A glimpse of a two-storey wooden bank building in Dundurn opened my eyes to the “wild west era” of banking in Canada.
The interesting structure sports the name Northern Crown Bank, a bank I’d never heard of.
The Northern Bank was formed in Winnipeg in 1905 with an impressive multi-storey building. By 1908 it acquired the Crown Bank and became the Northern Crown Bank.
In 1918, the acquisitive Royal Bank, now RBC, acquired the Northern Crown Bank, operating in Dundurn until 1935.
The Northern Crown Bank had 14 branches in Saskatchewan, most in the region from Saskatoon south to Regina, and 13 in Manitoba.
One branch in Holdfast located temporarily in the hotel. The safe was too big to fit in the hotel so it was left unguarded on the street.
Banking in Canada during the 56 years after Confederation in 1867 was essentially a free for all sector. Every bank issued its own currency notes until the 1940s when national currency notes were adopted
Sure there was a Bank Act, but it was toothless and regulations were rarely enforced,
Today’s banks need by regulation to have two levels of reserves and occasionally the reserves are increased if tough times threaten.
None of the banks required reserves back then. In fact one finance minister said there was no need for reserves.
The consequence was that a run on the bank by depositors could cause a bank’s collapse and that happened.
Today, savings from depositors are insured to a maximum level of $100,000 by the Federal Deposit Insurance Corporation.
No such luck then. No wonder some people preferred to keep money under mattresses, or buried in tobacco cans.
Under this lack of regulation banks often failed.
Government encouraged mergers of failing banks to avoid accountability and assisting depositors lost life savings, according to a recent Financial Post article.
Between 1896 and 1937, the number of banks dwindled from 37 to 26.
Bank management wasn’t professional. One failing bank sued a mining company for non-payment of a $15 million loan in today’s dollars. The judge refused the management claim asking why any one would lend to such a speculative venture.
Another inquiry into a failed bank concluded management was incompetent and did not understand the function of money lending.
A Bank Act revision in 1913 required a bank audit for shareholders. Some banks fudged the figures.
The whole situation came home to roost in 1923 when the Home Bank collapsed. The uproar was so great that government eventually paid depositors 33 cents on the dollar of losses.
It can be assumed the merger of the Northern and Crown Banks was to shore up finances. The Royal Bank acquisition came as the country entered a post-war recession.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
