Jan. 24 marked the 50th anniversary of the announcement in early 1964 by the B.C. government of its intention to seek a charter to operate a commercial bank.
W. A. C. Bennett, then head of the Social Credit party and premier, believed a B.C.-based bank was essential for the longer-term economic development of the province. He decided that a B.C. version of the Alberta Treasury Branches would not serve. Only a bank would be able to participate as an owner in the clearing system (the apparatus that exchanges payments between banks) and in the foreign exchange market.
From the get-go, Bennett made it clear he would determine the bank's ownership and where and how it would operate. He made some outrageously optimistic statements. The bank would have a capital base of $100 million; this was larger than the largest Canadian bank at the time. It would operate across the country, if not worldwide. It would have its headquarters in its own skyscraper in Vancouver.
At first, the reaction was surprised acceptance with little, if any, criticism. After all, there had not been an application for a federal bank charter in almost two decades and few reporters or other commentators really knew or thought seriously about what establishing a new bank entailed.
But, over time, business and the press began to voice concerns about how this grandiose scenario might unfold.Would the bank be used by Bennett to advance his political aims?
Legislation was introduced in the legislature to purchase bank stock. The premier refused to say how much the province would invest or what percentage of the shares would be held by the government.
The press took the position the premier was asking government to pass legislation without any clear idea of the financial consequences.
As criticism mounted, Bennett retreated somewhat, saying the province would not hold a majority of the shares and that the government was merely trying to get the bank launched. Several business people suggested ways in which the potential for political interference could be eliminated by putting the government shares into a trust overseen by a group of private sector business and labour interests. But Bennett was unwilling to relent, accustomed as he was to having his own way.
In June 1964, the attorney general announced the provisional directors, and fears only worsened when the list was made up of well-known Socred supporters including, as provisional chair, the former provincial minister of finance.
A new bank charter has to be granted by Ottawa. Bennett was concerned by the federal government's slow pace in reviewing and approving the proposed charter, so he organized a write-in campaign to put pressure on the feds.
The federal government was concerned that, if B.C. obtained a charter, the other provinces would follow, possibly compromising Ottawa's ability to control the banking sector and implement monetary policy. A royal commission on banking and finance had just issued its report calling for a significant overhaul of the sector, and that also made the government reluctant to act.
When hearings on the bill granting the charter were held in July 1964, the lead-off witness was not the provisional chair, but the premier. Both the private sector and government officials felt this was vindication of their fears about potential political domination of the bank.
Within weeks, the federal minister of finance announced that any granting of charters would have to wait until new Bank Act legislation was introduced, and Bennett was told in no uncertain terms that provincial governments would be forbidden from holding shares.
The dream had ended.
A year later, an entirely private Bank of British Columbia was chartered.
David Bond is an author and retired bank economist.