tion." The law, however, gives him no right of examination, and the government maintains no inspecting force. In addition to the monthly returns, each must make report once a year as to its dividends, drafts, and bills of exchange that have remained unpaid for five years, and the names and residences of its shareholders. This information, as well as the monthly returns, is given to Parliament and the public.

CANADIAN BANKERS' ASSOCIATION.

The Canadian Bankers' Association is an incorporated body with powers and duties prescribed in an amendment to the bank act passed in 1900. Each chartered bank is represented in the membership and has one vote. The association is required by law to supervise the issue of bank notes and to report to the government all overissues, to look after the destruction of worn and mutilated notes, and to take charge of suspended banks. Its headquarters are in Montreal in the Bank of Montreal building, and its active executive officer is the secretary-treasurer. The expenses of the association are apportioned among the banks and do not apparently constitute a very heavy burden, for the secretary has an exceedingly small staff. All expenses incurred by the association on account of a suspended bank are, of course, a charge against the assets of the bank.

When the notes of a bank are so worn or mutilated that it wishes to replace them with new notes, notice is sent to the secretary of the association, a date is fixed, and in the presence of the secretary the old notes are duly

counted and taken to a furnace," where they are consumed in the presence of the secretary and other witnesses. After this solemn operation has been performed and the signatures of all parties observing it have been duly attested, new notes are issued by the association to replace those that have been destroyed.

The clearing houses in the Dominion are subject to regulation by the association. It also has the power to establish subsections and to do educational work by providing for lectures, competitive papers, examinations, etc. The Journal of the Canadian Bankers' Association, a monthly publication of excellent quality, is edited by the secretary and is at present the only educational force at work among bank employees.

a Each bank maintains one such furnace for this purpose. A wire netting over the chimney prevents the draft from carrying any portions of the consumed notes into the air.

CHAPTER III.

THE MANAGEMENT.

The keynote of the organization of a Canadian bank is the centralization of responsibility. One man, the general manager, is supreme. Above him in authority under

the law are the directors, representing the stockholders. Below him is an army of employees, of whom all but two or three owe their positions entirely to his favor.

The general managers of Canadian banks are, without exception, men who have been in the banking business since boyhood. They have worked their way up through all the grades of employment by the force of brains, industry, character, and good health. They know from experience the task of every employee and they know when it is well done. They hold their positions because they have proved their fitness. They are, in other words, professional bankers. Untrained outsiders can not break into the banking business as they do in the United States.

The president of a Canadian bank is merely the chairman of the board of directors. This body holds meetings at least once a week. At these meetings the general manager reports on the business of the week and presents such applications for new credit as seem to require the approval of the board. As a rule, the general manager gives to the directors, either orally or in typewritten form, full information with regard to all the operations of the bank. His recommendations as to the granting of credits

are usually approved without much discussion, yet in Canada it is expected of every bank director that he shall give close and personal attention to the bank's operations as reported by the general manager and promptly raise objection whenever in his judgment a mistake is being made. All extensions of credit are reported by the general manager and must be formally approved by the board. Members of the board can not personally investigate individual cases, and are therefore obliged to place great reliance upon the judgment of the general manager. Nevertheless it is expected of each director that he shall always be well informed as to the important operations of the bank, as to its general policy, as to the amount of its cash reserve, the nature of its investments, etc.

The directors are not forced to rely entirely on the general manager. An officer called the "chief accountant" is expected to know quite as much about the bank's affairs as the general manager himself, and is often present at the board meetings. If the general manager misrepresents any transaction, or fails to reveal to the board the true condition of the bank, the accountant is expected to correct him. In some of the larger banks the board of directors has deemed it wise to place in the head office still another man to represent them, having full power to acquaint himself with the details of all transactions. This man is usually given some routine duties to perform, yet his prime function in the head office is as a representative of the board of directors. The appointment of such a man does not imply any lack of confidence in the general manager, but is justified rather by the belief that the general

manager, with two good advisers, will be less liable to an aberration of judgment than if he has only one.

The other general or "chief" officers, with headquarters in the "head office," are the superintendent of branches, the inspector, and the secretary. The superintendent is the general manager's right-hand man and is usually in very close touch with his chief and in sympathy with his general policy. The superintendents of the larger banks have the assistance of deputy and department superintendents.

The inspector is at the head of the bank's system of examination. He and his assistants visit the branches at irregular intervals, counting the cash and examining the discounts and other assets. As a rule they are keen to find something to condemn or criticise, and branch managers and their subordinates seem to regard them with considerable fear and respect. Canadian banks are not subject to government inspection, and bankers maintain that no inspection by an outsider could be as thorough or salutary as that which results from the present system. The expenses of the inspecting staff of some of the larger banks amount to $80,000 a year.

Theoretically the board of directors is superior to the general manager and can bring him to a halt if he enters upon any policy of which they disapprove. In practice, however, the general manager of a Canadian bank knows so much more about the banking business than any one or all of the directors combined that if a conflict of opinion does arise between the board and himself, the chances are that he will dominate. Yet in most of the banks it would be very difficult for the general manager from improper 31870-10-3

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