Mr. WHITE:

I think it was all from

the bankers, but I think they showed to the satisfaction of the committee that this legislation was in favour of the shareholders and I think it was not shown that there had been any abuse of it. Bunk shares being what are known as ' book ' shares, that is, transferable only on the books of the bank, the shareholder who obtains a loan from the bank would not be able to hypothecate his stock to obtain another loan outside without actually making the transfer into the name of the lender upon the books of the bank, nor to sell without giving a power of attorney to transfer into the name of the purchaser. So, I think the legislation is not liable to abuse, and oases of abuse have not been brought to my attention.

Mr. CARVELL:

I have no strong feeling in this matter, nor have I any particular interest, for I do not own bank stock and I do not suppose I ever shall. I do not know to what extent the banks use this power. But everybody knows that bank stock is considered good security, and it seems unreasonable that the value of it should be reduced by a clause which allows a bank to have a first lien 'upon it for a debt which the owner might owe to the bank, I have never even heard of a case in which this right was abused except one, in which there was danger of doss to the bank lending on its shares. It may be a great advantage to the holder of bank stock to be able to borrow without giving security. It is a sort of underhand transaction, but the minister meets it so fairly that I cannot but admire his honesty, and I suppose the banks put it as fairly before the committee. As I say, I have no strong feeling upon the subject, and if the committee think it well to allow- this clause to stand, I have no fault to find.

Mr. AMES:

Before the Banking and

Commerce Committee the evidence was given by four or five bankers each of whom stated that this right had not been abused. One said that he had never heard of a case, and another said that in an experience of forty years he had known of but one case. The bankers seemed to assume a rather indifferent attitude as to the retention of this clause. It is not for them it was put in, but really for the sake of the shareholders. The shareholders of a bank number, quite commonly, three, four or five thousand people scattered throughout Mr. WHITE (Leeds).

the country. It is a great convenience to these shareholders to be able to negotiate small loans with the bank without collateral security. It tends to popularize bank shares, which is -a good thing for the country, because we find it difficult to secure banking capital enough for Canada's commercial expansion. This is an attraction in bank shares which offsets to a certain extent the disadvantage of the double liability. I know how the shareholder feels in this matter, because I come into constant contact with them. I know it is a great convenience to a Shareholder to be able to go to the bank and borrow to cover an overdraft without giving collateral security which he has to endorse over to and leave with the bank.

Mr. OLIVER:

Is it not a fact that every bank disaster that has taken place has been caused by shareholders securing too great a share of the funds of the bank? Would it not greatly secure the deposits placed in our banks if shareholders were absolutely debarred from borrowing money from the banks in which they hold shares?

Mr. AMES:

That would certainly be a

drastic measure. No more effective way could be taken to make the securing of shareholders an absolute impossibility.

Sir WILFRID LAURIERI do not

exactly understand the whole of this subsection. This part of it is clear:

Unless the person making the transfer has, if required by. the bank, previously discharged all his debts or liabilities to the bank-

But what is the meaning of the rest of the clause?

-which exceed in amount the remaining stock, if any, belonging to such person, valued at the then current rate.

I think it should be stated without qualification that no person should be allowed to transfer stock unless he has discharged the full amount of his liability to the bank.

Mr. WHITE:

Section 77, which is connected with this particular matter, reads in part as follows:

The bank shall have a privileged lien, for any debt, or liability to the bank, on the shares of its own capital stock, and on any unpaid dividends of the debtor or person liable, and may decline to allow any transfer of the shares of 6uch debtor or person until the debt is paid.

Sub-section b of section 43, to which my hon. friend has referred, says that no transfer of the shares of the capital stock of the bank shall be valid unless:

The person making the transfer has, if re* quired by the bank, previously discharged all his debts or liabilities to the bank which exceed in amount the remaining stock, if any,

belonging to sucli person, valued at the then current rate.

If a stockholder has fifty shares and desires to transfer twenty-five, before he can make that transfer he must previously have discharged all his indebtedness or liabilities to the bank, which exceed in amount the remaining stock, namely twenty-five shares. The theory is that the bank should be entitled to retain a lien upon sufficient stock to cover the liability of the shareholder to the bank. .

Sir WILFRID LAURIER:

It is not unfair to the shareholder, when he desires to transfer his stock, to be told without qualification or restriction: You must discharge all your liability to the bank; but some complications may arise if you allow the clause to remain as it is.

