sts in other parts of the world, notably in the Orient, South
America, and Africa. They are, therefore, leaders on the stock as well
as the discount markets of the country, and are widely influential in
investment as well as commercial banking affairs.

These, as well as the other commercial banks, consisting for the most
part of local institutions and those catering to special interests,
use the Imperial Bank for rediscounts, for transfers of funds between
different parts of the country, and as a depository for surplus funds.
They do not normally keep on hand more cash than is needed for till
purposes. Being in easy reach of an office of the Imperial Bank,
supplies can be obtained at any time by checks drawn against credit
balances or through rediscounts of commercial bills. Special accounts
are carried for transfer purposes and are used even in the transfer of
funds between different offices of the same institution.

On account of its right to issue notes against commercial securities,
the Imperial Bank has the power to meet the demands made upon it and
to supply the country with an elastic medium of exchange. The levy of
a tax upon the excess of the issues above a prescribed maximum
prevents perfect elasticity, unless this maximum be kept above the
highest point which the circulation would normally reach, since the
actual levy of the tax forces the rate of discount to such a point as
to seriously restrict commercial operations. However, since the line
between commercial and investment banking is not drawn by the great
Berlin banks with the care that is desirable, and since they have been
able at times, especially on account of their foreign connections, to
embarrass the Imperial Bank in its efforts to maintain adequate specie
reserves, such a tax is probably a desirable safeguard against
over-expansion of credit.

_5. The Canadian System_

In important respects the Canadian banking system differs from those
of the European countries which have been described and from that of
the United States. It consists of a varying number of relatively large
institutions, each with several offices administered from a common
center, but without a central bank. For some time the total number has
decreased, since 1900 from thirty-six to twenty-seven, in spite of the
fact that the Canadian law, like that of the United States, provides
for the formation of new banks at any time, on compliance with certain
prescribed conditions, i