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MEMORANDUM 
 
 ON THE 
 
 BILL RESPECTING 
 
 Banks ^«^ Banking 
 
 NOW BEFORE PARLIAMENT. 
 
 BY 
 
 FRAxNK WEIR, B.C.L., 
 
 ADVOCATE, 
 
 AuiHOi' 01 I HE Law and Praciice of Banking Corporations 
 
 UNDER Dominion Acts. 
 
 MONTREAL : 
 
 1890 
 
COMMENTS OF THE PRESS 
 
 — ON — 
 
 Weirs Law & Practice of Banking 
 
 
 It is a work which will be very useful to bankers and merchants, for 
 whose use it is more especially adapted. The volume is well put to- 
 gether and of convenient form, and has not appeared too soon upon the 
 bookstalls. — Toronto M'metary Times. 
 
 It is worthy of being at the hand of every bank director, cashier, 
 accountant and merchant, as well as commercial lawyer. The author is 
 evidently qualified from education and practical experience in dealing 
 with the subject of banking lav/, and his work bears evidence of careful 
 and laborious study. — Toronto World* 
 
 The work itself shows an intimate knowledge of the whole science 
 and system of banking, and we welcome it as a valuable vade mecum oi 
 the laws bearing on the subject. In recommending it to bankers and 
 merchants as a desirable work to po>se3s, we consider we are doing them 
 a good service. — The Shareholder, A font real. 
 
 The author's aim, as stated by himself, has been " to present a clear 
 exposition of those general principles of banking law, with which every 
 bank director, manager and officer should be fully acquainted," and he 
 has succeeded admirably in doing so. Mi. Weir's book will prove most 
 useful, not only to bankers and merchants, but all professional men.— 
 The Tor^*'to Mail. 
 
 An exceedingly useful text book on the subject of banking, compiled 
 by an author peculiarly well fitted to undertake and c-reditably discharge 
 such an important task. * * The result is an exceptionally luminous 
 exposition of a subject which ordinarily presents no small amount of 
 difficulty. * * There is hardly a point, however minute, relating to 
 the law and practice of banking on which the author has not shed a clear 
 and valuable light. — r>*^ Empire y Toronto. 
 
MEMORANDUM 
 
 ON THE 
 
 BILL RESPECTING BANKS AND BANKING. 
 
 The proposed fiill respecting Banki? and Baokiog having passed its 
 first and second readings, I desire to draw attention to the changes 
 and ameliorations which will be made in the existing law should the 
 Bill pass the Rous'? in its present shape. This I am led to attempt 
 for the reason that no artirle has yet appeared in the public press, so 
 far as my perFonal observation goes, which can be said to fully, fairly 
 and concisely set forth all the alterations which it has been deemed 
 necessary or expedient to make in the law as now in force. 
 
 After mature dellbera<iion it will, I thick, be found that not a few 
 of the proposed amendments are open to adverse criticism, as being 
 either of doubtful application or barren of result. And, further, I 
 think it may fairly be shown that other amendments which might be 
 suggested, in the interest of the public and the Banks alike, have 
 escaped observation, and find no place in the proposed Bill. 
 
 With this threefold object in view the present memorandum has 
 been written, and with proper deference to the opinions and matured 
 experience of others more capable than myself to discuas these 
 matters, I beg to offer the following observations, in anticipation of 
 the mature consideration which will be given to the Bill when it 
 comes before Parliament for final sanction. 
 
 Prefatorily, it must be remarked that for the first time in the his- 
 tory of Canadian banking law has the Bank Act been cast into a form 
 at once iefinite and symmetrical. Its various members have each 
 their proper place, and are known under separate and appropriate ap- 
 pellations. All prior acts have snfi'ered more or less from the vice of 
 unintelligibility, due doubtless to amendments made almost annually 
 to one 01 other of their provisions. And even in the Revised Statutes 
 of 1886 there is to be noticed a sad want of method in the arrange- 
 ment of the present Act as there consolidated. In the proposed Bill, 
 on the contrary, by a judicious re-arrangement, the necessity of con- 
 
LJ„ I !■!•■ 
 
 mmtmi^BBm 
 
 — 2 — 
 
 fltant reference from one section to another In order to determine the 
 full meaniug of any general enactment, is obviated, and a provision of 
 the law once stated is immediately followed by whatever further pro- 
 vision may tend to limit or extend its operation ; many doubtful 
 readings have been re-cast, and he who runs may read. 
 
 Entering upon the consideration of our subject proper, I desire to 
 call attention first to the interpretation given by the proposed Bill to 
 doubtful readings in prior Acts. 
 
 svbbobibib'b liability. 
 
