Volume 2 - ElectricCanadian.com

DEVELOPMENT OF CANADIAN BANKING 459of itsable to make immediate provision for the redemptionnotes. As an additional precaution to maintain the notes of abank at par after its suspension, it was proposed that theyshould bear interest at six per cent, per annum from the dateof suspension until the date fixed by the liquidator for theirredemption. This was intended for the encouragement andprotection of the banks in accepting from the public the notesof any one of their number which might have fallen intodifficulties, and to do away with the operations of speculators,who had in the past mulcted the unfortunate holders in suchcases. The proposed fund was to be known as the "CirculationSecurity Fund," but when it came to be incorporatedinto the Bank Act its name was changed to "The Bank CirculationRedemption Fund." Provision was made for additionalassessments in case of need, and for recouping the fund fromthe assets of a suspended bank for any payments made on itsbehalf. The original idea was that all the banks shouldcontribute within a period of ten years to the extent of fromtwo and a half to five per cent, of their average annual notecirculation. As the exact extent of the Government's claimto priority was not free from doubt, and according to a decisionof the courts in the case of the Exchange Bank had no legalexistence under the law of the province of Quebec, the Governmentfinally accepted the proposal of the bankers, and theamount due by a bank to the Dominion Government was madea second charge on its assets in the event of insolvency, andthose due to the Provincial Governments a third charge. Inreturn, the banks became mutually responsible for each other'snote circulation. As an additional condition of assuming thisresponsibility, the bankers desired the enactment of stricterregulations governing the incorporation of new banks, so as toensure good faith on the part of those applying for charters.The circulation of the notes at par in all parts of Canada wasbrought about by requiring the establishment of a redemptionagency in the commercial centre of each province.Another important contribution towards the improvement