Volume 2 - ElectricCanadian.com

462 HISTORY OF THE BANKfixed reserve as a guarantee that a bank was able to meet itsliabilities, much less that it was sound in its banking practice,and the evil effect that it would have in greatly reducing thecapacity of the Canadian banks to assist the industry andcommerce of the country. Indeed, it would actually jeopardizethe financial stability of the banks, since it would tend toaggravate temporary financial difficulties by renderingspeculative much of the stable business of the country. Inthe end the representations of the bankers prevailed; hence,when the bill was finally brought down, it contained no referenceto a fixed reserve. The details of the measure were carefullyconsidered by the representatives of the banks, theBank of Montreal co-operating with the others as soon as thequestion of general policy was settled.The principal changes made in the Bank Act of 1890, asfinally enacted, may now be recapitulated as briefly as possible.The amount of paid-up capital required before a new bankcould commence business was increased from $100,000 to$250,000, and a time limit of one year from the date of thecharter was set for securing the necessary capital and complyingwith the other legal preliminaries to commencing business.Provision was made for reducing the capital stock of a bank incase of need. The notes of a bank were made the first chargeupon its assets in case of insolvency, the amount due to theGovernment of Canada a second charge, and the amount dueto the Governments of any of the provinces a third charge.The establishment of the Bank Circulation Redemption Fundhas been referred to already. 1Each bank was called upon tocontribute to this fund to the extent of five per cent,of itsaverage circulation, to be paid in two annual instalments oftwo and one-half per cent., and provision was made forsubsequent annual adjustments. The fund is held by theMinister of Finance and bears interest at three per cent, perannum. Each bank had also to make provision for theredemption and payment of its notes in a designated city in'See page 459.