 While considering the 20th section of the Act at present in force 
 I have elsewhere stated (Law and Practi je of Banking, p. 256; that : — 
 
 As a general lule the obligation of payment is created and per- 
 fected by the act itself of subscription. It would appear, however 
 that this act would not be considered as perfected unless a sum equal 
 to at least ten per cent, ou the amount subscribed for is actually paid 
 in Rt the time of or within thirty days after the time of subscribing. 
 Such, we apprehend, is the construction to b» placed upon the proviso 
 introduced into section twenty of the Bank Act. Shares otherwise 
 will not be held to " have been lawfully subscribed for." This point, 
 however, has never been adjudicated upon. 
 
 Where the act of subscription is thus perfected, the whole amount, 
 in the absence of a proviso to the contrary, is payable in terms of the 
 Act. A proviso may be inserted that it shall be demanded only in 
 instalments of specified amounts, to be called for within longer 
 periods, but no statement, however explicit, in the original contract of 
 subscription can relieve the subscriber from the ultimate necessity of 
 paying the full par value of the full number of shares subscribed for 
 and the double liability in addition, so long as any creditors of the 
 corporation remain unpaid. 
 
 In thus interpreting the law, I was of opinion that no other con- 
 •trnction could be placed upon the provision of the Act, as set forth. 
 A share " not lawfully subscribed fo/ " cannot be held the property of 
 the would-be subscriber. The attempted contract fails of completion. 
 No legal bond unites the parties, and having no rights in respect to 
 such share the subscriber incurs no liabilities. The point thus re- 
 ferred to has been made the subject of an amendment, or, should my 
 construction not be correct, o/ Legisilative interpretation. The general 
 
— 3 — 
 
 rule, as above given, is clearly adhered to, and it is provided " that the 
 directors may cancel any sahBcription for any ^j3a^e, unless a s'^ia 
 equal to ten per c^^nt at, loagt en the nmount subscribed for is actually 
 paid at the time of or \?ithin thirty days after, the time of Hubscribing, 
 but such cancellation uhall not relieve the 8ul)8cribir from his liability 
 to creditors in the event of insolveucyj as hereiuafter provided." 
 (Sect. 30) Hee also section 96, 
 
 BFPECT OK BKPKAL 
 
 In the absence of express provision to the contrary, Sir Alex. 
 Campbell, when Attorney- General (1881) eays in reference to the 
 penalty of forfeiture :— 
 
 " I may here remark, in pasBing, that there appears to me to be 
 some force in the objection made by counsel, on behalf of the Bank, 
 that the alleged infractions having all taken place before the Ist of 
 July last, and the charter of the Bank having been renewed from that 
 date by act of last session, no proceeding to forfeit the Bank's new 
 charter can be taken on account of alleged violation of the old 
 one." 
 
 In commenting upon this obiter diettim, I felt called upon to remark 
 that :— 
 
 It seems well established, however, that a renewal of a Bank char- 
 ter is simply a continuance of the prior charter, and that the corpora- 
 tion succeeds both to the rights and the liabilities of its predecessor. 
 If the remarks of the Attorney-General in the cited petition for id. 
 fa,^ are the law on the point, no penalty provided for by the Bank Act 
 can be imposed, unlesR proceedings are taken during the term of the 
 charter in which the wrongful act is done. Is this the intent of the 
 Legislature ? 
 
 This point also has been considered in the proposed Bill, which 
 enacts that from the 1st July, 1891, the present Bank Act "shall be 
 repealed, except as to rights theretofore acquired or liabilities incurred 
 in regard to any matter or thing done or contract or agreement entered 
 into or oflfencee committed under the said Act," &c. (Section 103). 
 
 DBALINGS IN STOCKS, BONOS, &0. 
 
 Section GO of the present Act enacts : — . 
 
 Nothing in this Act contained shall prevent the bank from 
 acquiring and holding, as collateral security lor any advance made by 
 
•^m 
 
 the bank, or debt due to the bank, or for any credit or liability iucnr- 
 red by the bank to or on behalf of any peraon (and either at the 
 time of the making of such advance, or the contrar^ing of such debt, 
 the opening of such credit, or the incurring of sucli liability), Dom- 
 inion, Provincial, British or foreign public Becurities, or the stock, 
 bonds or debentures of municip<)l or other corporations, except 
 banks. 
 
