointed by the shareholders. The bank took over today the gold reserves held by the Dominion Government and by the chartered banks. Gold held in the vaults of the Federal Treasury totalled £14,000,000. Gold handed over by the banks totalled £7,000,000, assumed on the nominal gold price of 20.67 dollars an ounce, although the price, in Canadian funds, today is 35.48 dollars. The banks entered a formal protest at.not receiving the current price of gold, but were overruled. The profit, over £4,000,000, goes to the Central Bank. With additional securities, the total assets will be about £44,000,000, which is approximately the obligation to the note issue. The bank's dividends are limited to 4J per cent. Shares are Umite'd to 50 per person. FUNCTIONS OF. INSTITUTION. The functions of the Central Bank include:— Regulation of internal credit. Regulation of foreign exchange. Mitigation of change in the level of production, trade,, prices, and employment, so far as may be possible within the scope of monetary policy and action. Rendering expert and impartial advice to the Government. Privately-owned, with a measure of Government control, the bank in its present status has not the support of Liberal or Progressive members of the House at Ottawa, who demand that it be publicly-owned* ■ In vievA of the anticipated victory of the Liberals at the forthcoming General Election, it will be interesting to see how far the Liberals will proceed with their policy when they return to power. Present control by the Government includes appointment by the Governor-General-in-Council of the Governor and Deputy Governor, and approval by the same source of the bank's bylaws and regulations. The clients of the bank will be the Dominion' and Provincial Governments, the chartered banks, and the savings banks, except on those occasions when the bank is engaged in open market operations. It will control the volume of currency and credit by adjusting the re-discount rate and by regular market operations. INFLUENCE IN FINANCE. The Deputy Minister of Finance at Ottawa, Mr. W. C. Clark, who is known as the godfather of the bank, says the private or members' banks will be normally dependent on it for surplus funds, needed in financing heavy seasonal requirements, or the later stages of a period of business expansion. As the banks require to expand their cash reserves to take care of these requirements, they may borrbw from the.Central Bank by selling to it or rediscounting with it highgrade securities or commercial bills defined by the Act as eligible for Central Bank investment. By raising the rate of rediscount charged for such accommodation, the Central Bank will be able to discourage borrowing by member banks, and conversely, by lowering the rate to encourage it. Canada has not a developed money market, with a highly-sensitive structure of interest rates, as in London and New York, and where operations in Montreal and Toronto would not be influenced so greatly as they would by by contemporaneous conditions in the New York money market. A definite raising of the Central Bank rate would have an important psychological effect on the market. This, coupled with advice and admonition on the part of the Ceneral Bank, should give it considerable leverage, especially in preventing a speculative boom from going to inordinate lengths. Should the bank decide, in the prevailing depression, to stimulate expansion, it may buy, in the open market, Government securities and commercial bills of certain class and maturity. The new notes, appearing today for the first time, contain portraits of the King, the" Queen, the Prince of Wales, the Princess Royal, Princess Elizabeth, Duke of York, Duke of Gloucester, Sir John A. Mac Donald, first Prime Minister of Confederate Canada, and Sir Wilfred Laurier. Ten years from today Central Bank notes will be the only ones in circulation. It is anticipated that a Federal Loan Council will be set up to harmonise borrowing by the provinc.es. Such an institution is already strongly demanded. two Venizelist Senators, M. Boulakis and M. Georgiaidakis, . and their families. The failure of the rebellion is due to the fact that it had no national basis or justification, but was inspired entirely by personal ambitions. It had the great mass of public opinion against it. The majority of intelligent Venizelists are horrified at their erstwhile idol's implication. General Kamenos, who was the Commander-in-Chief of the Greek rebels in" Macedonia, and his staff of three colonels, three lieutenantcolonels, and 11 junior officers, and Colonel Xidis, whom the Greek rebels set up as Governor-General of Macedonia, all of whom took refuge in Bulgaria, will be sent to Karlovo and kr>pt in barracks under strict supervision. The Greek Government has asked for the seizure and return of the 60,000,000 drachmas carried off by General Kamenos from banks in Macedonia. General Kondylis, Minister of War, who crushed the revolt in Macedonia, returned to a triumphal procession through the streets of Athens. His closed limousine was almost smothered with laurel wreaths. Other laurelcovered cars followed. The end of this triumphal progress was a tall apartment-house where, rather as an anti-climax to so much pageantry, General Kondylis climbed four flights of stairs to the little flat where M. Tsaldaris lives, with the Eastern Telegraph Company as one of his neighbours. The Premier and Genera! Kondylis appeared together at a window and were hailed by the crowds filling the street below. There were the usual happily phrased speeches which did.not carry far, and then the crowd trooped back to the centre of the city to spend tho nipht in more merrymaking.