The Wanganui Herald. [PUBLISHED DAILY.] SATURDAY, JULY 1, 1911. CANADIAN BANKING.

Wanganui Herald, Volume XXXXVI, Issue 13416, 1 July 1911, Page 4

The Wanganui Herald. [PUBLISHED DAILY.] SATURDAY, JULY 1, 1911. CANADIAN BANKING.

Home papers just to hand contain a report of an interesting- account of Canadian banking given by Mr F. W. Taylor, London manager of the Bank of Montreal, to the colonial section of the Royal Society of Arts in London. Canadian banking has prospered on very distinctive lines, and its history is well worthy the study of all interested in monetary and financial affairs. It is regulated under an Act passed in 1871, four years after Confederation, unifying the rights and privileges of the then existing banks. Since then charters have been re-granted every ten years, and revision likewise takes place at ten-year intervals. In founding a bank respectable men of substance, who are required to become important shareholders, must agree to act as provisional directors, and must secure from the Parliamentary Committee on Banking and Finance a favourable report upon their project before they can proceed to actual operations. The committee must satisfy itself as to the enterprise. The capital must not be less than £ 100,000, of which half must bo paid up within a year . When that is done a meeting of shareholders may be called and the permanent directors elected, the latter then applying to the Treasury Board for permission to issue notes and commence business. The permission is granted if the requirements of the law have been fully satisfied. All banks can issue notes of 5 dollars (£1), or multiples thereof, to the extent of their paid-up capital, free of note tax or specific security, such notes being a prior lien against the total assets, and also against a liability on the part of the shareholders up to twice the amount of the subscribed capital. Note-holders are further protected by the deposit with the Government of 5 per cent; of the average circulation of each bank, the funds form--64 thereby constituting a common insurance. Mr Taylor says that, though there had been failures since the Act was passed, not once has the fund so Ireated been resorted to. The notes, with silver and copper coins, constitute the currency of the country. In many parts of the Dominion a (gold piece is looked upon with a certain amount of curiosity, almost amounting to suspicion. The Dominion Government, over and above this, issue notes in denominations of one, two, and four* dollars, and of 50 dollars (.£10) and upwards. In 1908 the Government notes outstanding amounted t to £14,000,000, the main portion of which j was in denominations of £IOO and upwards, practically being held by bankers in their reserves. The bank-notes issued |

amounted to .£31,000,000. Dominion Government notes are secured by the holding of gold to the minimum of 15 per cent, of the actual circulation. Hanks may issue antes in excess of their capital during the usual season for moving the crops—that is, from October 1 to January 31—to nu extent not exceeding 1.1 per cent. of their combined unimpaired paid-up capital and reserve. On the excess, interest at the rate of 5 per cent, per annum must ho paid to the Government. Some of the leading Canadian banks lend largely on call and to the Slock Exchanges of London and New York, at rates usually not above the rates paid in Canada cn deposits, and sometimes lower, the object being, of course, to keep a portion of the bank reserves employed. They do this because in such groat markets as those of London and Now York money can be called in without causing the disturbance which such action would cause in Canada. The rates of dividend are lower in Canada than in Ureal Britain, partly because the bank.sailer more numerous losses than in older countries, and partly because the banks hold few deposits on which interest is not paid. Perhaps ono of the most interesting features of the practice of the banks in giving assistance to trade is by means of ‘'warehouse" receipts,” which was carefully explained by Mr Taylor. A bank may lend not only to individuals on the security of goods, wares, or merchandise, against hypothecation of warehouse receipts and bills of lading, representing goods in the custody of a third person, they may also advance in the same manner to the actual possessor of the goods on his own receipt. Such receipts acquire prior alienable rights in the bank, which acquires a direct, unregistered lien, and production and trad: are thereby greatly stimulated. Mr Taylor adds that ‘‘in the Dominion it is u sine qua non that borrowers furnish their bankers with detailed information regarding their affairs, supplemented by a balancesheet and copies of profit and loss accounts at least once a year."