 The question arose whether a Bank could acquire a talid title to 
 bonds or debentures purchased for purposes of profit. In discussing 
 this question (L. k P.ofBkg.,p. 167) I felt called upon to lay down, as 
 a rule of almost universal acceptance, that while a Bank may purchase 
 public securities, in order to invest its surplns funds in them, it can- 
 not "traffic" or deal in them ; it cannot buy them with a view 
 to sell them shortly at an anticipated advanced price. Such 
 would not fall within any department of the general province 
 of banking. This view, however, as I added, citing Jorus va. 
 the Imperial Bank, although supported by many English and American 
 caseft is not that taken by the Ontario courts, lu the cited case 
 it was considered that the words <<in such trade generally as 
 appertains to the business of banking '' covered the purchasing of 
 municipal bonds. Mr. Justice Proudfoot thus summarizes his opinion 
 on the point in consideration. *' The conclusion which seems to me 
 deducible from these acts, is that the business of banking cousiats in 
 dealing in money, the precious metals, and in bonds and negotiable 
 securities ; that this dealing confers the power of lending on them or'' 
 of purchasing them, whichever the fiank directors may deem most 
 for the advantage of the corporation ; and that whether to buy or lend 
 is a matter of internal management which, the directors may deter- 
 mine." 
 
 Whether, I further added, this power would extend to the purchase 
 of stock in chartered corporations, except banks, has never been adjudi- 
 cated upon. 
 
 The proposed Bill has settled this question, but whether advisedly 
 remains to be discussed. It is enacted that the Bank " may deal in, 
 * * and lend money and make advances on the security of, and 
 may take as collateral security for any loan made by it * * * 
 stock, bonds, debentures and obligations of munici j>r,l and other 
 corporations (except Banks) * • or Dominion, Provincial, British, 
 foreign and other public securities." 
 
 Here it might be profitable to pause, in order to consider the ad- 
 
m 
 
 — 6 — 
 
 ▼liability of this enntctment. The provisloD reBpecting maDloipal or 
 public P'-curlties may not be open to question, but the same cannot 
 bo eaid aB to the power given to de»l in or even ta)(o ai security the 
 stock of chartered corporations. Let one example of the posBible 
 BulEce. The directors of a bank or^^anize a loan company, transier its 
 stock to the bank and loan themselves the money thus obtained on 
 the security of their bank stock. The bank virtually lends money on 
 its own stock, and this actually happened in the case of a recently 
 liquidated bank. Would not an amendment denying to banks even 
 the right now enjoyed of lending on the security of such stocks be 
 more in order ? This would be a return to the law as in force before 
 the Bank Act of 1880. Legitimate banking cannot be held to com- 
 prise the providing of capital to organize or to equip manufacturing 
 or trading corporations, it should suflice if such corporationB are 
 permitted to enjoy the privileges extended to private firms, that of 
 discounting their bills receivable, or obtaining temporary loi^ns, on the 
 Becurity of their warehoused products, or of their goods in course of 
 transit. Within a very short period of time banks will virtually own 
 and be forced to operate extensive manufacturing, mining or trading 
 corporations, organized by their promoters for no other purpose than 
 that such contingency result. But my object in '(,he present memor- 
 andum is to point out, not to supply extended argument for or 
 against, any proposed amendment. Others more aole and better ac- 
 quainted with the needs oi the country will give this their attention 
 in the House. 
 
 LIRN ON BANK STOCK. 
 
 Under Section 69 of the present Act, the Bank is given a privileged 
 lien for any debt, or liability for any debt to the Bank, on the shares 
 and unpaid dividends of the debtor or person liable, and may decline 
 to allow any transfer of the shares of such debtor or party, until such 
 debt is paid ; and, further, if such debt is not paid when due the Bank 
 may sell such shares after due notice given. In discussing this sec- 
 tion I said (L & P. of Banking, p 264) that >< the nature of the in- 
 debtness, whence or how arising, is a matter of no consequence as 
 regards the attaching of the lien. Nor is it of any moment whether 
 or not the in<1ebtedne8S has actually matured at the time when a 
 demand for transfer is made." The omission of the words " which 
 have accrued and become payable," inserted in former acts, together 
 with the construction of ths text itself, led to the inference as above 
 stated. The refusal to transfer and the right to sell are two separate 
 
and diutinct rightH, the Inttor ouly accrning after the maturity of the 
 debt. The proponed Bill re-enictB th(^ proviHion ccntainetl in the 
 older Acts, and provideR that the liea shall only extend to debte 
 *' which bare accrued and become payable " The wiHdom of thid 
 amendment \» open to criticiflra. For certainly it Heems reasonable 
 that the lien (should secure indebttdnosR which has not fally matured ; 
 otherwine a large portion of the good which is icught to i>e accom- 
 plinhed by it must be wholly annulled. The Bank, knowing itself to 
 be entitled to Kuoh a lien, may fairly be supposed to rtly upon it in 
 allowing the indebtednens to bo aSHumed originally, and would be 
 justified in regarding it aa a raluable contribution towards perfect 
 security, on the faith of which the directors may not improperly 
 neglect to demand such strong additional safeguards as they are wont. 
 Further if the lien did not apply to immature iiidcbtedness, what is to 
 prevent the grossest frauds by the debtor? He could not be legally 
 opposed, if with the express purpose of stripping the Bank of all pot;- 
 sible means of repaying itself, and knowing that be wi!' not and can- 
 not himself pay it, he transfers all his shares upon the very day before 
 bis note to the Bink is to fall due. 
 
