The first bank notes in Canada were issued by the Montreal Bank (subsequently called the Bank of Montreal), following its establishment in 1817. 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. These included the Bank of Quebec in Quebec City and the Bank of Canada in Montreal, 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 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 of Upper Canada, Kingston, $5, 1819
One of the earliest notes issued in Canada, this bill bears an early image of Fort Henry, built by the British to help secure the St. Lawrence waterway.)
(Bank of Upper Canada, York, $5, 1830
The Bank of Upper Canada was the first bank to conduct business at York, now Toronto. For most of its existence, it acted as the government bank for the Province of Upper Canada, before going bankrupt in 1866.)
(Montreal Bank, $1, 1821
The Montreal Bank was chartered as the Bank of Montreal in 1822. This note is from a pre-charter issue produced by the American printer Reed Stiles and Company. The design features Britannia with a ship, the symbol of commerce, together with a representation of a city, perhaps Montreal. At the centre bottom is an image of a Charles IV Spanish dollar, an indication of value for those unable to read.)
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.
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 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
(Bank of New Brunswick, £1, 1831
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.)
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.
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. 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 with the United States.