The Bank of Canada (or BoC) (French: Banque du Canada) is a Crown corporation and Canada's central bank. Chartered in 1934 under the Bank of Canada Act, it is responsible for formulating Canada's monetary policy, and for the promotion of a safe, sound financial system within Canada. The Bank of Canada is the sole issuing authority of Canadian banknotes, provides banking services and money management for the government, and loans money to Canadian financial institutions.
The Bank of Canada headquarters are located at the Bank of Canada Building, 234 Wellington Street in the nation's capital, Ottawa. The building also used to house the Bank of Canada Museum, which opened in December, 1980 and temporarily closed in 2013. As of July 2017, the museum is now located at 30 Bank Street, Ottawa, Ontario, but is connected to the main buildings through the Bank of Canada's underground meeting rooms.
|Bank of Canada|
Banque du Canada
|Headquarters||Ottawa, Ontario, Canada|
|Ownership||Government of Canada|
|Central bank of||Canada|
CAD (ISO 4217)
|Bank rate||1.75% |
|Interest on reserves||0.25%|
Prior to the creation of the Bank of Canada, The Bank of Montreal, then the nation's largest bank, acted as the government's banker, and the federal Department of Finance was responsible for printing Canada's banknotes.
In 1933, Prime Minister R.B. Bennett instituted the Royal Commission on Banking and Currency and it reported its policy recommendations in favour of the establishment of a central bank for Canada. The Royal Commission's members consisted of Scottish jurist Lord Macmillan, Bank of England director Sir Charles Addis, Canadian former Finance Minister William Thomas White, Banque Canadienne de Montreal general manager Beaudry Leman, and Premier of Alberta John Edward Brownlee.
The bank was chartered by and under the Bank of Canada Act on July 3, 1934, as a privately owned corporation, a move taken in order to ensure the bank would be free from partisan political influence. The Bank's purpose was set out in the preamble to the act: "to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the Dominion". With the exception of the word "Canada" replacing "the Dominion", the wording today is identical to the 1934 legislation. On March 11, 1935, the Bank of Canada began operations, following the granting of Royal Assent to the Bank of Canada Act.
In 1938, under Prime Minister William Lyon Mackenzie King, the bank was legally designated a federal Crown corporation. The Minister of Finance holds the entire share capital issued by the bank. "The capital shall be divided into one hundred thousand shares of the par value of fifty dollars each, which shall be issued to the Minister to be held by the Minister on behalf of Her Majesty in right of Canada." No changes were made in the purpose of the Bank.
During World War II, the Bank of Canada operated the Foreign Exchange Control Board and the War Finance Committee, which raised funds through Victory Bonds. After the war, the bank's role was expanded as it was mandated to encourage economic growth in Canada. An Act of Parliament in September 1944 established the subsidiary Business Development Bank of Canada (BDC) to stimulate investment in Canadian businesses. Prime Minister John Diefenbaker's central-bank monetary policy was directed towards increasing the money supply to generate low interest rates, and incentivize full employment. When inflation began to rise in the early 1960s, then-Governor James Coyne ordered a reduction in the Canadian money supply.
Since the 1980s, the main priority of the Bank of Canada has been keeping inflation low. As part of that strategy, interest rates were kept at a low level for almost seven years in the 1990s. Since September 2010, the key interest rate (overnight rate) was 0.5%.
Between 2013 and early 2017, the Bank of Canada temporarily moved its offices to 234 Laurier Street in Ottawa to allow major renovations to its headquarters building.
In mid 2017, inflation remained below the Bank's 2% target, (at 1.6%), mostly because of reductions in the cost of energy, food and automobiles; as well, the economy was in a continuing spurt with a predicted GDP growth of 2.8 percent by year end. On 12 July 2017, the bank issued a statement that the benchmark rate would be increased to 0.75%. "The economy can handle very well this move we have today and of course you need to preface that with an acknowledgment that of course interest rates are still very low," Governor Stephen Poloz subsequently said. In its press release, the bank had confirmed that the rate would continue to be evaluated at least partly on the basis of inflation. "Future adjustments to the target for the overnight rate will be guided by incoming data as they inform the bank's inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities." Poloz refused to speculate on the future of the economy but said, "I don't doubt that interest rates will move higher, but there's no predetermined path in mind at this stage".
The mandate of the Bank of Canada is defined in the Bank of Canada Act preamble and it states,
WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada.
The Bank of Canada's responsibilities focus on the goals of low, stable and predictable inflation; a safe and secure currency; a stable and efficient financial system in Canada and internationally; and effective and efficient funds-management services for the Government of Canada, as well as on its own behalf and for other clients.
In practice, however, it has a more narrow and specific internal definition of that mandate: to keep the rate of inflation (as measured by the Consumer Price Index) between 1% and 3%. Since adoption of the 1% to 3% inflation target in 1991 and 2015, the average inflation rate was 1.79% . The most potent tool the Bank of Canada has to achieve this goal is its ability to set the interest rate for borrowed money. Because of the large amount of trade between Canada and the United States, specific adjustments to interest rates are often affected by those in the US at the time.
Canada no longer requires banks to maintain fractional reserves with the Bank of Canada. Instead, banks are required to hold highly liquid assets such as treasury bills equal to 30 days of normal withdrawals (liquidity coverage), while leverage is primarily tied to adequate loss-absorbing capital, notably tier one (equity) capital.