 A further amendment is made in this connection. The Bank is 
 required to sell snch shares within six months after such debt has ac- 
 crued and become payable. The object ot this provision Is, two-fold, 
 to defeat any attempt or the part of the Bink to thus indirectly lend 
 money or make advances on the security of its own stock, and to 
 insure the transfer of stock from insolvent to solvent holders. As a 
 result of this araendm«nt a shareholder, who is also a debtor, is denied 
 the privilege which the directors may extend to oUier debtors on over- 
 due paper. Eenewals or extension of the time o^ payment cannot bo 
 given him for a longer period than six months, no matter how good 
 the security he may be able to offer. Otherwise the provision will 
 fail of its purpose. It cannot be argued that it is only in case of the 
 insolvency of a debtor, or his refusal to provide the Bank with addi- 
 tional security or renewal notes that the obligation to sell devolves 
 upon the directorate. The clause admits of no exception, and the 
 word " shaU " is imperative. 
 
 QUIBTIONABLI WORDING. 
 
 It may be well at this point of my enquiry to pass from the oon- 
 lideration of obscure enactments in the present Act, now made c.^ear 
 from all doubt, to the consideration of two questionable readings 
 
wh'oh peem to r«qn{re reTiston in the BUI nnd«r dlBcntwJon. It will 
 '>e noticed that in section 47, Bub-sectiun 3, it is provided that "the 
 auditors shall at al) reaaonable times have access to tue books and 
 accounts of the Bank." The section which iirmediately follows pro- 
 virlrts that <• no person, who is not a director, shall be allowed to 
 inspect the account of any person dealing with the Bank." It is at 
 once apparent that a contradiction is here involved, and it might tend 
 to remove this anomaly if the words «or auditor'* were inserted in 
 the latter provision after and immediatfcly following the word '< direc- 
 tor." 
 
 Afi^ain, Section 19, sub^section 6, amends n provision of the 
 present law, by omitting the words «at the first meeting after 
 completion of their number." Under the present law the pres. 
 enoe of this claiiHo B0<>m8 in effect an enactment that a vacancy 
 created in the office of the president or vice-president cannot 
 be filled until the directors constitute a full board as fixed by the by- 
 laws. In omitting this clause the word " reraaininf? " should precede 
 the word *' directors" i.e, the remaining directors shall from among 
 themselves, &e. Otherwise ii. might be argued that in the absence of 
 exprosR provision to the contrary, the officers meutioued can only be 
 filled by a full 'loard, as is provided in the preceding sub-section 
 which clearly lays down that cnly after the election of the full num- 
 ber shall the directors proceed to ballot for president and vic-^^ nresi- 
 dent 
 
 LOANS ON RBAL KSTATI. 
 
 Before leaving this part of my investigation, I cannot refrain from 
 expressing regret that at least one very open question has not been 
 made the subject of Legislative interpretation. I refer to section 69, 
 which in a re-enactment verbatim of section 48 of the present Act. 
 This latter section is fully discudsed by me elsewhere (L. & P. of 
 Banking 170, ef aeg') to which reference is directed. The question 
 was whether the security of real estate might be taken simultaneously 
 with a loan made legitimately in the course of a banking business. 
 After considering cases bearing on the point, I concluded that the de- 
 cision iu the case of the Commercial Bank vs. The Bank of Upper 
 Canada was in my opinion the law on this point, but I added, lest my 
 opinion should be at fault, ^nd, after consultation, considering the 
 gravity of the question, that : — 
 
 It must be stated, however, that since the rendering of the de- 
 cision in the Bank of Toronto vs. Perkins, it seems to be the opinion 
 
->8 
 
 of Bank solicitors in genural, tbat a fiimultaneous advance and hypo- 
 thecation is Mlegal, or of such doubtful lejality as to render a loan c.o 
 secured precarious. 
 
 It ia to be regretted that the legislature has not removed all doubts 
 by a more explicit rendering of its intent. Having seen fit to enect 
 that warehouse receipts end bills of lading are to be taken as security 
 for simnltaneouB advances only ; and that stock, bonds and securities 
 may be taken for such advances, it i» clearly a grave omission on its 
 part not to huve enacted, if such was iU intention, that only such 
 debts as are overdue and have been contracted to the bank in the 
 course of its business may be ttecured by the hypothecation of real 
 property. 
 
