1907, was probably due to the desire of Canadian banks to increase their cash holdings, coupled with a rather wellfounded distrust of the New York situation. After the October currency panic in New York the foreign call loans of the Canadian banks show a steady increase. They were at the lowest point in November, 1907, being then $41,000,000. By December, 1908, they had risen to $95,000,000. During the same period the cash reserve advanced from $81,000,000 to $97,000,000. This great increase in the cash and secondary reserve was due to the quietude in Canadian trade and industry as a result of the panic of 1907. Current loans in Canada declined from $580,000,000 in October, 1907, to $512,000,000 in December, 1908. (Chart I, p. 48.) Canadian banks were suffering from a glut of idle money. Their net liabilities during the last six months of 1908 increased from $700,000,000 to $760,000,000, and their cash reserve from $79,000,000 to $97,000,000. Here was a gain of $72,000,000 in deposits and of $18,000,000 in the cash reserve. As the current loans in Canada during this period were steadily growing less, having declined $50,000,000 during 1908, it is evident that the gain in deposits must have been accompanied by an increase in the cash resources of the bank and that the only available outlet for this surplus was the call-loan market in New York City and elsewhere. As a result of these operations there was, of course, a considerable gain in both the cash reserve and in the secondary reserve in the latter part of 1908. The ratio of cash reserve advanced from II per cent in the beginning of the year to 13 per cent at the close. The total reserve

rose from 31 per cent at the beginning of the year to 41 per cent at the end. These figures mean a very easy money market in Canada, too large a proportion of banking resources being in cash and call loans. The banks would gladly have reduced their call loans in New York City during these dull months in 1908 if they could have found profitable use for the money in Canada.

CHAPTER VII.

OPERATION OF THE SYSTEM.

The 7,500,000 people living in Canada are engaged in gainful pursuits very much like those which give support to the inhabitants of the United States. Agriculture, lumbering, mining, and fisheries are the most important industries, but manufacturing, stimulated by a moderately protective tariff, is making rapid progress. Capital at the rate of $200,000,000 a year is coming into the Dominion from England and Scotland. From the United States are coming both money and men at such a rate that the western provinces are almost "American." Ontario is English and Scotch in ideals and customs. In Montreal and Quebec the population is largely of French descent. The population of the Dominion as a whole is intelligent, thrifty, and law-abiding, and nearly every Canadian is convinced that his country is the best on earth to work and live in, and that the development of its wonderful resources in the very near future is bound to astonish the world.

Great as has been the growth of Canada's population and wealth in the last ten years, the chartered banks have more than kept pace with it. The 36 banks in existence in 1900 had 700 branches, or one office for every 7,500 people. In 1909 the 29 banks in operation had over 2,100 branches, or one for every 3,600 inhabitants. The average of deposits per branch has declined from $453,000 in 1900 to

$336,000 in 1908. The banks maintain 50 branches outside of Canada-16 in the United States, 3 in England, 5 in New Foundland, 1 in Mexico, 24 in the West Indies, and I in Paris." Only a few of the branches in the United States are permitted to receive deposits under the laws of the States in which they are located. The branches in New York City are mainly concerned in foreign exchange transactions and call loans.

OLD BANKS GET THE NEW BUSINESS.

The decline in the number of banks from 39 to 29 during the last ten years has been in part the result of failures and in part the result of consolidations. Five banks have either failed or gone into liquidation since 1900. Three of them were institutions having small deposits and their failure was of little consequence. Two, the Sovereign Bank and the Bank of Ontario, were fairly large insti

a Of these 50 branches 15 are offices of the Royal Bank of Canada, 7 of the Canadian Bank of Commerce, 13 of the Bank of Nova Scotia, and 7 of the Bank of Montreal.

The Monetary Times of Toronto, in its issue of February 26, 1910, puts the number of branches then in existence at 2,214, distributed as follows:

tutions, one having 30 branches, the other 70. The liquidation of these was mainly due to the oversanguine and speculative temperaments of their chief managers, as is explained in the next chapter.

Eight banks have come into existence since 1900, but one of these, the Sovereign, is in liquidation, and two of the others, the Northern and the Crown, have been amalgamated. Some critics insist that the difficulties in the way of establishing a new bank are so great that the existing banks practically possess a monopoly. This criticism, however, is not altogether justifiable. A dozen or more new banks have been chartered since 1890, and there is no evidence whatever that Parliament has refused a charter to any set of deserving incorporators. The dividends of the chartered banks range from 4 to 13 per cent," most of them are accumulating large rest or surplus funds, and their stocks are selling at high prices. But other business enterprises in Canada are yielding higher rates of profit, and the amount of capital which men are willing to invest in a new bank is very limited. The real reason why more banks are not created in Canada does not appear to lie in the legal restrictions, but rather in the difficulty of finding the necessary amount of capital. The banking field is so well covered by existing institutions, and competition is so keen among them, that the prospects of a new bank are not as alluring as those of many other enterprises which invite capital. The population and business in Canada

a According to Doctor Breckenridge the average rate of dividend increased from 7.59 per cent in 1900 to 8.53 per cent in 1908; while the average per cent of dividend to total of capital paid up and rest has fallen from 5.01 to 4.81.