Publications and Research

Autumn 2006

ToTEM: The Bank of Canada's New Projection and Policy-Analysis Model by Paul Fenton and Stephen Murchison MUSE: The Bank of Canada's New Projection Model of the U.S. Economy by Marc-André Gosselin, René Lalonde, and Nicolas Parent Modelling Financial Channels for Monetary Policy Analysis by Ian Christensen, Ben Fung, and Césaire Meh A New Effective Exchange Rate Index for the Canadian Dollar by Janone Ong Full Review (PDF, 380 kb)

Cover: The "pretended" Bank of Upper Canada — Kingston (1819-22)

Although Kingston was the commercial centre of Upper Canada (now the province of Ontario) in the early part of the nineteenth century, it lacked the banking services that would help to maintain its strong economic growth. To meet chronic shortages of cash and to inject some capital into the local economy, efforts to establish a bank in the town began as early as 1810. In 1817, a group of Kingston merchants applied to the government for a charter to open a bank.

Unfortunately, royal assent for the legislation that would establish a bank arrived after the original bill had expired. While some of the merchants applied for another charter, others decided they could wait no longer. Articles of Association were drafted in 1818, shares in the new bank were offered for sale, and a board of directors was elected. In 1819 the Bank of Upper Canada finally opened in Kingston, but despite its official name, it operated as a private, unincorporated bank without a charter. Given the instability of the monetary system at the time, a charter, which reflected legal status, was imperative for the credibility and longevity of any bank.

At first, the lack of a charter did not seem to pose a problem. When cracks began to appear in the bank's operations in 1821, however, as a result of internal conflicts between the bank's president and some of its directors, strong criticisms began to be voiced against the institution. Soon afterwards, the bank was declared "illegal," and by 1822 it had closed its doors. The bank's main rival, also named the Bank of Upper Canada, incorporated in 1821 and based in York (now Toronto), began to use the term "pretended" to distinguish itself as a legitimate chartered bank from the unchartered and legally unrecognized bank in Kingston. As well, the term was later used in the government legislation intended to settle the affairs of the Kingston bank. Ironically, the bank's affairs lingered in political limbo long after it had ceased to exist.

During its short history, the pretended Bank of Upper Canada issued notes in denominations of $1, $2, $5, and $10. Like other bank notes in the early nineteenth century, they contained some important security features still used today. These included engraved vignettes with meticulous fine-line work that was difficult to reproduce and ornate lathework patterns framing the notes. The $10 note, featured on the cover, shows an engraved view of Kingston harbour to the right and, on the left, the gun towers of Fort Henry. The note is part of the National Currency Collection of the Bank of Canada.

Photography by Gord Carter