Volume 2 - ElectricCanadian.com

458 HISTORY OF THE BANKoffices of the banks and in their numerous branches did notbecome money until issued, and remained so only while incirculation, and to this feature both their efficiency and theireconomy were due. As Mr. Walker pointed out, if the headoffices of the banks had to provide reserves for all the notesin possession of the branches, whether they had gone intocirculation or not, branch banking with all its convenienceto the trade of the country would be rendered impossible.As was pointed out by another member of the delegation, afixed reserve being entirely useless for the purpose of redeemingnotes, the banks must still hold their usual reserves inaddition to this fixed amount. Thus, if the fixed reservewere placed at twenty per cent, of the note issue, the bankswould require to keep reserves of at least thirty per cent.In dealing with the other part of his subject, that is, thesecurity of the note issues and particularly the steps necessaryto ensure their circulation at par under all conditions and inany part of the country, Mr. Walker submitted to the Ministerof Finance a plan which had met with the general approval ofthe bankers. The Act of 1880 had made the notes of a bank afirst charge upon its assets in the event of failure. The bankersnow proposed that this statutory charge should be strengthenedby giving the notes precedence even over the priority claimedby the Crown under the common law for any debt owingto theGovernment. 1 Experience had indicated that the ultimateredemption of the notes in full was reasonably certain, evenunder the existing prior lien. The bankers therefore suggestedthe establishment of a fund to which all the banks wouldcontribute, and the whole of which would be held by theGovernment for the purpose of redeeming on presentation thenotes of any bank which might suspend payment and not be1This right of priority had been invoked by the Crown in the case of two bankswhich failed during the decade which preceded 1890; successfully in the case of theMaritime Bank of the Dominion of Canada in 1887, and unsuccessfully in the case ofthe Exchange Bank of Canada in 1883. The head office of the latter bank was inMontreal and the common law priority of the Crown did not exist in the civil law ofQuebec. Breckenridge, The Canadian Banking System, pages 308 and 309.