Hon. R. J. MANION (Minister of Railways) :

I beg to lay on the table of the house a report of the work performed and the expenditures made, as of December 31, 1933, together with the estimated expenditures for 1934, under authority of chapter 12, statutes of Canada 1929, of construction by the Canadian National Railway Company of certain terminal facilities, with grade separation and other works at and in the vicinity of the city of Montreal.

Mr. MACKENZIE KING:

Will the minister explain?

Mr. RHODES:

The occasion which calls for the introduction of this bill is well known to the house and to the country, inasmuch as the charters of the existing banks expire on the 1st day of July of this year. It is some eleven years since a similar measure was introduced in this house-to be exact, on the 20th day of March, 1923-by the then Minister of Finance, the Right Hon. W. S. Fielding, and I think it might not be amiss if I quoted from one or two paragraphs of his introductory remarks on bringing down that legislation on that occasion. These remarks will be found at page 1310 of Hansard of that year. He said:

I think, perhaps, the house will be con-venienced if I proceed at once, on the motion before us, to state the nature of the bill which I shall have the pleasure of introducing shortly. In that measure the government will bring the best possible judgment they can to bear upon a question of the highest importance, and one of widespread interest. I cannot venture the hope that the conclusions we have reached will he received with unanimity. I am well aware that the question is one concerning which there will be differences of opinion, but I am going to ask, and I think it reasonable to do so, that hon. gentlemen reserve their judgment in the matter, until they have had an opportunity of examining the bill, and, what perhaps is of more importance, an opportunity of participating in or observing the inquiry which will take place before the 74726-52

committee on banking and commerce. So soon as the early stages of this bill are disposed of, it is my intention to ask the house to refer the bill to the committee on banking and commerce, where there will be abundant opportunity for raising every question in relation to it, and the fullest possible opportunity for inquiry and discussion.

The Bank Act is the fruit of the study of a long line of ministers of finance, of governments and parliaments, and I feel that in the main it has served a good purpose; it has proved itself adapted to the needs of Canada; and I venture the opinion-which, possibly, will riot be shared by everybody-that any radical change in the act at present would have a disturbing effect upon the business of the country; it is a class of question upon which we shall do well, I think, to go slowly.

The first provision is of course the one which proposes to extend the charters of the banks for a further period of ten years. Perhaps the most important of the earlier changes is that which will be necessitated by the creation of the central bank, and it arises in connection with the note issue. Section 60 of the present bill continues in force until the day on which the Bank of Canada is authorized to commence business the provisions which presently govern the issue of notes by the chartered banks.

Briefly stated, these provisions limit the total amount of the notes of a bank in circulation at any time to the aggregate of- (a) the amount of the unimpaired paid-up capital of the bank; and (b) the amount of current gold coin and of dominion notes held by the bank in the central gold reserves.

In addition during the crop moving season, it is possible for a bank to issue additional notes to an amount not exceeding 15 per cent of the combined unimpaired paid-up capital and rest or reserve fund of the bank.

Section 61 contains the provisions that wijl govern note issue after the central bank has been authorized to commence business. On that day, subsections 3 to 18 of section 60 are repealed and thereafter the maximum amount of notes which a bank may have in circulation at any time shall not exceed the amount of its unimpaired paid-up capital. Moreover, beginning with the first day of January, 1936, this maximum is reduced by 5 per cent per year for a period of 5 years and then by 10 per cent per year for another period of 5 years. Thereafter, until parliament further enacts, the amount of notes of a bank in circulation shall not exceed 25 per cent of the amount of its unimpaired paid-up capital. These provisions, however, do not operate to limit the right of a bank to issue its notes outside of Canada in British possessions or colonies as authorized by section 62

Bank Act-Mr. Rhodes

of the Bank Act. Under no circumstances, however, may the total amount of notes outstanding both within Canada and elsewhere exceed the amount of the bank's unimpaired paid-up capital.

The general purpose of these provisions is gradually to eliminate the note issue privileges of the chartered banks and to secure for the Bank of Canada the sole right to issue notes intended for public circulation in Canada. It is in conformity with the general theory that the right to issue currency is a prerogative of the sovereign and should not be delegated to any private profit seeking institution. Despite the acceptance of this general principle, however, it has been realized that the too sudden withdrawal of the circulation privileges of the chartered banks would undoubtedly result in the closing up of many branches and the consequent loss of banking facilities by many pioneer and small or remote communities.

The next important provision is that having to do with the rate of interest. Section 91, subsection 1, provides that no bank may charge a higher rate of interest than seven per cent, and that every bank which violates the provisions of this subsection shall be guilty of an offence. For each such offence, the bank shall be liable on summary conviction to a fine not exceeding $500, and every officer of the bank who violates the said provision shall be guilty of an offence and liable on summary conviction to a fine not exceeding $100. Provision, however, is made for a minimum charge of one dollar.

It will be recalled that much controversy has recently waged over the precise effect and the wisdom of the provision in the present Bank Act stipulating a maximum rate of interest. Experience in other countries has shown that the attempt to restrict interest rates is usually ineffective and inexpedient in the public interest. In Great Britain, for instance, after several methods had been tried, an act was finally passed in 1854 repealing all the usury statutes.

The question in its Canadian application was given careful consideration by the Macmillan 'Commission on Banking and Currency, and their comments will be found in paragraphs 249 to 253 on pages 72 and 73 of their report.

