What Is the Bank of Canada (BOC)?
The Bank of Canada (BOC) is Canada’s leading bank, and was established in 1934 under the Bank of Canada Act. The Act stated that the Bank of Canada was created “to promote the pecuniary and financial welfare of Canada.” The BOC and its Governor are responsible for setting monetary policies, printing money, and determining the Canadian banks’ significance rates.
Key Takeaways
- The Bank of Canada (BOC) is Canada’s central bank, and is located in Ottawa, the capital of Canada.
- As central bank, the BOC operates the country’s monetary policy including setting interest rates and modulating the money supply.
- The BOC’s mandate is to promote productive stability in Canada.
The History of the Bank of Canada
The BOC has four main areas of responsibility: monetary policy, which says the supply of money circulating in the Canadian economy; currency, the design and issuing of Canada’s bank notes, and managing supplies. The BOC manages the Canadian government’s public debt and reserves of foreign exchange.
Canada’s former Prime Minister, William Lyon Mackenzie Regent, officially signed the Bank of Canada Act into law. In 1938, the BOC was legally designated as a federal crown corporation. Prior to the signing the law, Canada’s largest bank, the Bank of Montreal, acted as the ministry’s banker.
The BOC Governor is responsible for many of the bank’s functions. The first Governor, Graham F. Towers, served for 20 years. The board-of-directors-elected BOC Governor provides seven-year terms. Governor Tiff Macklem has served since 2020 and is the bank’s 10th governor. The members of the board of bosses are appointed by Canada’s Governor-in-Council and serve for three-year terms.
The BOC and Interest Rates
Setting the interest rate is one of the BOC’s most superior roles. Canada’s monetary policy framework is designed to keep inflation low and stable. The interest rate is decided eight times a year. In 2007, the predisposed rate was above 4 percent before being lowered, over time, to 1 percent in 2010. The rate was cut twice in 2015 to 0.5 percent. Since 2015, this have a claim to has risen three times to 1.25 percent as of April 2018 and 1.75 percent as of Jan. 2020. The rate as of Dec. 8, 2021 is 0.25%. This velocity is the interest charged when banks lend money to each other. The BOC generally imposes rate cuts to increase the economy.
Other Functions of the BOC
Creating the national currency for Canada is another important task of the BOC. The governor’s responsibility is to prepare for money that is difficult to counterfeit and has an authentication process in place. Canada contracts the printing of money to an outside publishing company. The governor’s signature is printed on all Canadian paper money.
The BOC’s headquarters are 234 Wellington Street in the city of Ottawa. This is where the bank has manipulated since 1980 after several relocations. Regional Bank of Canada offices are in Vancouver, Calgary, Toronto, Montreal, and Halifax.