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120   DAYS OF PREPARATION

Clearing House rules continued to require each member bank to accept its own notes and settle for them (if any balance were due on the general exchange) in Dominion bills. Thus, since membership in the Clearing House is practically indispensable for a solvent chartered bank, the bills of each bank continued to return to it as soon as they were no longer required for circulation in the hands of the public. The public could not tender them to the banks and demand gold or Dominion notes in their stead, but it could tender the bill of any bank in settlement of indebtedness due to any bank, and the bill so tendered at any bank other than the one which issued it would in due course pass back to the issuing bank and would have to be redeemed.

Anything in the nature of a "run" on a chartered bank was thus rendered practically impossible, for the depositors would have been obliged to accept the bank's own bills in settlement of their claims until its issuing power was exhausted, thus merely substituting one form of bank liability for another, and permitting the printing press and the manager's fountain pen to under-take the task of making settlements. But the position of any solvent bank was made absolutely impregnable by the first provision of August 3rd, authorizing the Minister of Finance to make advances of Dominion notes to banks which should deposit acceptable securities in his hands. To the banks this amounted to a privilege of re-discount of their securities, and they were thus enabled to face the unknown contingencies of a world-wide upheaval without cutting down their loans to the vanishing point and endeavouring to convert as large a proportion as possible of their assets into cash or promptly realizable securities—a policy which would have had a paralyzing effect upon Canadian trade. The Order-' in-Council of the 3rd of August was confirmed by the Finance Act (5 George V, Chap. 3), dated the 22nd of August, 1914, which also provided that the securities deposited with the Federal Government by the banks


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