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Bank Cash
Published online by Cambridge University Press: 07 November 2014
Extract
Structurally, one of the principal contrasts in Canadian banking between 1914 and 1938 is to be found in the accessibility of cash. In 1914 cash was available to a bank only in the same way that it was available to any other business concern which wished to avoid borrowing. A bank had access to cash only by disposal of its own assets and a change in the cash position of the system was almost wholly represented by a corresponding change in metallic reserves. Both an individual bank and the banking system had to be self-reliant as far as the maintenance of an adequate cash position was concerned, and for this purpose nest eggs were maintained at home or abroad. In 1938 cash is available to a bank, not only by the orthodox redistribution of its assets, but also by its access to the lending and rediscount facilities of the Bank of Canada. Moreover, cash may be forced on the banking system by definite action of the central bank, and changes in the cash reserves no longer correspond to changes in the gold holdings of the financial organization. In brief, the passing years have brought Canadian banks around to a point where an individual bank need no longer be wholly dependent upon its own resources for an adequate cash reserve and where the aggregate reserves of the system are not dependent upon the accessibility of metallic reserves.
- Type
- Articles
- Information
- Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 4 , Issue 3 , August 1938 , pp. 432 - 459
- Copyright
- Copyright © Canadian Political Science Association 1938
References
1 The term “bank cash”, as used herein, comprises legal tender gold and Dominion notes in Canada, owned by the chartered banks and acceptable in the discharge of their liabilities in Canada up to the establishment of the Bank of Canada in 1935. Thereafter it includes the chartered banks' holdings of the notes of, and deposits at, the Bank of Canada. Up to 1913 the condition statements of the banks did not segregate gold holdings at home and abroad and until that year “bank cash” necessarily included gold held abroad which was a supplementary cash reserve. Modifications in the definition of “bank cash”, arising out of occasional or unusual circumstances which could be cited, have been ignored but not overlooked in this paper.
2 For details of the Canadian legislation on currency and banking see the historical sections of the Report of the Royal Commission on Banking and Currency in Canada, Ottawa, 1933.Google Scholar
3 “Total gold” refers to gold held in the Dominion currency reserves and gold held in Canada by chartered banks. Inasmuch as the Dominion notes included in bank cash were virtually warehouse receipts for monetary gold held by the Dominion, the total gold held by the chartered banks and the Dominion (except a minor amount segregated for savings bank purposes) could all be regarded as the basic metallic reserves against bank liabilities.
4 “Total cash” refers to chartered banks' holdings of gold and Dominion notes in Canada; “free cash” refers to total cash, less gold and/or Dominion notes deposited in the Central Gold Reserve; and “net cash” refers to total cash, less advances under the Finance Act.