Mr. WHITE:

No change has been made in this particular clause, and I think it will work out in the future, as it has done in the past, satisfactorily. It simply puts the bank in a position to say: You owe us $5,000: you propose to transfer all your shares, and we object to that. We will allow you to transfer a number of your shares, but you must allow a sufficient number to remain in your name to give us a continuing lien to cover the amount of your indebtedness.

Mr. OLIVER:

I asked the hon. member for St. Antoine (Mr. Ames) a moment ago if it was not a fact that in all cases the wrecking of banks has been caused by the borrowing of money from the banks by the shareholders?

Mr. AMES:

By no means.

Mr. OLIVER:

Have not a large majority of the wrecks occurred as a result of that condition?

Mr. AMES:

No.

Mr. OLIVER:

Have any bank wrecks occurred for that reason?

Mr. AMES:

Yes.

Mr. TURGEON:

I have had several letters from managers of banks in the small country towns in northern New Brunswick, who claim that they should be allowed to retain the privilege of engaging in insurance business. I believe that as a rule a great deal of the insurance business in our small towns has been carried on by th6 bank managers, as our merchants have not the time to devote to it. A single individual cannot carry on the business with any reasonable degree of profit, and it naturally falls into the hands of the bank managers,

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who have time to devote to the business. I would move, therefore, that section 146 be amended by striking out sub-section 2 thereof.

Mr. OLIVER:

I would make the suggestion that the banks pay their managers a sufficient salary, so that they will not require to engage in other business.

Mr. SHARPE (North Ontario):

When

this clause was under discussion in the Banking and Commerce Committee, the-amendment offered by the hon. member for Carleton (Mr. Carvel!) was flung rather hurriedly upon the committee; it was not discussed for a very great length of time, and the bankers and bank representatives lid not oppose it very strongly. It struck me during the discussion that, while the banks were very jealous of all their rights, when it came to small managers in small districts, they were willing to let them suffer.

I am free to confess that I voted for the amendment embodied in sub-section 2, but upon reconsideration of the matter I think it would not be in the best interests of the bank managers who are drawing small salaries in some of the outlying districts.

I do not know 'that any persons in my constituency would be affected by its application, but I have had a number of-communications from men outside of my constituency in reference to the matter. One of them is to the effect that one of the bank managers has built up an insurance business that means more to him than his salary as. manager. Although he has been with the bank for twenty-two or twenty-three years, he would under the operation of the Act, and because the insurance is the best portion of his business,., have to give up his managership, sacrifice his right to the pension fund, and continue the insurance portion of his occupation. This letter, which is dated May 13, 1913, says in part:

Banks like the little Western, which could' not pay big salaries, let their agents act as agents for insurance, and some of them have built up very substantial offices. One of them writes me that he will have to give up the bank, as the insurance is the best end, and that means a loss of salary and 28 years' service with the institution and the pensions that go with it.

I think it is a fact that there are very few bank managers throughout the country who are engaged in the insurance business, but it seems to me it would be a great hardship to deprive them of the opportunity of adding to their incomes in this regard. I think some good results would be obtained if the banks wrote to their managers at the local centres and asked them for a report with regard to the insurance business they were carrying on. The Finance Minister might ask the.

bank to make a special report in connection with the matter, with a view to rectifying any abuse which may exist. Upon reconsideration, I am disposed to support the motion to strike out this clause.

Mr. WHITE:

Personally, I think the

principle underlying this legislation is sound, although I believe it is drastic, having regard to the conditions which exist, and to which I shall refer a little later on. The complaints that have been made are, in substance, this: A bank manager is the trustee of the bank's funds, having under his control the making of loans to customers. Of course that puts him in a position to compel a customer to effect insurance in the company with which he is connected, and that constitutes a very valuable franchise in his hands. If he were loaning his own money as a private banker, I think it would be proper for him to say: Now I will make you a loan, but only on the condition that you place your insurance with the company which I represent. But he is not in that position. He is in the position of loaning the funds of a bank. In other words, he is a trustee or agent. Now, some of the banks have absolutely prohibited their managers from engaging in the collateral business of insurance, and as I have said, I think that is a sound policy for the banks to adopt.

Mr. CARVELL:

Can the minister give

me the name of any bank which is doing that?