the commissariat officers, vouchers for pensions, and other miscellaneous bills coming from all parts of the province. The larger importers in Montreal acted also as bankers for the wholesale men in the upper province, receiving deposits, making payments to order, and not infrequently advancing loans or credits to be met later on by produce, exchanges, or cash, though we find very little of the latter passing." (The Early History of Canadian Banking, pp. 6 and 7.)

This primitive method of exchange was never perfect and was soon outgrown. Complaints were early made of the power which these banker merchants obtained over the prices of the farmers' products and of the disadvantages under which government operations, particularly of a military character, were placed as a result of these restrictions. The representatives of the English government in Canada early proposed means of freeing the settlers and the public officials from their dependence upon the merchants. These took the form either of paper money or banking expedients, but none of them were adopted until the declaration of war between the United States and England in 1812.

During this period there were issued in Canada a species of paper money known as army bills. The quantity issued was sufficient to provide for the most pressing currency needs of the provinces, and the conditions under which these issues were made were such as to prevent their serious depreciation. The advantages which came from the circulation of these notes and the scarcity of currency which succeeded their retirement were chiefly responsible for the success of the banking propositions which were made as a remedy for the financial difficulties of the time.

3. The first banks.-In all the provinces requests were made for bank charters at a comparatively early period, but the first one which was actually granted was in the province of Upper Canada and led to the establishment

of a chartered bank in that province in the year 1817. Previous to 1825 five banks in all were chartered in the four provinces; three in Lower Canada, and one each in Upper Canada and New Brunswick. Two private institutions were also established, one in Upper Canada and one in Nova Scotia. These latter institutions were shortlived and the subsequent development of banking in Canada was based upon the five chartered institutions. The provisions of these early charters are, therefore, basal and must be briefly described.

For the three banks in Lower Canada the following charter provisions* were typical:

(1) Charters were to continue for ten years.

(2) The directors were to be British subjects.

(3) Dividends were to be declared as often as onehalf yearly, but only when profits were earned. In paying dividends no encroachment should be made upon the capital. Directors were obliged to submit a clear statement of the bank's position to the share-holders at the annual meeting.

(4) Banks might receive deposits, deal in bills of exchange, discount notes, buy silver coin, bullion, etc., but might not engage in any business other than banking.

(5) Banks could not lend money directly upon real property; they could, however, take such property as further security for loans already made. They were not permitted to lend money to a foreign country.

(6) They were permitted to issue notes to circulate as money, but no limit upon this right, other than that placed upon their general obligations, was fixed.

(7) The government might require at any time, for the protection of the public, a statement under oath of the position of the bank.

*These were taken from Walker's “Banking in Canada,” pp. 428 and 429.

(8) Tranfers of shares in the bank were not to be valid unless registered in the stock-book of the bank, and the bank was given a prior lien on the stock for ordinary debts due to the holder.

(9) The total liabilities were not to exceed three times the capital stock actually paid in, and directors were personally liable if they permitted such excess.

(10) Any director might save himself by publicly protesting within eight days after the transactions causing the excess took place.

(11) The share-holders were exempt from any liability except that of payment for the stock for which they had subscribed, with a penalty of five per cent. for non-payment after instalments matured.

(12) Voting by shareholders was not in exact proportion to shares held, the number of votes diminishing by scale as the holdings increased, so that while one share gave one vote, ten shares gave only five, and thirty shares only ten; no holding gave more than twenty votes.

In the nature of its charter the Bank of Upper Canada did not differ materially from those of the lower province. One essential difference was the fact that the government was permitted to subscribe for 2000 shares of the stock of this bank and was allowed to name four of the fifteen directors. Provision was made in the charter of this bank also for periodical instead of occasional reports to the government, one being required each year.

It is claimed by Professor Shortt that the charters of these early banks were closely modelled after that of the Second Bank of the United States rather than after those of the Scotch banks, as has been frequently asserted. They certainly bear more similarity to the former than to the latter, and on account of the close relations which existed between the two countries it is perfectly natural that they

should have copied after their nearer neighbor whose economic conditions so closely resembled their own.

Between the years 1825 and 1837, as the need for banking institutions developed, other charters were granted, modelled upon those already described. Five banks in all were chartered in the province of New Brunswick, one in Nova Scotia, two each in Upper and Lower Canada, and one, the Bank of British North America, was chartered in England with authority to do business in all the provinces. The only peculiarities worth mentioning in the charter provisions of these new banks are indicated in the fact that the Bank of Nova Scotia introduced into Canada the principle of double liability for stockholders, that the Bank of British North America was not permitted to issue notes below the denomination of one pound, or four dollars, and that La Banque du Peuple of Montreal was not a pure joint-stock institution of the modern sort, but a combination of a partnership and joint-stock company. It had twelve partners, who were subject to unlimited liability, and it was permitted to have an indefinite number of associates or stockholders whose liability did not extend beyond the payment for the stock for which they subscribed.

4. Restraining influences on banking excesses.-The student of banking history in the United States will be surprised at the small number of banks established in Canada during this period, while across the border such institutions were increasing in numbers with great rapidity. The explanation of the difference in this respect between the two sections is to be found in the restraining influences which were operative in Canada and not in the United States. In the former country the same tendencies were at work as in the latter. There was agitation for the introduction of the principle of free banking, criticism of the conservatism of the chartered banks, accompanied by claims that the

bank capital and the circulating medium of the country were inadequate, and other evidences of those ideas regarding credit and currency which seem to be characteristic of frontier communities. In Canada these tendencies were checked in part at least by the attitude of the English government, which had the right of veto over bank and other forms of legislation. The process of securing a bank charter consisted in its passage by both houses of the provincial legislature, and its signature by the GovernorGeneral, whose right, however, to append his name was conditioned upon the consent of the privy council of the English government, which practically meant the committee for trade. The early charters were frequently delayed for two or three years by the delay of the home government in granting its consent, and as early as 1830 a set of regulations were prepared and submitted to the legislature through the Governor pertaining to the conditions under which the home government would be willing to give its consent to the granting of bank charters. These regulations have been summarized by Mr. Walker (p. 437) as follows:

"I. Bank charters to be forfeited by suspension for sixty days consecutively or during a year.

2. Note issues to be dated where issued and to be redeemed in specie there and at the head office. No branch need redeem notes issued at any other branch or the head office.

3. One-half the capital to be paid in at commencement, the remainder at discretion.

4. The directors not to become liable on obligations to the bank exceeding one-third the total discounts of the bank. 5. Bank not to hold its own stock or lend money thereon. 6. Half yearly statements to the Government of average assets and liabilities made from weekly balance sheets with particulars of dividends and reserved profits. Special re