27. Bank Circulation Redemption Fund (Sections 64-69)

Each bank must maintain with the Minister of Finance a deposit equal to at least five per cent of the average amount of its notes in circulation during the year. These deposits are known as the Bank Circulation Redemption Fund, and are held only for the purpose of redeeming the notes of any banks which fail to redeem their own issues in specie or Dominion notes. For all notes so redeemed the fund has the same rights against the estate of the failed bank as any other holder. Interest at three per cent is allowed by the Government on the fund. The amount at credit of the banks in this fund is to be adjusted on the first of July of each year, in such a way as to make the amount at credit of each bank equal to five per cent of its average note circulation during the preceding twelve months. In calculating the average circulation the average amount at the credit of the bank in the central gold reserves is to be deducted.

If a bank suspends payment of its notes, interest accrues thereon at five per cent per annum1 until the day named for their redemption, of which public notice is given by the liquidator, after which interest on the notes outstanding ceases. If, after the expiration of two months from the date of suspension, the liquidator has not funds to redeem the notes, the Minister of Finance may redeem them out of the Circulation Fund. If payment made from the fund exceeds the contributions of the failed bank, the other banks must recoup the fund pro rata for the amount of the excess, recoveries from the liquidation of the failed bank being, of course, distributed in like proportion. For this purpose, however, no bank shall be required to pay in any one year more than one per cent of the average amount of its notes in circulation.

1 The provisions contained in Sections 64-69 were added to the Bank Act of 1890, at the suggestion of the banks themselves. The rate was changed from six per cent to five per cent in the revision of 1900. XVI - 4

In the winding-up of a bank, if satisfactory arrangements are made for the redemption of the outstanding notes, with interest, the Treasury Board may return the amount to the credit of the bank or such part as may seem expedient.

The Treasury Board will make all necessary rules and regulations as to the management of the Circulation Fund.

The Minister of Finance may take legal action, if necessary, to enforce payment of any sum due by a bank to the fund.

28. Redemption At Par (Sections 70-71)

Banks are obliged to make arrangements to ensure the circulation at par of their notes in any and every part of Canada, and must maintain offices or redemption agencies for the payment of notes at Toronto, Montreal, Halifax, St. John, Winnipeg, Victoria, Char-lottetown, Regina and Calgary, and at such other places as are from time to time designated by the Treasury Board. Altho the notes of a bank are al-most invariably payable only at its head office, they must be accepted at par at any of the branches, agencies or offices of the bank.

29. Payments In Dominion Notes (Section 72)

In making a payment a bank must, if required, pay in Dominion notes (legal tender) in denominations of $1, $2 and $5, not, however, exceeding $100 in any one payment. No payment in Dominion notes or notes of the bank shall be made in unclean or torn bills, and the Treasury Board has the right to make regulations regarding the disinfection and sterilization of bank and Dominion notes by the banks.

30. Signing of bills, etc. (Sections 73-74). - Bills or notes issued by a bank are binding on a bank, tho not sealed with the corporate seal of the bank. The directors may deputize an officer of the bank to sign notes intended for circulation.

If both the signatures on a bank note are impressed by machinery, at least one name, together with a distinguishing device and number, must be impressed or engraved, under authority of the bank, after the notes have been received from the engraver or printer.

31. Counterfeit Notes (Section 75)

Officers receiving public moneys and bank officers must stamp or write on fraudulent bank notes or Dominion notes such words as "Counterfeit," "Altered," or "Worthless," as the case may be. If, however, a bill is wrongly stamped it must be redeemed at its face value by the officer at fault.

Review

What are the leading features of the Bank Act of 1913? Give the argument for and against an audit of the banks by the Dominion Government.

State the procedure in incorporating a new bank. What information should be contained in the auditor's report? What provision is made for note issue in British colonies? Are banks obliged to keep their notes circulating at par?