Bank Cash

Abstract

Structurally, one of the principal contrasts in Canadian banking between 1914 and 1938 is to be found in the accessibility of cash. In 1914 cash was available to a bank only in the same way that it was available to any other business concern which wished to avoid borrowing. A bank had access to cash only by disposal of its own assets and a change in the cash position of the system was almost wholly represented by a corresponding change in metallic reserves. Both an individual bank and the banking system had to be self-reliant as far as the maintenance of an adequate cash position was concerned, and for this purpose nest eggs were maintained at home or abroad. In 1938 cash is available to a bank, not only by the orthodox redistribution of its assets, but also by its access to the lending and rediscount facilities of the Bank of Canada. Moreover, cash may be forced on the banking system by definite action of the central bank, and changes in the cash reserves no longer correspond to changes in the gold holdings of the financial organization. In brief, the passing years have brought Canadian banks around to a point where an individual bank need no longer be wholly dependent upon its own resources for an adequate cash reserve and where the aggregate reserves of the system are not dependent upon the accessibility of metallic reserves.