The notes of failed banks bear interest at 5 per cent per annum from the date of suspension to the date announced for payment. Such notes are regarded, therefore, as 5 per cent investments to the date of redemption, and the notes of these banks may be actually more valuable than the notes of solvent banks. The holders have, at least, no difficulty in selling them at par to other banks, brokers, or persons having money for temporary invest ment. Instead of protractedly circulating at a depreciated value, the investment quality of these notes keeps them at par and with draws them from circulation.
Every bank is required to redeem its notes at its head office and in such commercial centers as are designated by the Treasury Board. At present the redemption cities for all the banks in common are Toronto, Montreal, Halifax, Winnipeg, Victoria, St. John, and Charlottetown. The many redemption offices make it easy to redeem the notes, the distances are short, and there is no charge for exchange.
Banks issue notes freely, both at the home office and the branches, as loans and discounts are made; such loans and dis counts are paid in bank notes or credited as deposits; when these loans are repaid later the means of payment are five in number, viz.: 1. Gold or Dominion notes葉hese increase the bank's re serve and decrease the total currency of the country.
2. Checks against the loaning bank葉hese leave the notes outstanding at the same amount, but reduce its deposit liabilities.
3. Checks against other banks葉hese are cleared and col lected.
4. Bank notes of the loaning bank葉hese reduce its bank note liabilities and the total bank note currency of the country.
5. Bank notes of other banks葉hese are sent at once to the redemption offices or to the issuing bank for redemp tion, or if the head office or a branch of the issuing bank is in the same town as the loaning bank, the notes are enclosed along with the checks in the exchanges for the clearing house, for, although branches are not re quired to redeem notes of the parent bank, they are required to accept them at par in payment of all dues.
Every bank strives to put out into circulation its own notes, but at the same time to bring about the redemption of the notes of all other banks when tendered in payments or for deposit. The branches facilitate the bank note system by providing facili ties for maintaining upplies of notes handy to borrowers. Though the bank notes acquire a national circulation, they do not stay out in circulation but are speedily returned for redemption. The result is an alm st perfect elasticity of note issue; the curve of the combined outstanding issues is highly symmetrical from year to year, the fluctuations ranging between 15 and zo per cent, the maximum issue coming in October, the minimum in January. The spring revival calls out some extra notes, but the big issues start in August and decline in November.