Banking in Different Provinces
It is generally known that the Eastern branches get heavy deposits and are creditors of the head office, and that the funds they collect are forwarded to the Western branches, whose loans greatly exceed deposits. Bankers will admit that this transference of funds takes place, but there is considerable grumbling about it in the old communities of the East, and the bankers fear that a monthly or even annual publication of the facts would keep them perpetually in hot water. A glance at clearing-house statistics leaves no doubt as to the banking importance of the Western Provinces or as to the relative financial quietude of the East. Between 1900 and 1909 the total of Canada's bank clearings increased 227 per cent., but Halifax gained only 23 per cent., St. John only 90 per cent., and Quebec only 68 per cent. On the other hand, Toronto's clearings increased 179 per cent., Winnipeg's 600 per cent., and Vancouver's 524 per cent.
EASTERN PROVINCES HAVE SUFFERED
This transference of funds from sluggish to active communities is the inevitable result of a system of branch banking and is the cause of the tendency of the rate of interest toward uniformity in all parts of Canada. Whatever may be said against a system of branch banks, there can be no question that it does bring about a more even distribution of capital in a country than is possible under a system of independent local banks. Canadian bank managers are anxious to put out their money where it is most wanted, for there they get the best possible rate of interest and obtain paper of the best quality. No matter where a manager's headquarters may be, he is most deeply concerned in three questions: (1) Where is idle money accumulating? (2) How can he best draw it into his bank? (3) In what parts of the Dominion is money most needed? In localities of both kinds he establishes branches; in the one the branches accumulate deposits often much in excess of their loans, in the others the loans exceed the deposits. Thus it happens that the savings of the Eastern Provinces, where the growth of industry and trade is slow and the demand for new capital is not increasing, are sent westward and loaned out to merchants and manufacturers and farmers of the new territories. The people of the East supply the capital for the development of the West, though many of them perhaps are entirely ignorant of the useful purpose their savings are made to perform. In the western cities of Canada one hears no talk among business men about the scarcity of capital. A merchant or manufacturer in Manitoba gets the money he needs as easily as does the merchant or manufacturer in Toronto or Montreal.
Justifiable as the bank's policy is from a national point of view, one can not help believing that the branch banking system has really checked the development of business and industry in the maritime Provinces. If Canada during the last thirty years had depended, like the United States, upon independent local banks, there would have been a plethora of capital in the East, and Montreal, Quebec, and Halifax, like Boston, New York, and Philadelphia, would years ago have had 4 and 5 per cent. money, while Winnipeg and other Western cities, less populous than now, would still be paying 1 per cent. a month. The relative cheapness of capital undoubtedly helped build up the prosperous industries of Massachusetts. The same cause operating in the maritime Provinces of Canada would doubtless have led to the establishment there of industries of which the people under existing conditions have not ventured to dream.