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BY D. R. WILKIE.
(General Manager Imperial Bank, Toronto.)
THE chartered banks of
the Dominion of Canada are incorporated under 53 Victoria chapter 31,
which came into force on the 1st July, 1891. The capital of any bank
thereafter incorporated is fixed at a minimum of $500,000, with shares
valued at $100 each.
Before commencing business $250,000 must be
paid up in cash to the Minister of Finance, within one year of
incorporation. Shareholders have power to fix within certain limits the
number, qualification and remuneration of directors, and the maximum
amount of loans and discounts which may be afforded directors, and other
persons and companies. In the event of insolvency each shareholder is
liable for the debts of the bank to an amount equal to the par value of
the shares held by him, in addition to any amount not paid up on such
shares. Directors are elected annually. Their stock qualification is
fixed at a minimum of $3,000 to $5,000 dependent upon the amount of
capital of the bank, but the minimum may be increased by a resolution of
the shareholders. The capital stock may he increased from time to time
subject to the approval of the Treasury Board of the Federal Government,
and the additional capital carries with it the same privileges
concerning note issues as does the original capital. Capital stock may
he reduced by resolution of share-holders to an amount not below
$250,000, with the consent of the Treasury Board. Shareholders, before
being permitted to transfer their stock, may be compelled to liquidate
any liability or debt to the bank which exceeds the value of their
remaining shares. Purchasing, dealing in, or lending money upon the
security or pledge of its own stock, or of the stock of any batik is
strictly forbidden under penalty. Executors and trustees, where the
nature of the trust is expressed, are not personally liable as
shareholders for double liability upon shares standing in their name,
but the estate and funds in their hands are liable. Dividends are
limited to eight per cent. until the rest equals thirty per cent, of the
paid-up capital, but the capital must not in any event he impaired by
payment of a dividend or bonus. A regulation is in force by which banks
are required to hold at least forty per cent., and as nearly as possible
fifty per cent., of their cash reserves in government notes upon which
no interest is paid.
The three objects aimed at in authorizing
the issue of bank-notes are safety, convertibility and elasticity, the
whole without monopoly. Under the Act of 1880 the note circulation of
each bank was limited to the amount of the unimpaired paid-tip capital,
and became in case of insolvency, a first charge upon the assets of the
institution, and, if necessary, upon the double liability of
shareholders. This worked well. Not a dollar was lost, but the basis of
security has been further strengthened by establishing a ''Bank
Circulation Redemption Fund," the amount payable for each bank to the
fund to be adjusted annually, and to be, in all, five per cent. of the
average circulation of such bank for the previous twelve months.
Beginning in July, 1891, the fund, in July, 1897, amounted to
$1,859,936, oil average circulation of $32,062,710, and varies, of
course, from year. to year. The fund is held by the Finance Department
at the credit of each bank contributing thereto, and bears interest at
three per cent. per annum. The Act of 1891 ensures the circulation at
par in every part of Canada of all notes issued or re-issued by a bank
and intended for circulation, the effect being that notes issued by
banks of one province are accepted without discount in the other
provinces of the Dominion. So successful are the provisions for
elasticity of note issues, and so well has the system worked, that
during the movement of crops with calls from all parts of the Dominion
for money, and more money, the Canadian banks are not only able to
supply all legitimate demands without advancing the rate of interest by
a fraction of one per cent., but are also able to lend very large
amounts to the grain dealers of the United States. The banks have power
to advance on bills of lading and warehouse receipts; to lend to
manufacturers upon time security of goods; to lend to the purchaser or
shipper of products of the field, forest, mine and waters; upon live
stock and dead stock, and products thereof. Those engaged in legitimate
business call reasonably count oil upon satisfactory security. The form
of pledge is short, and the transaction itself does not require public,
or, in fact, any registration, the object being to aid business to a
reasonable extent on security and thus the operations of the Canadian
banks are closely identified with the business development of Canada. |