 It certainly is in the interest of Banks to have their position 
 clearly defined, either by distinctly forbidding the simultaneous 
 acceptance of hypothecs on real eastate, or by conferring upon them 
 the unconditional right to take such hypothecs as additional security 
 for loans on current discounts, leaving to the discretion of 
 the Banks to guard against the locking up of their funds in' 
 such a way as to deprive them of the benefits arising from their cir- 
 culation and deposits, which would result from simple loans on real 
 estate. This important question will no doubt be fully discussed 
 before the Banking Committee on the renewal of the Bank charters in 
 1890. 
 
 Passing now to consider amendments which clearly and distinctly 
 change the existing law, I proceed to discass them m their proper 
 order. 
 
 INTBBNAL RSUCLATIOKS. 
 
 Section 18 takes from the list of matters incidental to the manage- 
 ment and administration of the a£fairs of the bank, upon whieh the 
 shareholdeiG may regulate by by-law, the question of the closing of 
 the transfer books before the payment of each dividend. This being 
 80 clearly a matter of convenience and a technical part of the busi- 
 ness of the bank is now left entirely within the discretion of the 
 Board of directors by section 49. 
 
 GUihAHTES FUNl). 
 
 Section 18, eub-section 2, enacts that the shareholders may aathor>^ 
 ixe the diueotora to establisb guarantee aad pension funda for the 
 
r 
 
 i 
 
 officers and employees of the bank and their familieg, and to contri- 
 bute thereto out of the funds of the bank. Thio pioviidon Decessitated 
 the withdrawal of the obligation imposed opcii directors by the pre- 
 sent Act to give bonds for the due and faithful performance of their 
 duties. This has been done m section 23, sub-sertion 2, the word 
 " may" replacing tne word " shall." 
 
 The ifesult of these amendments, however, is that in the event of 
 the shareholders not authorizing the establishment of guarantee 
 funds, the necessity of requiring offcial bonds is left' entirely within 
 the discretion of the directors. It may well be asked is this the in- 
 tent of the Bill, or has there been merely an omission, which if sap- 
 plied would require the taking of bonds in the absence of such 
 authorization. If the intent of the Bill, recent defalcations would 
 seem to render so important an amendment ill-ac^viged. If at one 
 time the necessity of requiring official bonds was considered to 
 exist, times can scarcely be said to have changed 
 
 QUALIFICATION 0B< DIRBOTORB. 
 
 .Jeotion i9, sub-section 2, deals with the qualification of directors. 
 H^re, also, an amendment has been made to the present law. Each 
 director will be required to hold capital stock on which the amounts 
 fixed nxepaidup. At present the law is satisfied if he is the pos- 
 sesEor of *• stock " to the fixed amount, whether such stock is wholly 
 or only partly paid up. 
 
 PB0XI3S. 
 
 Section 25, sub-section 5, provides that all proxies to be valid, 
 must be L-xade or renewed in writing within two years next preceding 
 the time oi meeting. The present Act reads " three years." 
 
 CAPITAL STOCK. 
 
 Passing on to the next general head, that of capital lock, it will 
 be noticed that the clause in the present Act which enables the share- 
 holders to increase the stock of the bank is amended, and in the pro- 
 posed Bill every such increaqp requires the consent of the Treasury 
 Board. (Section 26.) 
 
 An importment amendment anthoviases any Bank to reduce its 
 stock with the approval of the Treasury Poard, without the passing of 
 % special act being necessary, as at present. And in all cases in which 
 
— 10 — 
 
 legislation is asked to sanction any redaction of the capital Rtook, a 
 ntatement similar to that required to be laid before the Treasnry 
 Board, in the other alternative, must be filed with the Minister of 
 Finance and Receiver General at least one month prior to the intro- 
 duction into Parliament of the Bill relating to finch reduction. (Sec- 
 tion 28.) 
 
 Section 27 which deals with the allotment to shareholders of the 
 original uasabscribed stock, or of the increased stock of the Bank, 
 amends the present law by providing that in no case shall a rate be 
 IJxed by the directors, which will makt> the premium (if any) paid or 
 payable or suci. stock exceed the percentage which the reserve fund 
 of the Bank then bears to the unimpaired paid-up capital stock. 
 
 ^ fiHABBS AND CALLS. 
 
 Section 28 contains an amended provision to the effect that Bank 
 shares shall bo assignable or transferable not only in Canada and the 
 United Kingdom but also in any of the British Colonies or posses- 
 tions, and the directors may open books of subscription and make 
 dividends payable in any place or places in any such colonies or pos- 
 sessions, and may appf>int agents therein for such purpoaes. 
 