In paragraph 251 of their report they make the following statement:

As regards the future we are of opinion that the choice lies betwen either repealing the subsection altogether or so recasting it as to put it beyond doubt that it is illegal to stipulate for more than seven per cent interest or discount; if the latter course is adopted a penalty for contravention should be imposed.

After weighing the considerations pro and con, the commission was unable to reach a unanimous agreement, although it might be well to point out that four members of the commission were of the opinion that we should adopt the method that had been found most effective in Great Britain of removing the limitation altogether. The fifth commissioner, however, contended that the statutory maximum still serves a useful purpose; that adequate reasons for repealing the section had not been adduced and that it ought to be retained. The present draft of section 91 retains the statutory maximum, but provides for what we believe will be appropriate penalties in case of contravention.

The next change is that which arises out of the recommendations contained in paragraph 291 of the report of the Macmillan Commission on Banking and Currency, reading as follows:

As, under the law of the province of Quebec, a married woman could not, apart from section 95, deposit or withdraw money without her husband's consent, the effect of the subsection just quoted is that in this province a married woman cannot without her husband's consent deposit more than $2,000 in a bank. Apparently under the Dominion Post Office legislation a married woman is under no disability as regards the amount 'which she may deposit in the Post Office Savings department, and may make deposits up to the limit of $5,000 which applies generally. "YVe were asked to recommend that in the case of married women in the province of Quebec the limitation on deposits in the banks to $2,000 should be removed and an unlimited right of deposit conferred, without the requirement of the husband's consent. We think that this is a reasonable request and we recommend that section 95 (3) be amended accordingly.

This recommendation of the commission has been accepted and implemented by eliminating subsection 3 of section 95 of the present Bank Act. This subsection reads as follows:

(3) If the person making any such deposit could not, under the law of the province where the deposit is made, deposit and withdraw money in and from a bank without this section, the total amount to be received from such person on deposit shall not, at any time, exceed the sum of $2,000.

The next change has to do with the yearly and monthly returns. Various changes have been made in sections 53 and 112 and in schedule G of the act. These sections and this schedule provide for the form of the annual and monthly statements to be made by the chartered banks to the Minister of Finance. The changes made are designed primarily to secure more uniformity between the annual and the monthly return, to clarify previous wording, and in some cases to give a more

Questions

detailed classification of assets or liabilities in order to make possible a clearer appreciation of the position of t'he bank.

The next important amendment occurs in section 75 having to do with the business and powers of a bank. Paragraph (f) of subsection 2 is changed by lowering from ten per cent to five per cent of its paid-up capital the amount of a loan or advance which can be made by a bank to a director or to any firm or corporation in which the president, general manager or director of the bank is a partner or shareholder, without the approval of two-thirds of the directors present at a meeting of the board.

A new subsection 3 is added providing that in no case shall a director of the bank be present or vote at a meeting of the board during the time when loans or advances to himself or any firm or corporation of which he is a partner or director are under consideration. This implements a recommendation made by the Macmillan commission.

Certain changes or additions are made, particularly in section 90, concerning the relations between the bank and its customers, the type of security that can be taken, and so forth. These changes are designed to facilitate the granting of banking credit in certain cases.

A new subsection has been added to section 125 providing for a reduction in the double liability of shareholders pari passu with the withdrawal of the note circulation privilege of the banks.

These are the principal provisions of the bill. There are a number of minor changes which involve clarification of wording, uniformity in phrasing, improved definitions and so forth.

In submitting the bill to the house, I do so with the assurance that the government invites the closest and most careful scrutiny of the committee on banking and commerce, and while it cannot be expected that the measure will meet with universal accord, I express the hope that on the whole it will be found acceptable. As a concluding word may I suggest that, in the interest of public business as well as for the convenience of hon. members, its passage on its way to the banking and commerce committee might be expedited.

Motion agreed to and bill read the first time.

Mr. SPEAKER:

When shall said bill be

read a second time.

Mr. RHODES:

Would there be any objection to its being read now a second time for the purpose of facilitating its passage to the banking and commerce committee?

74726-52 J

Right Hon. W. L. MACKENZIE KING (Leader of the Opposition):

Mr. Speaker, I

desire to expedite the measure, but we would like to see it before having it pass its second reading.

1. How many disability pensions were: (a) increased; (b) decreased, as a result of routine medical reexamination of pensioners during the year 1933?

2. What was the increased annual liability as a result of: (a) increased; and the decreased annual liability as a result of (b) decreased?

1. (a) 2,540; (b) 2,695.

2. (a) $480,844; (b) $561,607.

1. What is the agenda of the Cairo Postal congress?

2. lias the government given special instructions to the Canadian delegates in connection with the subjects mentioned in the agenda?

3. If so, what are such instructions?

4. Since the beginning of this congress: (a) what subjects were discussed; (b) what matters were decided?

5. Has said congress adjourned or come to an end?

6. If not, what questions are to be (a) discussed; (b) decided before the end of said congress?

7. Who are the members of the Canadian delegation who have taken part in the discussion since the beginning of the congress?

8. What technical subjects have they discussed ?

Mr. BENNETT:

Mr. Speaker, I should like to make a very earnest appeal to the hon. member for Temiscouata to drop this series of questions dealing with the activities of the Postmaster General while attending a postal congress-

Mr. POULIOT:

Mr. Speaker, I rise to a point of order. Chapter IV of the standing orders of the house-