Volume 2 - ElectricCanadian.com

DEVELOPMENT OF CANADIAN BANKING 405the bank appeared as drawer, acceptor or endorser, should beWhenlimited to one-third of the total discounts of the bank.this provision was afterwards introduced into new or amendedcharters, the proportion was made to depend somewhat on theamount of the authorized capital. Thus in the case of theBank of Montreal and other large banks it was reduced toone-twentieth of the total discounts, and in some cases to onethirtieth.The practice, now so general in modern banking, ofallowing interest on time deposits, was first introduced intoCanada by an unchartered bank, the Agricultural Bank ofToronto, established on the English basis of a joint stockcompany with unlimited liability on the part of the shareholders.When this bank opened for business in May, 1834,itwas announced that interest would be allowed on deposits.Although this innovation was much criticized by the representativesof the Bank of Upper Canada, it was followed, inJuly of the same year, by the Commercial Bank of the MidlandDistrict, and the other banks soon found it necessary toconform to the practice.The period 1837 to 1840 was one of economic and financialcrisis throughout North America, and in Canada was aggravatedby political crises in both provinces which disruptednormal legislation in the Lower Province and deprived severalof the banks for a time of their legislative charters. Whilethe financial consequences of the suspension of specie paymenthad a serious temporary effect upon the banks, and the storyis both interesting and instructive, yet during this period nopermanent changes materially affecting the development of theCanadian banking system took place. The union of Upperand Lower Canada in 1841, and the establishment of a singlelegislature for the two provinces, naturally gave to subsequentbanking legislation a unity and a breadth of range, the lack ofwhich was becoming increasingly injurious to the commercialand exchange relations of the provinces.