(14) Currency and coinage. (15) Banking, incorporation of banks and the issue of paper money. (16) Saving Banks. (18) Bills of exchange and promissory notes. (20) Legal tender. "An Act respecting Banks" (31 Vict. c. 11) passed in the session of 1867-1868 was the earliest statute on the subject of banking enacted under this authority. It was merely a temporary measure, to expire at the end of the first session of Parliament after the 1st of January, 1870. It extended to the whole Dominion the powers of banks previously incorporated by any of the four provinces. In other respects it was mainly a re-enactment for the Dominion of the general banking legislation previously in force in the Province of Canada. Chapter 46 of the same session, being "an Act to enable Banks in any part of Canada to use notes of the Dominion instead of issuing notes of their own," was likewise an extension to the Dominion of the Provincial Note Act of 1866. The latter act had authorized the government under the authority of the Governor-in-Council to issue not more than $8,000,000 of provincial notes payable on demand in specie at Toronto or Montreal, as they might be dated, and made such notes legal tender at places other than the offices in these cities. It also contained provisions offering inducements to the existing banks to surrender their note circulation, and to take up the issue and redemption of provincial notes, $3,000,000 of the above note issue being authorized for this purpose. In the event, however, the chartered banks, with the exception of the Bank of Montreal, proved unwilling to reduce their resources by the retirement of their notes from circulation. This bank, owing to the fact that the government was largely indebted to it, was able advantageously to withdraw its notes from circulation, replace them by notes of the province, and set off the amount of such notes against the government's indebtedness. By the act of 1868 the $8,000,000 worth of provincial notes prepared in 1866, and the $5,000,000 thereof in circulation in 1868, were declared to be Dominion notes redeemable at Montreal, Toronto, Halifax and St. John. In 1869 a number of bank charters which were about to expire were extended until the end of the first session of Parliament next after the 1st of January, 1870. By these measures time was gained to consider the important problem of creating one uniform system of currency and banking for the Dominion, applicable to all banks, both those to be incorporated in the future, and those which had originally come into existence or were doing business under charters granted by the Provinces of Canada, Nova Scotia and New Brunswick or, (as in the case of the Bank of British North America) under Royal charter. Discussion preliminary to the Act of 1870. In the interval between 1867 and 1870 the question of the future banking policy of the Dominion was much discussed, the chief interest being concentrated on the question of the character of the note issue. A select committee of the Senate in 1868 made a report deprecating the taking possession of the note issue by the Government, but recommending the issue of a paper currency by the banks based on the deposit of government securities, if the financial requirements of the government demanded such an expedient. The representatives of the bankers were heard by a select committee of the House of Commons in the same year, and the case against a bond secured circulation was fully argued. Nevertheless in 1869 the Hon. John Rose, Minister of Finance, proposed a banking scheme upon the model of the National Banking System of the United States, the unsecured circulation of the banks to be gradually retired after 1871. The measure was, however, temporarily withdrawn in view of the opposition which displayed itself, and before the next session of Parliament Mr. Rose had resigned, and Sir Francis Hincks had become Minister of Finance. After a conference with the leading bankers, the new Minister on the 1st of March, 1870, brought down to the House of Commons a series of resolutions on banking and currency, which emphasized the need for a uniform banking law, and contained a number of recommendations. The most significant features of the recommendations were the issue of bank notes not secured by deposit of securities, the necessity for the security afforded by a large paid up capital, the surrender by the banks of the right to issue notes under $4, the management of the circula tion of Dominion notes directly by the government instead of by the Bank of Montreal and an increase in the issue of such notes and the holding by the banks of 50 per cent. of their cash reserves in Dominion notes. Bank Act of 1870. The Statute 33 Vict. c. 11, an "Act respecting Banks and Banking" 1870, embodied the resolutions of Sir Francis Hincks. It enacted that in any act establishing a new bank or renewing the charter of any existing bank a number of restrictions should be incorporated, certain exceptions being granted in the case of the Bank of British North America and La Banque du Peuple in order to conform to the peculiarities of their respective charters. These provisions were practically re-enacted by the Act of 1871 presently to be referred to. The monopoly of issuing notes for circulation was assured to the banks by imposing on private or unauthorized issue a fine of $400. Previous legislation in conflict with the new act was repealed and the "Act respecting Banks" of 1868, was extended to the end of the session of 1872. The act also contained provisions for the extension by letters patent of the charters of existing banks until the end of the