The conditions governing loans to municipalities, school districts and other public bodies differ in the various provinces and also in the case of cities incorporated under special charter. As the laws are frequently changing no general procedure can be formulated. The head office of each bank generally issues specific instructions and forms regarding these loans to their branches in the several provinces.

Generally speaking, municipalities, on resolution of their councillors, are authorized to anticipate taxes by-borrowing up to a certain percentage of their annual assessment. These borrowings must usually be retired by the taxes as they are paid in. The loans are, and should be, short in term. When, however, one year's borrowings overlap another the advances should be kept distinct. Such loans, when supported by authentic copies of the resolution of the council, may be considered legitimate banking undertakings.

Frequently a municipality is authorized by a bylaw, voted on by its ratepayers, to borrow money for some specific purpose, such as water works, drains and the like. It is advances of this description which form one of the objectionable features of municipal accounts. As a rule, municipalities postpone any definite arrangement as to the disposition of the bonds until the construction, for which the issue is authorized, has been completed. In the meantime, they look to their banks for advances from time to time until the work is fully accomplished. This feature in itself is not objectionable if the municipality takes immediate steps to dispose of its bonds on the completion of the work. Unfortunately, this is seldom the case. Financial committees sometimes number among their members one or more amateur financiers, who not only have exalted ideas of the market value of the bonds in question, but also overestimate their own ability in judging market conditions. The result is that the time in their opinion is rarely opportune for making a sale of the bonds, and the bank is confronted with the necessity of continuing to carry an unsatisfactory loan or enforcing a sale of the bonds, both undesirable alternatives. The proper method to follow in making such advances is to see that, at the inception of the loan, a definite arrangement is made as to the disposition of the bonds, irrespective of market or other conditions.