History Early Canadian banking system

20 dollar note, bank of montreal, 1817

in 1817, montreal bankers granted charter british government open first formal bank in canada. bank of montreal. under charter, bank of montreal given monopoly on right issue promissory notes on model of army bills. because of monopoly rights, bank of montreal acted central bank both upper , lower canada.

in years after 1817, britain granted several new bank charters, including charter now-defunct bank of kingston, act competitor bank of montreal in upper canada. new chartered banks required under terms of charters recognise 1 s currency, practice allowed development of long-distance trade within british north america. however, banking remained in private hands, meant issue of currency @ discretion of private bankers. led high inflation when infant canadian economy in recession.

4 dollars, bank of montreal, overprinted provincial note

the provincial note act passed in 1866 link note issue needs of british administration. marked beginning of enduring policy of government intervention in canadian economy. british north america act of 1867 formally codified policy, allowing government control on coinage, currency, bills of exchange, promissory notes, banking, , incorporation of banks. in turn allowed creation of uniform currency across canada. official canadian currency took form of canadian dollar in 1871, overriding currency of individual banks.

after confederation, canada developed banking system different of united states. whereas united states served large number of small banks serving 1 town or, @ state, canada s banking sector came dominated few banks transcontinental branch networks. canadian system promoted stability , produced far fewer bank failures either contemporary united states or australian banking systems. downside of canadian banking system was less competitive united states , australian systems, meant consumers paid more banking services. legal foundation of canadian banking system consisted of series of laws passed in 1870 , 1871.

banking remained relatively decentralized until 1935, when bank of canada founded in response economic instability experienced during great depression in canada. first opened on december 5, 1980, canada s currency museum located on ground floor of bank of canada in ottawa, ontario.