 Under the present Act no time is fixed within which the directors 
 are required to sell stock forfeited tc the Bank for non-payment of 
 calls. The proposed Act provides that such sale shall take iy\HOQ 
 " within six months after such stock has been declared forfeited to 
 the bank." The object of this provision, as also a similar enactment 
 with regard to stvck on which the Bank has a privileged lien, is to 
 prevent any part of its subscribed capital oeing long held in abeyancs 
 The effect of the double-liability clause is always weakened in pro- 
 portion to the number of sharei^ not outstanding ; and the basis of 
 circulation being the amount of paid-up capital stock a Bank, if it 
 held in abeyanca shares of insolvent debtors over which it had a lien, 
 might in time be issusng its notes against a capital, part of which had 
 virtually been paid up out of itself. 
 
 STOCK TRANSrSBS. 
 
 Of all the amer nents under this head, that contained in section 
 37 is by far the most important. It is in effect an addition to Can- 
 adip.n law of the most important provision of the Engiisb act, known 
 as " Leeman's Act," by which contracts for the sale of Bank shares are 
 void unless the numberu by which such shares are distinguished are 
 
— 11 — 
 
 get forth in thr contract of sale. The hand by which the proposed 
 Bank Act has been re-arranged is seen in this enactment. It is pro- 
 vided that: — 
 
 " All sales or transfers of shares, and all contracts and agreements 
 in respect thereof, hereafter made or purporting to be made, shall be 
 null and void, unless the person making puch faAe or transfer, or in 
 whose name or on whose behalf the same is made, shall be at the time 
 thereof the registered owner in the books of the bank of the 'share or 
 shares so sold or transferred, or intended or purported so to be, and 
 the distinguishing number or numbers of such share or shares (if any) 
 shall be designated in the contractor agreement of sale or transfer ; 
 and any person, whether principal, broker or agent, who sh&V violate 
 the provisions of this section by wilfully selling or transferring, or 
 attempting to sell or transfer, any share or shares by a false number, 
 or of which the pnacipal is not, at the time of such sale or attempted 
 Bale, the registered owner, shall bo guilty of an offence against this 
 act." 
 
 The intent of this clause is to prevent 'vhat are known as 
 "short ' sales, that is to say the buying or selling of shares, sub- 
 ject to future delivery, a species of speculative trading which, unfor- 
 tunately, fonstitntes the chief part of stock exchange transactions in 
 this advanced age of our civilization. It has been well remarked that 
 this amendment " will be geuerr lly regarded as desirable, in that it 
 8.urroundfi speculation in bank shares with whoJesom§ restrictions 
 and lessens the danger of " bear " movements on the stock and credit 
 of these institutions in periods of ;fiaancial striugen y and trade de- 
 pression. It matters little how operations are conducted in miscel- 
 laneous securities, but the bank shares list ought to ba protected from 
 the devices of wreckers." 
 
 I have seen it stated, in one of our most prominent " dailies," 
 that this enactment calls for the numbering of Bank shares. This 
 statement it is perhaps well to deny. The words " if any " inserted 
 within brackets, should have led thn writer to the concluiion that 
 snch numbering is to be entirely optional with the Bank. 
 
 ANMtJAI. 'UDIT AND INSPIBCTION. 
 
 We have arrived at a point in the Bill under discussiop which can- 
 not fail to be a halting place in the passage of the Act through its 
 final stages. Section 47 provides for the auditing of the acpounts of 
 
I* ' 
 
 I 
 
 wmmm 
 
 — 12 — 
 
 the Bank at least once a year by two or more auditors appointed by 
 thn ghareholders, not being oflBcers or directors of the Bank. This is 
 an application of the EngliBh Act of 1879, sec. 7 to Canada. It may 
 well be asked will this clause be useful or will it be mischieyous ? At 
 least one Canadian Bank at the present time audits its accounts yearly. 
 The last auditors' report of this Bank was signed and deliveied with, 
 in a day from the closing of the books, and a glaring error embellished 
 the statement. 
 
 I will leave this clause to be further amended, or to be "examined 
 and found correct," to pass lightly oyer the amendments to be found 
 under the heads next following. 
 
 DIVIDENDS iMD NOT! ISSDI. 
 
 Section 49 provides for quarterly as well as for half-yearly divid- 
 ends, according to the discretion of the directorial board. 
 
 In section 53, sub-section 2, the penalties now imposed for over- 
 i-isue of circulation are subjected to an increase, while in the follow, 
 ing section notes issued for circulation are declared to be^ as at present, 
 a first charge on the assets of the Bank in case of its insolvency. A 
 question heretofore in doubt, until carried to the Privy Council for 
 solution, is then laid at rest by the enactment that the payment of 
 money due to the Government of Canada shall be a second charge and 
 that due to Provincial Governments a third. 
 
