Bank of Montreal's association with government banking

News: Welcome to the Canadian Paper Money Forum.

All notes will continue to be redeemable from the Bank of Canada, and probably through designated banks (Bank of Montreal has historically been this choice of the government for this).

I am curious about how the Bank of Montreal has historically been this choice? and I am assuming you mean choice of the Bank of Canada and not the government. (I think they are related but arms length)

Could you share some specific examples.

Hello Rupiah:

Bank of Montreal's association with government banking or financial operations goes back at least to the Province of Canada, when Bank of Montreal notes were overprinted "Provincial Note."

See page 95 of the 30th edition of the Charlton GPM catalogue for details on this relationship.

Newfoundland had such a strong association with BofM that it give the bank a prominent spot at the central part of its cash notes dated from 1901 through 1914.

The town of Trenton, Ont., used the BofM as an agent for its Relief Certificate scrip (date of issue unknown but likely 1930s).

There's a few. As far as choice of the Bank of Canada, don't know of specific examples of this.

Hope this helps....

From Stephen Bell's powerpoint presentation on the history of Canadian banknotes:

• Bank of Montreal could be considered the first bank to be granted a charter & hence circulated banknotes in Canada
• 1866 Province of Canada notes finally issued in partnership with the Bank of Montreal

P 95 of Charlton describes how the Province of Canada overprinted these with "Provincial Note/Legal Tender" (all caps) horizontally & "Payable in Toronto" and "For the Receiver General" (all caps) vertically.  The majority of the notes were actually "Payable in Montreal."  Charlton recommends you refer to "The Charlton Standard of Canadian Bank Notes, Eight Edition" for further info on these early provincially overprinted notes.

Every government attempt to issue banknotes had failed and this gave the government a foothold in the production of banknotes.  Bell eluded to the fact that the relationship between the government and chartered banks was often an uneasy one since the government was inching its way into this profitable enterprise.

In 1870-71 the government made it law that they had the right to issue $1 and $2 notes exclusively.  Bell explained that "banks had to hold 1/3 to 1/2 of their cash reserves in Dominion notes" (thus chartered notes could only be issued in higher denominations: $5, $10, $20, $50, $100).

In 1890, the government further revised the Bank Act and took more control over the issuing of banknotes.  One of the most important/significant features of the new legislation was that a "redemption fund was established as a safety net for failed banks..." which allowed "defunct banks' notes" to be redeemed with 6% interest establishing more trust/security in holding banknotes.

The government had to be in constant consultation with the Chartered banks, because even after the establishment of the BOC (in 1935) there was still a massive amount of chartered notes in circulation.  Private banks were given a decade to reduce their circulation of chartered notes by 25% of their capital. It wasn't until 1944 that a further revision of the Bank Act removed the rights of banks to issue banknotes.  Finally, in 1960, banks had to pay BOC "a sum equal to their outstanding circulation."  After seeing this presentation it made me realize how powerful our banks have been (& will likely continue to be in the future).

@alvin5454 and @walktothewater

Thank you. Very informative.

I did look at the Charlton and I am tempted to continue the discussion here but it looks like a wrong thread.

Maybe the moderators can move this to another thread. It seems like an interesting thread to have without mixing it with the current thread on RCNA Auction.