The Early History of Canadian Banking

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  • THE


    Origin of the Canadian Banking System ^


    ADAM SHORTT, M.A.Queen's University,


    TORONTOJournal of the Canadian Bankers' Association

    : 1896. 'i .

  • THE


    Origin of the Canadian Banking System


    ADAM SHORTT, M.A.Queen's University,


  • 3



    T^HE history of banking in Canada, as in other countries, isbut one phase of the general economic history of the people.

    Banking operations are so wholly dependent upon the commer-cial habits and ideas of the people, the character of their busi-ness and the nature of their occupations, that they cannot bestudied with much certainty or profit apart from the generaleconomic atmosphere in which they are carried on. It will bemy purpose in these articles to set forth, as fully and as accur-ately as the material which I have been able to gather will per-mit, the origin of the Canadian banking system, the earlyhistory of the first banks, particularly those of Upper Canada,and their relations to the economic condition of the country atthe period of their introduction.

    The present article deals with the origin of the Canadianbanking system.

    In treating of banking in Canada Httle attention hashitherto been given to the question of its origin. So far as ithas been looked upon as other than a native growth, Scotlandhas commonly been credited with its parentage. At first sightthis conclusion seems so natural and obvious as to be hardlyworth questioning. From the very infancy of Canadian bank-mg Scottish names have been chiefly associated with its growthand expansion. Moreover, prominent external resemblances,particularly in the feature of branch banks, seem to closely relatethe two systems on the one hand, while distinguishing them fromtheir nearer neighbors on the other. Closer inspection, how-ever, and especially a slight acquaintance with the history ofthe two systems, soon show us that the resemblance is merelyaccidental, or at the best only to be attributed, in the course oftheir development, to a community of national temperament in


    the persons of the most influential managers. Evidence of themost direct kind shows that the Canadian system was derivedfrom quite another source. But since its origin has been attri-

    buted to Scotland, it may be as well to make a few observationson the negative side.

    Though the Canadian system was established largelythrough the influence, and under the direction of persons ofScottish nationality, yet it does not follow that these persons

    were prejudiced in favor of Scottish examples. The richestnational individuality is that which is capable of absorbing thewidest range of foreign experience without losing its character-istics. It is matter of common observation that the pro-

    nounced individuality of the Scotchman is almost invariablyaccompanied by the widest cosmopolitanism. The Scotch-man's capacity, in every region of the world, to adapt himselfto circumstances, or more often to induce them to meet himhalf way, is proverbial, and mainly because m so doing he onlyin:ensihes his national identity. The Scotchmen who were soprominent in the early days of Canadian commerce, did notattain to that position by any special adherence to Scottishexperience. Few of them had much occasion to be familiarwith the mechanism of exchange before leaving their nativecountry, otherwise Canada had never known them. Their com-mercial experience was gained on this side of the Atlantic.Even after they became extensive traders, there were few occa-sions in which they had any direct intercourse with their coun-trymen in Scotland. The Canadian trade was almost whollyconfined to New York and the New England States, and theWest Indies, on this side the Atlantic, and London, with a fewother English towns, on the other. So late as 1823 the ship-ping Hsts show only rare arrivals from any Scottish port.

    But even had the Canadians been familiar with Scottishbanking, at the time they were forming their own ideas on thesubject, they would hardly have been likely to take the Scottishbanking of that time as a model. That was the period of thegreat struggle with France, from 1793 to 1 815, during whichboth Eng