Bank of Canada

Throughout the whole of Canada, from Halifax to Victoria, from North Portal to The Pas, there are only eleven commercial banks. Canadian banking is branch banking in finest flower. But Canada is unique in that it has no central bank of issue, no Federal Reserve, no bankers' bank. Last week Premier Richard Bedford Bennett prepared to give the Dominion a quasi-public institution modeled after the venerable Bank of England.

The Bank of Canada is the legislative offspring of a Royal Commission's report on the Dominion's banking system. Last spring when Canada's Bank Act came up for its regular decennial overhauling, the furious farmers of the Prairie Provinces howled for a new system, for lower interest rates and "nationalization of credit."

Conservative Premier Bennett hastily got the Parliament to extend the eleven banks' charters for one year instead of ten in re turn for his promise to call a commission to study Canada's whole banking, currency and coinage system. Head of this com mission, which shuttled all over the Dominion holding public hearings last summer and autumn, was Hugh Pattison Macmillan, Baron of Aberfeldy (TIME. Aug. 28, Nov. 20). For ten years Lord Macmillan had been heading British com missions including the Royal Commission on Lunacy & Mental Disorder and the Home Office Committee on Street Of fences. His most publicized job was "The Macmillan Report," which he wrote as head of the British Treasury Committee on Finance & Industry and which became the only Blue Book ever to be published in Britain at a profit. After two months of probing Lord Macmillan recommended a central bank. The Bank of Canada, as proposed last week to the Canadian House of Commons, will have the usual tools of credit control -- the rediscount rate and the power to issue bank notes. Each private, chartered bank will be required to maintain on de posit with the Bank of Canada an amount equal to 5% of its own deposits. Each bank and the Dominion's Finance Department will turn over their present gold holdings (some $100,000,000 worth) to serve as a credit base. Taking a hint from President Roosevelt, Prime Minister Bennett wrote into his banking bill a clause empowering the central bank to seize any other gold within the borders together with a provision that any profits from eventual devaluation of the Canadian dollar will revert to the Government. The charters of the commercial banks will be renewed but their privilege of note issuance will be gradually curtailed, definitely ended in ten years.

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