session of Parliament next after the 1st of January, 1881, and no longer, and subject to the other provisions of the act. Bank Act of 1871. Only in one instance, however, was a charter renewed under the Act of 1870, bankers having expressed themselves in favour of having parliamentary charters. The government therefore determined to embody in one general banking act, not only the provisions of the Act of 1870, but also the general provisions respecting what might be termed the internal regulation of banks. The statute drafted in accordance with this purpose was passed with very slight discussion in either house, and on the 14th of April, 1871, received the royal assent. This statute was the first general law under which the banks really operated, and may be regarded as practically the first Bank Act of the Dominion. By this act (34 Vict. c. 5) the charters or acts of incorporation, and amendments thereof, of the several banks enumerated in the schedule were continued as to their incorporation, the amount of their capital stock, the amount of each share of such stock, and the chief place of business of each bank, respectively, until the 1st of July, 1881, subject to the right of any such bank to increase its capital stock in the manner provided for by the act. In other respects the charters became subject to the provisions of the act from the 1st of July, 1871, until the end of the then next session of Parliament, after which, it was provided, the act should form and be the charters of the said banks respectively until the 1st of July, 1881, and the provisions thereof should apply to each of them respectively, and their charters as existing at the time of the act should be repealed, except only as to the matters for which the said charters were as above provided continued until the said 1st of July, 1881. It was also enacted that the provisions of the act should apply to any bank to be thereafter incorporated, (either at the then present session or at any future session), whether the act should be specially mentioned in its act of incorporation or not. Any act incorporating any bank thereafter was to declare the capital stock of such new bank, the amount of each share, the name of the bank, and the place where its chief office should be situate. The Acts of 1867 and 1870 were also repealed. A large part of the act was devoted to the re-enactment and consolidation of legislation previously in force. One important change was the provision requiring a bank, before issuing notes or commencing the business of banking, to have $500,000 of capital stock bonâ fide subscribed and $100,000 bonâ fide paid up, a further sum of $100,000 to be paid up within two years from the commencement of business (sec. 7). Another important change was the authority given to shareholders, at any annual general meeting or any general meeting specially called for the purpose, to increase the capital of the bank. The bank was empowered to open branches or agencies, and offices of discount and deposit, and transact business at any place or places in the Dominion. Of the other provisions of the act which were made generally applicable to the banks as above stated and which illustrate the policy of the act, particularly as regards the security afforded to the public, the more important may be summarized as follows: Sec. 8. Amount of notes intended for circulation issued by the bank and outstanding at any time not to exceed the amount of the bank's unimpaired paid-up capital, and no note to be for less than $4. Sec. 9. Notes of the bank to be received in payment at par at any of its offices, but the bank not to be bound to redeem them in specie or Dominion notes at any place other than where they are made payable, the chief seat of business of the bank always to be the place or one of the places of payment. Sec. 10. Paid up capital not to be impaired by any dividend or bonus; directors knowingly and wilfully concurring in any impairment to be individually liable for the amount thereof as a debt due to the bank. Loss of paid-up capital to be made good by calls upon unpaid stock, such loss and calls to be mentioned in the next return to the government. All net profits to be applied to make good loss, if capital impaired. Sec. 11. No division of profits by way of dividends or bonus, or both, or in any way, exceeding 8 per cent. per annum to be paid unless, after paying the same and deducting all bad and doubtful debts, the bank shall have a rest or reserve fund equal to at least 20 per cent. of its paid-up capital. Sec. 12. Certified lists of shareholders with their respective additions, residences, and holdings of stock, to be laid before Parliament annually. Sec. 13. Monthly returns of assets and liabilities to be made to the government in the form prescribed by the act, signed by the chief officers of the bank. Sec. 14. The bank to hold, as nearly as may be practical, one-half, and never less than one-third, of its cash reserve in Dominion notes. Sec. 15. A bank to which this act is applicable to be exempt from the tax on the average amount of its notes in circulation and from the obligation to hold any of its capital in government or other debentures. Sec. 27. Each shareholder to have one vote for each share held by him for at least 30 days before the time of shareholders' meeting. Sec. 28. Shareholders to have power to regulate by by-law certain matters incident to the management and administration of the bank, including the qualification and the number of the directors, (to be not less than 5 nor more than 10), and the quorum thereof, the time and manner of electing directors and filling |