In the United States the bank's president is generally its chief executive officer, but in Can ada this is not the case. British precedent is followed, and the bank is managed by a general manager, who accepts the fullest responsibility for the conduct of its business. The Board of Directors deliberate on all important transac tions and all applications for large credits which have been approved by the general manager are submitted to them. The branch managers are responsible for the general business of their respective branches, and, as a rule, are allowed i to use their own discretion n making advances up to certain amounts, varying according to the importance of the particular branch. Any loans applied for in excess of the limit fixed must be referred to the general management at the head office. By means of the branch sys tem credit is distributed throughout the whole country; money borrowed from depositors in the rich but less progressive portions of On tario may be lent out again in the newest parts of the Northwest, and interest tends toward a common level. The average rate obtained in western Canada is only about 1 per cent more than in Ontario. The banks being large, and under no restrictions as to the amount which they may lend to any one customer, are able to supply the total needs of any person with whom they are willing to do business. They grant yearly credits, and practically undertake to supply their customers' wants up to the limit fixed at any time during the continuance of the credit. As a corollary to this they almost invariably require that each customer shall borrow from only one bank.
No special percentage of cash reserves is required to be kept — in fact, the banks are not required by law to keep any cash or other reserves — but of whatever cash reserves are kept in Canada at least 40 per cent must be in Dominion notes. Percentages of cash re serves to total liabilities to the public held by all banks on 31 December in certain years were as follows: moo Omitted).
It must not be forgotten that the banks' cash reserves are only their first line of de fense. Their real reserves are in the shape of call loans in New York against stocks and bonds, balances in the hands of their corre spondents and securities lodged with their agents in London and elsewhere, against which they are entitled to draw at any moment. New York and London are the final settlement points, and it is there that real strength is most necessary and most effective.
On 31 Dec. 1917 there were 25 clearing houses in Canada, the oldest being that at Halifax, which was established on 1 July 1886. Montreal followed in January 1889 and Toronto in July 1891. The others, listed in order of age, are Hamilton, Winnipeg, Saint John, Vancouver, Victoria, Quebec, Ottawa, London, Calgary, Edmonton, Regina, Brandon, Leth bridge, Saskatoon, Brantford, Moose Jaw, New Westminster, Medicine Hat, Peterboro, Fort William, Kitchener and Sherbrooke.
The total clearings in certain years have been: 1900, $1,584,869,240; 1910, $6,115,039,241; 1911, $7,343,729,546; 1912, $9,147,334,855; 1913, $9,230,096,680; 1914, $8,063,814,799; 1915, $7, 276,476,210; 1916, $10,557,187,917; 1917, $12,552, 821,949.
The right to issue notes intended for cir culation (other than notes issued by the Do minion government, see CURRENCY, COINAGE AND LEGAL TENDER) is confined to the char tered banks. The bank may issue and re issue notes of $5 and multiples thereof, which must circulate at par in any and every part of Canada and must he redeemed on demand in specie or Dothinion notes. In order to ensure this the bank must establish agencies for the redemption and payment of its notes at To ronto, Montreal, Halifax, Saint John, Winni peg, Victoria, Charlottetown, Regina and Cal gary, and at such other places as are, from time to time, designated by the Treasury Board. In addition, the hank must accept its own notes in payment at any of its branches.
The notes issued by a hank arc a first charge upon all its assets, and they are also especially secured by the Central Gold Reserve and by the "Bank Circulation Redemption Fund," to which all the banks have contributed 5 per cent on their average circulation and which is held by the government for the purpose of redeeming with interest at 5 per cent any notes of a suspended bank which the hank or its liquidator is not ready to redeem within two months after the date of suspension. The result of this is that the other banks readily accept at par the notes of a suspended bank, the notes remaining in their hands earning interest at 5 per cent until they are redeemed. As the banks are obliged to replenish the Redemption Fund gradually if it ever becomes depleted, they are all practically guaranteeing the notes of each. The amount at credit of this fund on 31 Dec. 1917 was $5,769,631, bear ing interest at 3 per cent. No call has yet been made on it. Since 1841 the limit of the bank's authorized note issue had been the amount of its unimpaired paid-up capital, and for many years the banks had found no diffi culty in keeping well below this limit. So late as 31 Dec. 1890 the total paid-up capital of all the banks was $60,000,000, while their note issue was only $35,000,000. But early in the present century conditions began to change, and by 1907 the increase in capital had so far failed to keep pace with increase in business that on 31 October of that year the total note issue had reached its legal maximum, un less and until some of the banks increased their capital. But as the acute need for the issue of additional notes only existed during four or five months each year, the banks were loath to increase, for this purpose alone, cap ital which was otherwise sufficient, so in 1908 each bank was authorized to issue "during the season for moving the crops," that is, from 1 October to 31 January, "excess circulation" to the extent of 15 per cent of its combined un impaired paid-up capital and rest. In 1912 this period was extended to run from 1 September to the end of February. On this °crop-moving" issue the bank must pay to the government inter est at a rate to be fixed by the government, but not exceeding 5 per cent per annum. In 1913 provision was made for °central gold reserves." Trustees are appointed by the Canadian Bank ers' Association and by the Minister of Finance, who receive such amounts in current gold coin and Dominion notes, or either, as any bank may desire from time to time to deposit. Against the gold and notes thus act ually held for it, any bank may at any time issue notes of an equal amount, in addition to the amount which it may otherwise issue. The °excess circulation" provision was also continued. Although this arrangement makes it easy for the banks to furnish all the cur rency needed, it may be doubted whether, from the public standpoint, it is altogether wise. The gold reserve" feature is illogical, inas much as assets which already form part of the general security for the total note issue are placed in the hands of trustees, and there used as special security for an additional issue. All that is gained is thephysical certainty of their actual and continued existence, and pos sibly some small increase in total cash reserves. But as the security is ample in any event, this is of little consequence. A serious objection is that the banks are thereby relieved to a con siderable extent from the necessity of increasing their capital from time to time as their business increases, and thus the °margin of safety," in the form of capital and double liability, which is the general creditors' insurance against loss, tends constantly to become proportionately less at a more rapid rate than it otherwise would. And in this way, too, any tendency to undue• concentration in banking is strengthened.