Government shifts power from chartered banks

By Jesse Robitaille

This is the first story in a three-part series highlighting the Canadian banking system’s transition to government control and the now-collectible banknotes left in its wake.

For their issuers, banknotes have always been a product of necessity.

The card money used to pay soldiers in New France, the early notes issued by chartered banks to control the money supply, and even Canada’s modern notes – upgraded about every decade to combat counterfeiting – are examples of how banknotes serve society’s financial needs. But the right to issue these promissory pieces of paper (or polymer) also comes with broad economic powers, something the government noticed and successfully shifted in its direction beginning in the mid-1800s.

While the card money issued in New France beginning in the 1680s “could be considered North America’s first experiment at a paper currency,” the first true Canadian banknotes didn’t begin circulating until the 1800s, according to third-party banknote grader Steven Bell.

“Prior to 1866, most paper money was issued by chartered banks,” said Bell, the founder and owner of Kitchener, Ont.’s Banknote Certification Service.

The first chartered bank in present-day Canada is believed to be the Montréal Bank, whose first branch opened in 1817; however, this is “somewhat debatable,” Bell said, as another establishment – the Union Bank of Canada – also operated at about the same time.

The first notes issued by the Montréal Bank were signed by its President John Gray and cashier Robert Griffin. They feature the port of Montréal alongside the goddess Britannia, which is a symbol of the British Isles.

One of these early $20 notes (CH-500-10-20C) was offered as Lot 3415 of the February 2015 Canadian Legacy Sale II by Moore Numismatic Auctions and Canadian Coin & Currency. Auctioneers said the lot was “believed to be a deceptive contemporary counterfeit,” of which there are many on the market (and which some collectors use to fill holes in their collections). It sold for $1,000 (plus $180 buyer’s premium).

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