Double liability in a branch banking system: Historical evidence from Canada

Arbeitspapier

We investigate the effects of the abolition of double liability requirement imposed on bank shareholders in Canada on bank risk-taking and lending behavior. Under the double liability rule, the shareholders of a bank were liable up to twice the amount of their subscribed shares in the case of bankruptcy. With the establishment of the Bank of Canada in 1934, the double liability requirement became less stringent and depended on the pace of the redemption of notes in circulation issued by the individual chartered commercial banks. Using historical balance sheet and accounting data, we show that the abolition of double liability was not accompanied by increased bank risk taking in Canada. Our findings are consistent with the literature that focuses on uniform regulations and nationwide branching as key financial stability elements in Canada.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 316

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Economic History: Financial Markets and Institutions: U.S.; Canada: 1913-
• Subject: Double Liability ; Bank Risk-Taking ; Leverage ; Canadian banks ; Financial Stability

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Grodecka, Anna ; Kotidis, Antonis
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/157959
• Last update: 10.03.2025, 11:44 AM CET