The first bank notes
The first bank notes in Canada were issued
by the Montreal Bank (subsequently called the
Bank of Montreal), following its establishment in
1817.26 These notes were issued in dollars.
The success of the Bank of Montreal led to the
incorporation of additional banks in Upper and
Lower Canada as well as in the Atlantic provinces,
all of which issued their own bank notes.27
These included the Bank of Quebec in Quebec City
and the Bank of Canada in Montréal, in 1818; the
Bank of Upper Canada at Kingston, in 1819; the
Bank of New Brunswick in St. John, in 1820; the
Second or Chartered Bank of Upper Canada in
26. There are examples of notes, denominated in pounds and shillings, issued by the Canada Banking Company in 1792. It is not clear, however, whether
this bank ever opened for business.
27. The charter of the Bank of Montreal,
which provided the model for other Canadian banks, was itself modelled on that of the First Bank of the
United States, which was established in 1791 by Alexander Hamilton, the first U.S. secretary of the Treasury (Shortt 1914a, 610).
Bank of Nova Scotia, £5, 1820–1830s
This note is an example of an early chartered bank note.
It was a “remainder” (i.e., it was never issued, as indicated
by the holes punched across the bottom) and was printed
in England.
Nova Scotia, 1 pound, 1831
As an anti-counterfeiting measure, the government of
Nova Scotia issued Treasury notes during the 1820s and
1830s that were printed in blue ink rather than the more
conventional black.
18 A History of the Canadian Dollar
York (Toronto), in 1822; the Halifax Banking
Company, in 1825;
the Bank of Nova Scotia in
Halifax, in 1832; and the Bank of Prince Edward
Island, in 1855.
Bank notes represented the principal
liability of a bank and were redeemable in specie,
upon demand. Banks committed themselves to
maintain convertibility and, under their charters,
restricted their total liabilities to a given multiple of
their capital.28 The extent of their note issues was
also limited by the public’s willingness to hold their
notes. Unwanted notes were returned to the issuing
bank and converted into specie.
Bank notes were well received by the public
and became the principal means of payment in
British North America. The general acceptance of
bank notes in transactions helped to mitigate the
problems associated with having a wide range of
foreign coins in circulation with different ratings
(Shortt 1986, 234).
As new banks were incorporated in Upper
and Lower Canada during the 1830s and 1840s,
their bank notes were typically denominated in both
dollars and pounds.
These notes circulated freely in
both the Canadas and in the United States, although
often at a discount, the size of which varied
depending on distance, the name of the issuing
bank, and the currency rating used.29 Dollardenominated bank notes issued by U.S. banks also
circulated widely in Upper Canada during the
early 1800s.
In contrast, bank notes circulating in New
Brunswick, Nova Scotia, Prince Edward Island, and
Newfoundland were typically denominated
in pounds, shillings, and pence. This reflected
both the stronger ties these provinces had with
Great Britain and their weaker commercial links
Bank of New Brunswick, £1, 1831 with the United States.
The Bank of New Brunswick received its charter in 1820. This is
a large-format note (184 mm by 98 mm), typical of the early
notes issued by chartered banks.
28. During periods of financial stress, convertibility was sometimes suspended.
29. During much of the nineteenth century, a bank’s notes had to be accepted at par only at the issuing office. Elsewhere, the notes were discounted, even
by branches of the issuing bank (Shortt 1914b, 279).
A History of the Canadian Dollar 19
Dollars and cents or pounds,
shillings, and pence?
As noted earlier, pounds, shillings, and
pence were used as the unit of account in the
British colonies of North America up until the
middle of the nineteenth century. Given the scarcity
of British coins, however, and the prevalence
and wide acceptance of Spanish silver dollars, it
became increasingly difficult to maintain a
currency system based on sterling. The introduction
of the U.S. dollar (modelled on the Spanish dollar)
in the United States in 1792,
together with
growing trade and financial links between
Upper and Lower Canada and the United States
during the first half of the nineteenth century,
also favoured the use of dollars. The same was
true for the colonies of Vancouver Island and
British Columbia on the west coast, with the
preponderance of their trade being with San
Francisco during the late 1850s and early 1860s.
Canadian bank notes, denominated in
dollars, were also widely accepted and circulated
freely in the United States. Had Canada adopted
the sterling standard, this circulation would have
United States, half-dollar, 1827
During the early 1800s, the American
half-dollar was imported by Canadian
banks and used widely in Upper and
Lower Canada. Workers on the Rideau
Canal were paid with these pieces.
William IV half-crown, 1836
This is an example of British
coinage used in the mid-nineteenth
century. A half-crown was worth
2 shillings and 6 pence, or 50 cents.
Money madness
The diversity of notes and coins in circulation
was frustrating, making simple transactions complex. In a letter to the Acadian Recorder in 1820,
an irate citizen in Halifax complained that
when he bought vegetables costing six pence
in the market using a £1 Nova Scotian
Treasury note, his change amounted to
93 separate items, including 8 paper notes from
four different merchants or groups (ranging
in value from 5 shillings to 7 1/2 pence), one
silver piece, and 84 copper coins. The letter
ended “For God’s sake, gentlemen, let us get
back our DOLLARS” (Acadian Recorder,
21 October 1820, Martell 1941, 15).
20 A History of the Canadian Dollar
been lost, to the detriment of Canadian banks
(Shortt 1986, 428).
The widespread use and popularity of the
dollar, combined with the potential cost of shifting
to a sterling standard, stymied efforts by the
imperial authorities in British North America to
establish a common monetary system throughout
the British Empire based on pounds, shillings,
and pence. The British authorities believed that
an empire-wide common currency would
strengthen economic and political ties. In a letter to
Sir James Kempt, the Governor General, dated
6 February 1830, which was subsequently tabled
in the House of Assembly of Lower Canada,
Sir Randolph Routh, the Commissary General of
the British forces in the Canadas, stated,
The British Government have in view the political
tendency of this introduction of English money into
the Colonies. A similarity of coinage produces
reciprocal habits and feelings, and is a new chain and
attachment in the intercourse of two nations.
(Journal of the House of Assembly, Lower-Canada
11 George IV, Appendix Q, 9 March 1830).
Despite such pressure from the British
Government, local custom and practices dominated.
There was also a first-mover problem. While
Nova Scotia was willing to adopt sterling, it would
do so only if neighbouring colonies did so as
well. Colonial co-operation was, however, not
forthcoming (Martell 1941, 18).
Adam Shortt noted,
To the eye of pure reason the scheme [a common
imperial currency] was faultless. Even official minds
trembled on the verge of sentiment in contemplation
of its vast imperial possibilities. But, unfortunately,
the shield had another side, the colonial, from which
it excited little enthusiasm. Hence, in the course of
the official attempts to put the ideal in practice, it
encountered the most unlooked for obstacles and
caused no little bitterness (Shortt 1986, 223).
