It is apparent that the branch system not only gathers up money thruout the country, but distributes and varies the risk of the bank's investments. It does more than this, it distributes the risk of the deposits which, at times, is a very real risk. A run on a solvent bank is always more or less local in character and, tho quite capable of wrecking an individual bank, would not seriously affect the standing of a branch banking system. Not only would the head office be able to send ample funds to pay off every deposit if necessary, but the branch itself would be in a position to allay the run by its ability to pay out its own notes; these would be taken readily by the depositors and, as a rule, assistance from the head office would not be required. Nothing will stop a run of this kind quicker than an apparent willingness and ability to meet all demands. Frequently, in such cases, the majority of the deposits are returned to the bank if it is willing to take them. Depositors who can be stampeded in this manner by a chance word or rumor are not desirable, and the refusal to reopen a few of these accounts has a very salutary effect on a community. So unreasonable are panics of this nature that people have been known to withdraw money from a small city branch and deposit it in the main office of the same bank further down the street, but occupying a more pretentious building. Such panics as these are disagreeable, but do not seriously affect a bank as a whole, and fortunately they seldom happen.
Even a serious loss by way of a bad loan would not affect the security of a branch depositor; no matter how small the branch, the depositor shares in the general security of the assets of the whole bank. The failure of a large customer might easily force a purely local bank to close its doors, but under the branch system the loss would be spread over the earnings of the whole system.
Altho the keenest competition exists among the banks in obtaining business at their various branches, and little or no intercourse occurs between the general managers in ordinary times, they are, as trained bankers, naturally in accord in interpreting the first signs of trouble on the financial horizon, and either in their several annual addresses or thru the press warn the public to retrench and prepare for the storm. All the annual reports of the banks issued at the end of 1906 and beginning of 1907 contained, in the addresses of the several general managers, serious warnings of troublesome times ahead, which unhappily materialized in October, 1907. Banks made themselves very unpopular in the early part of 1907 by their insistence on retrenchment in all lines of business activity, but their wisdom was fully justified by the result - Canada rode thru the storm inconvenienced but unscathed.
Should a sudden emergency ever arise a few hours would suffice to bring the general managers of the twenty-five banks to Montreal or Toronto. Their united counsel and experience would go far to ward off the anticipated trouble. In a few hours, if necessary, every branch in Canada from Dawson City to Halifax would act in unison. With a system capable of such control a general crisis or panic would be almost impossible.
Consider, too, the personnel of the general managers, who are men trained from their youth up in their profession, as only the branch system can train. In their early years, moving from branch to branch thru-out Canada, they became thoroly versed in local customs and environments, and in many cases they gained experience in foreign branches in England, the United States, and elsewhere. As accountants and managers of large city branches they obtained a broad knowledge of national trade and finance until, as general managers, they are found not only directing the administration of their numerous branches, but also digesting and interpreting the reports of conditions received from the branches, scattered thru-out the length and breadth of Canada. There are few things connected with the life of Canada that a banker can afford to leave unstudied. The weekly reports or news letters received from the branch managers deal with every variety of subject, from the price of staples to the death of a leading citizen. As a result, the bankers know more of the general conditions of Canada as a whole than anyone else. It has been said that the files of one of the larger banks contain more valuable and accurate information than can be found in any newspaper office.