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CHAPTER X

CANADA'S BIG BANKS

HERE are more than eight thousand national banks in the United States, but Canada has only sixteen. While new ones are organized in our

country every month, the number in Canada tends constantly to grow less, and to-day is not half what it was twenty years ago. The banking system of the Dominion is patterned somewhat after the Scotch, and was worked out largely by men of that shrewd, hardheaded race. The people think it suits their conditions better than any other. Certainly it is true that while Canada has had its ups and downs, the people have suffered far less than we from bank failures and panics.

One might think that with all the banking business of Canada monopolized by only sixteen institutions, they might make fabulous profits. However, such is not the case. I have before me the current monthly statement which the government publishes regarding the condition and operation of each bank. This shows that all are making money, but their dividends range from six to sixteen per cent., and the Bank of Nova Scotia is the only one that paid the highest rate. Nine of the banks paid twelve per cent. on their capital stock last year, while the shareholders of five got less than ten per cent.

In the United States a handful of business men can start a bank on a few thousand dollars. Here it is not

so easy a matter. Canadian law requires a minimum capital of five hundred thousand dollars, half of which must be paid in, before a bank can be chartered, and there are other conditions to be met that make the establishment of a new bank a big undertaking. The smallest bank in Canada, at Weyburn, Saskatchewan, is the only one with a capital of less than one million dollars, while the largest, the Bank of Montreal, has paid-up stock amounting to twenty-seven and one quarter millions. The total combined capital of all the banks is one hundred and twenty-three millions.

The great banks extend their service throughout the Dominion by means of branches. These now number nearly five thousand, and new ones are being constantly added. The branch plan is the most striking difference between Canada's banking system and ours, which prohibits the establishment of branches except within a bank's home city, and, under certain regulations, in foreign countries. The larger Canadian banks are represented by their own branches in every city, from coast to coast, while the Bank of Montreal alone has more than six hundred agencies. Nearly all the banks have their head offices in Eastern Canada. Six of them are located in the province of Quebec, seven in Ontario, and one each in Nova Scotia, Manitoba, and Saskatchewan. Three of the banks in Quebec are controlled by the French Canadians. Their combined capital is just under nine million dollars, or not quite half that of the Royal Bank of Canada, the second largest in the Dominion.

An official of the Canadian Bankers' Association has explained to me some of the advantages of this system. He said:

When the discoverers sailed up the St. Lawrence to what is now Montreal they thought these rapids just above the city blocked their passage to China, and so named them "La Chine."

Montreal's rise as a great port began a century ago when the Lachine Canal was built around the rapids, and gave the city a water passage to the upper St. Lawrence and the Great Lakes.

Many homes have the Rideau Canal and its fringe of park at their front door. Built originally for military reasons, the canal now makes possible a boat trip through the Rideau Lakes to the St. Lawrence.

"Our plan of branch banks is based partly on the principle that there is more strength in a bundle of fagots joined together than there is in the same number of sticks taken separately. Poor management or bad times, under your system, may bring disaster to a single bank, whereas with us losses in any branch would be easily absorbed in a great volume of business covering the whole country, and the shock hardly felt at all. Under our system it is a simple matter for a bank to concentrate its funds in the districts where they are most needed, and money flows easily into the channels where there is the greatest demand. This is of the utmost importance to Canada, for we have limited capital, and therefore must keep it liquid at all times.

"Canada is still a young country, not yet done with pioneering, and its banks must lend a hand in promoting its development. When a branch bank is opened in a tent or shack in a new mining camp, the people know that the manager is there to give them service, and that he represents a strong institution with millions in assets. A remote fishing village or new paper-mill town is thus provided with banking facilities quite as effective as those of Montreal or Toronto. The difference in rates of interest charged is never more than two per cent., no matter how remote from the money centre a branch bank may be. The only reason it is ever higher is that where the operations of a branch bank are small, the overhead expenses are proportionately greater, and must be compensated for by the bank's customers. In recent years our wheat farmers of southern Saskatchewan have been getting money cheaper than have the farmers of your North Dakota, just over the border. The banks represented in