Savings banks under the management of the government are of two kinds: Government savings banks, under the control of the Fi nance Department, and post office savings banks, which are part of the post office system. The former were in existence in the Maritime Provinces for several years previous to 1867 and were taken over by the Federal government when the provinces entered into Confederation. In British Columbia savings banks controlled by trustees existed before Confederation, and these banks were wound up and ((government savings banks) established in their stead. A government savings bank was opened in Win-. nipeg in 1871 and another in Toronto in 1872. In 1888 there were 50 offices with 57,367 depos itors, having $20,682,025 to their credit, an aver age of $360 for each depositor. It has now been recognized that these banks are no longer necessary, and whenever the position of super intendent of any office becomes vacant, the de posits in that office are transferred to the post office savings bank.
By 31 Dec. 1917 the number of offices open had decreased to 14, all of them, except those at Winnipeg and Victoria, being in the Mari time Provinces. The total amount on deposit was $13,61o,069. In 1868 the system of post office savings banks which had proved so successful in Great Britain was introduced into Canada, 81 offices being opened on 1 April in that year. On 31 Dec. 1916, there were 1,269 savings bank offices in Canada with 134,345 depositors and total balances of $40,478,123. In order to give some support to the theory that both kinds of public savings banks are intended primarily as safe places of deposit for persons of limited means, the net amount which may be received from any person dur ing one year is $1,000, while the total amount which any depositor may have at his credit is $3,000. The rate of interest paid in both classes of savings banks was formerly 4 per cent but on 1 Oct. 1899 it was reduced to 354 per cent and on 1 July 1897 to 3 per cent. Until recently there was, however, no justifica tion for even 3 per cent being paid. Canada in normal times was able to negotiate term loans (against which no reserves need be kept) at a net interest rate of about 2.86. By an act passed in 1903 the Department of Finance is obliged to hold as reserves against savings bank deposits an amount in gold, or in gold and Canada securities guaranteed by the gov ernment of the United Kingdom, equal to not less than 10 per cent of the deposits. When
to the rate actually paid on these deposits is added cost of reserves and expense of manage ment (from one-fourth to one-half of 1 per cent per annum), the money held on deposit actually costs the country about 3.75 per cent. This fact was fully recognized by the govern ment, and some years ago they proposed to reduce the rate paid to 2V2 per cent, but, for political reasons, the proposal was withdrawn. Having regard to the high rates at which the government at present has to borrow for war purposes, it is a question whether the rate should not be raised to per cent.
Amounts held on deposit by the government in certain years were as follows: Apart from the public savings banks, the only savings banks of any importance are the Montreal City and District Savings Bank, of Montreal, and La Caisse d'Economie de Notre Dame de Quebec. The former has a paid-up capital of $1,000,000, and a reserve fund of $1,350,000; its deposits are about $31,000,000, it holds securities of about $19,000,000, and has loans against securities of over $8,000,000. The latter has a paid-up capital of $250,000, and a reserve fund of about ;1,000,000; its deposits are about $10,000,000, it holds securities of about $8,000,000 and has loans of about $3,000,000 against securities. These banks may invest 80 per cent of their deposits in certain approved securities, including the stock of chartered banks, and may make advances against such securities. These are the only classes of investments which they may make. They are specially prohibited from lending on real estate, promissory notes or commercial paper. Unlike the ordinary chartered banks, they have not the right to issue notes for cir culation.
At the outbreak of the European War it became necessary to take steps to conserve the financial resources of the country. On 3 Aug. 1914, an Order in Council was passed, giving authority as follows: (1) To the Minister of Finance, to issue Dominion notes to such an amount as might be necessary against such securities as might be deposited by the banks and approved by the Minister; (2) To the banks, to make payment in bank notes, instead of in gold or Dominion notes; (3) To the banks, to issue at any time excess circulation not to exceed 15 per cent of their respective combined unimpaired capitals and rests.
This Order in Council (together with one dated 10 Aug. 1914, suspending the redemption in specie of Dominion notes (see CANADA