The banking system of Canada is in marked contrast to the highly The Chief Banking Systems of the World. 205 centralized systems of France and Germany on the one hand, and to the excessively decentralized system of the United States on the other. In 1896 it consisted of thirty-eight large joint-stock banks, with an aggregate capital of $62,196,391, and with four hundred and eighty-three branch establishments located in two hundred and seventy-three different localities. The smallest capital possessed by any of these banks was $48,666, that being the capital of the Summerside Bank of Prince Edward Island, and the largest was that of the Bank of Montreal, amounting to $12,000,000. The average capital of the large banks is nearly $2,000,000, being about nine times as great as that of the average national bank of the United States. No one of these institutions occupies a position comparable to that of the Imperial Bank of Germany, the Bank of France, or. the Bank of England. A considerable number of them, on the contrary, stand upon a footing of equality.

All of these large banks enjoy the right of note issue under regulations which render the noteholders absolutely safe and at the same time permit the greatest possible elasticity. Each is permitted to issue notes to the amount of its paid-up capital. These are redeemable on demand in coin at the chief commercial centres of each of the provinces and at such other places as the central government may designate, and the banks freely redeem the notes of each other. Noteholders have a first lien upon the assets of the bank, and the stockholders are held liable for unpaid debts to the amount of their capital. The notes of a bank,which has failed draw interest at the rate of six per cent from the date of its refusal to redeem them on demand. This regulation makes them good securities for investment, and, on this account, readily salable to other banking institutions or to private persons, and prevents their depreciation in the interval during which the affairs of the bank are being settled. In case the resources of the bank are insufficient to redeem all its outstanding notes, a fund of cash, raised by a levy upon all the banks, and amounting to five per cent of the total amount of notes in circulation, is on deposit with the government at Ottawa for the purpose of meeting any deficit. Any depletion of this fund is made good by a new assessment, which, however, cannot at any one time exceed in amount one per cent of the aggregate circulation. All the notes of a bank which has failed may be paid from this fund, and the other banks remunerated when its resources have been turned into cash.

Depositors do not enjoy the degree of protection from the Dominion legislature that is thought desirable in the United States and some other countries. There is no official inspection of banks in Canada and no legislation pertaining to reserves or the character of investments. Since the act of 1890 no new bank is permitted to organize with a subscribed capital of less than $250,000. There is no provision in this act, however, regulating the proportion between the capital and the debts of a bank. Depositors are equally interested with noteholders in the regulation imposing liability upon the stockholders for the debts of the bank to the amount of their stock. They also derive benefit from the regulations pertaining to the safety fund, in so far as these ensure mutual watchfulness and sound management. Since most of the large banks were founded by the provincial legislatures before the Dominion government took this matter in hand, their charters are not uniform and some of them contain regulations which provide additional protection to depositors. For example, the charter of the Bank of The Chief Banking Systems of the World. 207

Montreal, one of the oldest and largest of the Canadian institutions, forbids the contracting of debts by the bank to an amount in excess of treble the capital stock exclusive of the deposits, and forbids loaning upon real estate or mortgages. Many of the large banks maintain a system of inspection and supervision which is said to be as efficient as any conducted by public officials.

The Canadian banks are closely connected with the financial system of the United States through agencies conducted by representatives in the city of New York. The foreign exchange of the country is negotiated through that centre, and in various ways the connection between the two systems is of mutual advantage. Canadian banks also maintain similar connections with England through agencies established in the city of London.

According to the statement of the condition of the banks made April 30, 1900, the total amount of deposits at that time was $100,500,000, and the amount of notes in circulation $43,908,432. The gold circulation was estimated at the same date at $21,000,000, and that of subsidiary silver at $5,000,000. In addition there were in use on the same date Dominion notes, redeemable on demand in gold, to the amount of $24,600,000, a large proportion of which constitutes a part of the cash reserves of the banks.