Financial History Issue 124 (Winter 2018) | Page 37
Canadian Banks, 1841–67
Number of banks
Currency
Capital stock paid up [000]
Liabilities
Promissory non-interest bearing notes
Cash deposits bearing interest
Cash deposits not bearing interest
Balances due other banks
Net profits or contingent funds
Dividends unpaid
Total other than stock
Assets
Notes and bills discounted
Coins, bullion and provincial notes
Balances due from other banks
and foreign agencies
Other debts due to the bank
not included elsewhere
Government securities
Landed or other property of the bank
Promissory notes or bills of other banks
Total
1841 1851 1861 1871
9
£ 8
£ 16
$ 19
$
2,276.7 2,897.6 24,411.0 26.618.7
919.0
54.9
786.5
340.8
146.4
21.0
2,268.6 1,623.4
565.3
1,623.4
271.6
59.8
0.9
3,647.5 11,780.4
9,545.3
9,176.0
444.1
0
0
30,945.8 8,312.4
14,765.9
13,938.4
2,771.9
0
0
39,788.6
3,282.2
392.5 5,574.0
413.4 39,588.8
4,960.4 48,158.4
7,384.2
203.6 218.5 4,157.3 5,068.6
0
24.7
46.1
148.3
4,097.4 0
43.8
135.3
144.4
6,529.4 4,064.4
2,736.0
1,429.3
1,136.2
58,072.4 2,297.4
6,142.6
1,510.6
1,651.8
72,213.6
Source: Breckenridge, page 85
Adam Shortt argues that the bank’s
restriction of operations may have done
more damage than a temporary suspen-
sion of payments would have because it
brought legitimate trade to a standstill,
preventing a recovery. He contrasts this
with the United States banks, which sus-
pended payments but managed to facili-
tate a recovery under normal trade con-
ditions without abnormal restrictions of
their discounts. The Panic of 1857 is cited
as the beginning of the end for the Bank of
Upper Canada, the oldest bank in Ontario,
which failed in 1866.
The Canadian banking system grew
and prospered in spite of the panics.
While there were no new banks until the
mid-1850s, by 1867 there were twice as
many banks as there had been a quarter
century earlier. In 1868, the Commercial
Bank was absorbed by the Merchants
Bank, and there were a number of other
smaller failures, including: the Zimmer-
man Bank; the Bank of Western Canada,
which was wound up in 1860; the Bank
of Brantford, withdrawing from business
in 1863; and the short-lived International
and Colonial Banks in 1859. All of these
failures were caused more by “mistakes
and misapprehensions, peculiar to the
institutions directly involved” rather than
to “world-wide…financial and speculative
upheavals.”
The accompanying table provides a
picture of Canadian banking progress
between 1841 and 1867. The dramatic
growth as evidenced by the increase in
paid up capital stock is striking. A notable
feature is the shift from British pounds (£)
to Canadian dollars ($). On the liability
side, what is most striking is the dramatic
increase in deposits, particularly those
bearing interest. On the asset side, what is
noticeable is the increased diversification.
While discounted notes and bills are still
the major asset class, there has also been
terrific growth in government securities.
What is less obvious is the need for flex-
ibility in notes because of the highly-cycli-
cal nature of the economy with demand
peaking in September and October and
the trough typically occurring in May.
Another feature to note is the dramatic
increase in government securities, often to
support railway enterprises.
Another notable feature was the dra-
matic increase in bank branches from just
a handful in 1840 to well over 100 in 1867.
Most of the branches were in Ontario with
less than a dozen in Quebec, nine in the
Maritimes and two in British Columbia,
which was not yet part of Canada. The
Bank of Montreal alone accounted for
over one-third of all branches — primarily
in Ontario, but by 1867 in Atlantic Can-
ada, including St. John’s and Halifax.
The late Christopher Kobrak was the
first Wilson/Currie Chair of Canadian
Business and Financial History at the
Rotman School of Management at the
University of Toronto and a professor of
finance at ESCP Europe, Paris. An inter-
national fellow at the Centre for Corpo-
rate Reputation, Oxford University, he
served on the editorial boards of several
business history journals.
Joe Martin, formerly the partner in
charge of a large Canadian management
consulting firm, is the director of the
Canadian Business & Financial History
Initiative at the Rotman School of Man-
agement at the University of Toronto and
president emeritus of Canada’s History
Society. He currently serves as the found-
ing president of the Canadian Business
History Association.
This article was adapted from the forth-
coming book, From Wall Street to Bay Street:
The Origins and Evolution of American and
Canadian Finance, by Joe Martin and Chris
Kobrak (Rotman-Utp Publishing, May 2018).
Editor’s Note: For more on Canadian
banking, see Bank of Montreal Bicenten-
nial (FH #120, Winter 2017) and Profit
From Prudence: How Canadian Banks
Avoided the Recent Finance Crisis (FH
#106, Spring 2013).
www.MoAF.org | Winter 2018 | FINANCIAL HISTORY 35