 THl BANS OIROULATION BIDHMPTIOK rOKp. 
 
 The provision to which I am now called upon to draw attention 
 is of a nature to require greater space than is at my disposal if a 
 criticism, tavorable or otherwise, were required of me. Here is to be 
 found tbv^ most important change in the proposed Bill, a change whose 
 aim is to be highly commended, that of providing a guarantee fund for 
 the immediate redemption of the notes of a suspended bank. All banks 
 will be required to deposit with the Government two and a-half per cent 
 per annum for two yoars on their average circulation for that purpose, 
 and in the event of this fund being impaired at any time, such im- 
 pairment is to be immediately made good. " The weak point of this 
 provision is that in the event of the suspension of a large bank, or of 
 several small cjies, the fund might be quite inadequate to meet the 
 demands upon it, and there is no limit to the additional amount the 
 remaining Banks might be called upon to contribute. Whether the 
 
— 13 — 
 
 Iiegislatare will be able to pat this clause upon a more equitable foot- 
 ing remains to be seen." 
 
 r 
 
 BIDIMPTION or NOTIB. 
 
 Section 66 requires that the bank makes such arrangements as may 
 be necessary to ensure the payment of its notes at par at the chief 
 places of business in each Province. No penalty, always eaye that of 
 forfeiture, is attached to this clause, but the result must be that all 
 bank bills will ererywhere pass at par. 
 
 In th's connection it must be noted that a weakness is apparent 
 in the wording of this section. No more seems to be really intended 
 than that the bank shall make arrangements to insure the redemption 
 and payment of its notes at the cities of Halifax, St. John, Charlotte- 
 town, Montreal, Toronto, Winnipeg and Victoria, and at such other 
 places as the Treasury Board may designate from time to time. 
 Banks whose Head Offices are not situated in such places must also 
 redeem at their chief place of business, as is elsewhere (section 67) 
 provided. But at first reading, it would appear that the Bank is to be 
 called upon to establish agencies in every part of the Dominion. It 
 might be well to re-consider the reading of this section, and to strike 
 out, M surplusage, the words << payment at par iii any and every part 
 of the Dominion of Canada of all notes issued or re-issued by it and 
 intended for circulation, and for this purpose the bank shall establish 
 agencies for." 
 
 Section 60 amends the law as at present in force, by providing that 
 at least one signature to each bill or note must be in the actual hand- 
 writing of a person authorized to sign such bill or note. This will 
 be a protection to the bank in case any of its notes are stolen before 
 completion and issue. 
 
 BUSINB88 AND POWIBS OF TBB BANK. 
 
 An amendment of considerable importance, proposed by the Bill 
 under consideration is to be found in section 76, and relates to loans to 
 wholesale dealers, shippers and manufacturers. In the present 
 Act it is provided that warehouse receipts may be granted by certain 
 dealers and manufacturers who, although owners, may issue Buch re- 
 ceipts for goods in their own possession, as security for loans obtained 
 from the Bank. At the suggestion of bankers generally, an extension 
 of this power has been granted by the proposed Bill. The amendment 
 is a sweeping one, " practically converting every manufacturing 
 
— 14 — 
 
 establishment into a bonde<i warehouse, and giving to tho Bank a 
 praferential lien on all goods contained therein upon which money 
 has been loaned. The effect of this provision Is to introduce the sys- 
 t«»m of chattel mortgage into all the provinces, and to place Banks in 
 the poeition of preferential cr'iditors in respect of the merchandise of 
 wholesale manufacturers and producers." Exactly how far the Do- 
 minion Government may go in thus interferring with the civil rights 
 accorded by law to the unpaid vendor, in this Province, or the neces- 
 sity of registration required in other Provinces, where a chattel mort- 
 gage is a recogjiized e« curity, will be qiiestions for Courts to decide, 
 for they aro certain to be raised by third parties who find themselves 
 bringing up the rear in the participation of the aseets of an insolvent 
 creditor. 
 
 RBMAININQ AMEMDMRNTS. 
 
 I have now reached a point at which I may safely withdraw atten- 
 tion from particular sections, and summarize the less important 
 changes which follow. 
 
 Returns must be made up and sent in within the first fifteen days 
 of each month. The present Act allows twenty days. 
 
 Insolvency will insue if the Bank suspends payment for ninety 
 days consecutively, or for ninety days at Intervals within twelve con- 
 secutive months. 
 
