BANKING IN CANADA IN THE 1830s

James Forman’s first few months in his new job were very busy. Neither he nor the Directors had any previous banking experience and he was sent to St John in New Brunswick to obtain on the job training at a branch the Bank of New Brunswick. To modern eyes the approach to his training appears to be rather casual. In their letter of introduction his directors ask the directors of the Bank of New Brunswick “that as far as their regulations permit that he should be allowed to attend the bank for a few days during the hours of business to witness the practical operation of the establishment”. After this testing introduction to the world of banking, James Forman was back in Halifax in the first part of July.

The next task that he had was considerably more challenging. On the 26th of July the first bank notes arrived from New York, but unlike modern notes which have the Chief Cashier’s signature neatly printed on them, these notes were unsigned and the Cashier and President of the Bank had to sign each one of them before they were valid. The order, which was made up of five different denominations ranging from £1 10s to £10, came to a total of 99,800 notes. However despite this Herculean task [assuming 5 seconds for each signature, it would take a signatory nearly 6 days, working 24 hours a day, to complete the task] on Aug 1st the Bank was able to announce that they would be opening for business on August 29th.

There was however one further problem which was an engaging mixture of high drama and farce that tells one a certain amount about the state of law and order and the relaxed attitude towards financial regulation that existed in Nova Scotia during the 1830s. When the Directors of the Bank of Nova Scotia announced on August 1st that they were ready to open for business they were being slightly economical with the truth. Clause 2 of the Act of Corporation had stated that the Capital or Joint Stock of the Corporation shall consist of Gold or Silver Coins or Provincial Treasury Notes. Despite this ruling the new bank had in fact collected £23,000 of the £50,000 capital required before it could start business, in the notes of its arch rival, the Halifax Banking Company. Until these notes could be turned into gold, silver or possibly the notes of a another provincial bank, such as the Bank of New Brunswick, it would technically be illegal for the Bank of Nova Scotia to open its doors to the citizens of Halifax.

The answer to this problem appeared to be simple. On Aug 8th James Forman put £23,000 worth of Halifax Banking Company notes into a box, and with a messenger, walked down the street to the rival’s bank premises, a matter of a few hundred yards, and demanded that the notes should be redeemed in gold and silver specie. Not surprisingly, it should be remembered that £23,000 in 1832 was roughly equivalent to £1,250,000 in today’s money, the teller on duty at the Halifax Banking Company did not feel that he was able to meet this request without referring to his superiors. He asked James Forman to return in half an hour, which he agreed to do. He left the box and the money with the teller. On his return he found that one of the directors of the Halifax Banking Company, a Mr Hezekiah Cogswill, had arrived to take charge of the situation. He pointed out to James Forman that his bank was in breach of the conditions under which it had been incorporated and that he was not prepared to redeem the notes unless the President of the Bank of Nova Scotia sent a letter saying that he had sent his cashier to redeem the notes. Forman returned to his bank again, this time taking the notes with him. After a further delay, during which presumably it was decided that the letter from the President could not be provided, Forman once again returned to the Halifax Banking Company and repeated his original request. Once again it was refused and once again the box with its bank notes made the journey between the two banks. After another delay James Forman, the messenger, the box and the bank notes set off on their fourth journey down Duke Street. This time they were accompanied by reinforcements in the form of two directors of the Bank of Nova Scotia. By now quite a crowd had gathered to watch the drama. The fourth visit produced some form of compromise. The Halifax Banking Society redeemed its notes, in what form is not quite certain, and the Bank of Nova Scotia was clear to open for business.