The savings bank ledger is a book having an affinity with the current account ledger. The savings bank department, as at present constituted and run, is a comparatively recent development in Canadian banking. Twenty-five years ago the great bulk of the bank deposits was contained in the current accounts and deposit receipts; the savings department was almost unknown.

Savings Departments And Deposit Receipts Compared

Under the deposit receipt system, when a bank takes a sum of money at interest from a depositor it gives him a certificate or receipt in which the receipt of the money is acknowledged, and a contract entered into by which it agrees to account to him for the principal sum, with interest at a specified rate, if the money remain not less than three months, the depositor to give the bank ten or fifteen days' notice of withdrawal, on which notice interest to cease. The receipts are stamped, "Not negotiable," or "Not transferable." Several features in connection with the deposit receipts were highly advantageous for the banks.

In the first place, the bank contracted, not to pay the principal in cash to the depositor, but to account to him for it. This circumstance, taken with the non-negotiability of the document, gave it a better opportunity to enforce claims of one kind or another against a deposit receipt-holder than it has against the owner of a savings account balance. Then, the fact that the depositor must come in person to withdraw his money, made the deposit less liable to capture by another bank. The stipulation that the deposit should remain three months to entitle it to interest was more advantageous for the bank than the present savings bank stipulation that the money must remain one month in order to draw interest.

The interest on money left on deposit receipt runs at simple interest. The banks compound interest on their savings bank balances twice a year. While some few deposit receipts were brought in, under the old system, every three months for the addition of the interest to the principal, the most of them ran for six months, and a considerable number for over a year.

Some few were allowed by the holders to run for several years at simple interest. The average term of a deposit receipt would probably be somewhere between nine months and a year.

The Minimum Balance

With regard to the notice clause, though notice was not exacted, it was customary to deduct the ten or fifteen days' interest at withdrawal. But this last is fairly offset by the minimum balance feature of the savings bank department. This rule, when strictly enforced, means practically that the interest on a new deposit made by a depositor commences to run from the beginning of the following month; and, similarly, on money withdrawn through the month, he loses his interest from the first of that month.

In some other respects the banks have been greatly benefited by the more universal adoption of the savings departments. They are unquestionably far more convenient for depositors than were the deposit receipts; and it is reasonably certain that because of the change bank deposits have grown more rapidly than they otherwise would. Had there been no change in this respect it is pretty sure that the loan companies, trust companies, and the Dominion Government savings banks would have received a part of the gains in deposits made by the chartered banks, and the power of the latter to facilitate the commercial and industrial development of the country would have been less than it now is.

The deposit receipts have not been abolished altogether. The theory of the savings accounts is that they provide wage-earners and people of moderate means with facilities for saving. They were not meant for capitalists and rich people. There is, therefore, the semblance of an effort made to have the savings department limited to moderate balances.