 All dividends and deposits with the interest due thereon, not 
 claimed or called for within eight years, must be paid over to the 
 Government "for the public uses of Canada." In this connection a 
 .writer in the public press rather uncharitably remarks that : — 
 
 '• It ifl a wonder that the honorable Finance Minister forgot to 
 claim the stock as well as the dividends. He will proba,bly supply 
 this omission in committee, if the clause is allowed to reniain " " A 
 clause," he adds,\ " requiring the banks to advertise such deposits and 
 dividends after five years would be much more likely to find the 
 claimants, if that is the object^ of the Government." 
 
 An amendment has also been made affecting private bankers, with- 
 drawing the right to use the words *' bank," " banking house," " bank- 
 ing company," banking association," or " banking institution." At 
 present these words may be used, by way of title, if followed by the 
 notice " not incorporated." 
 
 The last and most important of the amendments is that requir- 
 ing the Bank to pay wherever presented, and without any charge or 
 
— 16 — 
 
 discount, all official cheques of the Dominion of C-nada, whether 
 drawn on itself or on another Bank, and this without limit as to 
 amount. This olau.se callH for further amendment. A «mall bank 
 receiving a call from one of its minor agencies to remit $50,000 to 
 enable such .rgeLcy to do its duty, would have to do a little financing 
 for the benefit of the Government and another Bank, awaiting the re- 
 ceipt of the official cheque to recoup itself. 
 
 QOViSaNMBNT RBTDRN8. 
 
 The schedule of liabilities and assets has been altered so as to give 
 effect to amended clauses. The new form seems an improvement on 
 the present form, but will entail «.an enormous amount o^ labour on 
 the head office of a bank having thirty or forty agencies." One clause 
 calls for '«th' greatest amount of drculalion during the month" 
 Another requires a statement of municipal debentures held, but no 
 statement appears necessary of the " stock in chartered corporations." 
 
 Such are the changes and ameliorations to be made in the existini- 
 law respecting banks and banking. It is sincerely to be hoped that 
 due consideration will be given in Committee to each and everyone 
 of the amendments which propose a radical change in either the law 
 or the practice of Banking. 
 
 Frank Wbir. 
 
w 
 
COMMENTS OF THE PRESS 
 
 •ON — 
 
 IVeirs L(tw & Practice of Banking 
 
 A work from the pen ({' a ^vritcr air .;uly veil known lu the commer- 
 cial press. A carefully compiled analytical index of 35 pape^ ren'.iers 
 this work extremely valuable as a book of reference, ilie itiaumerable, 
 points considered \^<:\\^\1^ thus rendered easy of access to the reader. We 
 heartily recomrnci'J Mr. Weir's vohimL'. to those for whose a^'iistancc it 
 is primarily intended : Banks ,in«l their shareholders and customer-;. — 
 Trafe. Rt.'ieiv, Ahn real. 
 
 The author is a distinjvuished graduate' of McOilJ University and a 
 son of Mr. Wni. Weir, President of the Ville Marie Rank. Mr. Weir 
 has been a \alued contribuior to the commercial press, ano. by his educa 
 tioiiand practical experiL-nce, is well futed for the task he has undertaken. 
 The work is Dominion in its scope, and from the care taken in selecting 
 and considering its va-ious poinis, — covering "jcK) pages, — will be of 
 valuable assistance to bank officials. This treatise has been well received 
 by the commercial press and iii banking and legal circles. — Daily Star, 
 Montreal. 
 
 It aims to supply a ready boou of reference upon all points of the 
 law relating tu banks anil their dcaHngs with the commercial community, 
 for the use of all who in their daily business have found the ever recurring 
 need of such a text -book. The Bank Act is cited at length, and is 
 followed by the author's commentary, in which every section of the act 
 is dealt with in a lucid and coaiplete exposition of the legal propositions 
 which it contains, ti)getl)er with references to the decided cases whirh 
 support the text. It brings the law down to date, and is based on our 
 own revised statutes. — The Gazette, Montreal. 
 
 ■ , '.V' 
 
T H E 
 
 LAM^ AND PRACTICE 
 
 OF 
 
 Banking Corporations 
 
 UNDER DOMINION A C TS. 
 
 BY FRANK WEIR, B.CL 
 
 AI)\'0' A IE. 
 
 JOHN LOVEI,L & SON, 
 
 MONTREAL. 
 
 Over Eight Hundred Copies of this vahiable work are now in u.-.e in 
 Banking and Mercantile circles. No other similiar Canadian puh'icatitm 
 has reached so extended a circulation. The volume is handsomely bound 
 in half-calf — law binding, — and contains tive hundred octavo pages. 
 
 FOR SAI.K 1!V 
 
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 And all Booksellers. 
 
 Price $4 00. 
 
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