The Bank of Canada is structured as a Crown corporation rather than as a government department, with shares held in the name of the Minister of Finance on behalf of the government. While the Bank of Canada Act provides the Minister of Finance with the final authority on matters of monetary policy through the power to issue a directive" no such directive has ever been issued. The bank's earnings go into the federal treasury. The governor and senior deputy governor are appointed by the bank's board of directors. The Deputy Minister of Finance sits on the board of directors but does not have a vote. The bank submits its spending to the board of directors, while departmental spending is overseen by the Treasury Board with their spending estimates submitted to Parliament. Its employees are regulated by the bank and not the federal public service agencies.
The bank has a zero book value policy on its balance sheet—matching total assets to total liabilities—and transfers any equity above this amount as a dividend to the Government of Canada. As of December 30, 2015 the Bank of Canada owned C$95 billion in Government of Canada debt. It had a net income in 2014 of $1.039 billion. The Bank of Canada matches its liabilities of $76 billion in currency outstanding, $23 billion in deposits from the government and $3.5 billion in other liabilities—to its assets owning $95 billion in Government of Canada debt and $7.5 billion in other assets. Bank notes in circulation have increased from $70 billion at the end of 2014 to $76 billion at the end of 2015. The Bank of Canada lists cash on its 2014 balance sheet at $8.4 million in currency and foreign deposits. The Bank of Canada's books are audited by external auditors who are appointed by the Cabinet on the recommendation of the Minister of Finance, and not by the Auditor General of Canada.
The Bank of Canada 2008 balance sheet expanded to $78.3 billion from $53.7 billion from the previous year. After the financial crisis, these emergency asset purchases were unwound and removed from the central bank's balance sheet. This action represented a fifty percent increase in the size of the central bank's balance sheet. This central bank transaction was referenced under "securities purchased for resale" from Canada's major banks. It was termed advances to members of the Canadian Payments Association and were liquidity loans made under the bank's standing liquidity facility as well as term advances made under the bank's commitment to provide term liquidity to the Canadian financial system.
In December 2015, the Bank of Canada forecasted increasing annual growth throughout 2016 and 2017, with the Canadian economy reaching full capacity mid-2017. With this annual growth, the Bank estimated the effective lower bound for its policy interest rate to hit approximately 0.5 per cent. This is differing from the Bank's 2009 assessment of 0.25 per cent.
To ensure Canada's monetary system remains intact should another financial crisis take place, for example the 2007-2008 global financial crises, the Bank of Canada has put forward a framework for the use of unconventional monetary policy measures.
Principles surrounding the use of unconventional policies have not changed since 2009. Although each crisis is unique, the Bank will ensure it attains its primary focus of achieving the inflation rate.
The Bank of Canada has established these unconventional monetary policy measures after reflecting on its previous annex in its April 2009 MPR, as well as how other central banks responded to the global financial crisis. These measures are in place so, in the improbable circumstance the economy is hit with another significant negative financial shock, the Bank of Canada has principles it can reference. These measures are strictly hypothetical and are in no means being embarked upon at any foreseeable date. The unconventional monetary policy measures is also a living document; because the post-crisis adjustment process continues to develop and best practices are still being garnered, these measures will continue to be worked on and altered as needed.
The framework for the use of unconventional monetary policy measures includes the following four tools:
The first option within the Bank of Canada's toolkit for its framework for the use of unconventional monetary policy measures is forward guidance as it relates to substantial impacts for the future. An example of forward guidance would be the Bank's 2009 statements regarding the conditional commitment to keeping the key policy rate untouched for a year, so long as the inflation rate remained unaffected during this time. Forward guidance, when partnered with conditional commitments, is both an effective and credible approach, allowing the Bank to deliver on its commitment as long as the condition in question is upheld.
Large-scale asset purchases
Although the Bank of Canada engages in asset purchases regularly as for its balance sheets to grow with the economy and enable the distribution of a growing stock of bank notes, in this circumstance, it would go beyond even that to participate in large-scale asset purchases.
Often referred to as quantitative easing, large-scale asset purchases involve establishing new reserves for the purpose of purchasing large quantities of securities, for example government bonds or private assets, such as mortgage-backed securities, from the private sector. The benefits to these purchases are three-fold:
Funding for credit
The third unconventional monetary policy tool is funding for credit, which ensures economically-important sectors continue to have access to funding, even if the supply of credit is impaired. In order for this to be effective, the Bank of Canada would provide collateralized funding to others at a subsidized rate as long as they met specified lending objectives. This tool is designed to encourage lending to households and businesses when banks may otherwise face increasing funding costs.
Negative interest rates
Pushing for short-term interest rates below zero has become common amongst many banks, including ECB and Swiss National Bank. Due to the negative interest rates, these financial markets have adapted when faced with a financial crisis and continue to function. The Bank of Canada believes the Canadian financial market is capable of functioning in a negative interest rate environment and, as such, added it to its toolkit for unconventional monetary policy measures.
In previous years, the Bank of Canada had a predetermined sequence of measures in place should a crisis take place. These newly created unconventional measures will work towards finding a solution to a problem in whichever combination of policies is judged appropriate at the given time under their unique circumstances. These unconventional measures, and the sequence in which they would be adapted, are designed to minimize market distortions, as well as risk to the Bank of Canada's balance sheet.
The head of the Bank of Canada is the governor. While the law provides the Board of Directors with the power to appoint the Governor, in practice they approve the choice of the government. The governor serves a fixed seven-year term which may be renewed, but recent governors have only chosen to serve a single term. With the exception of matters of personal conduct ("good behavior") the Bank of Canada Act does not provide the government with the direct ability to remove a governor during his or her term in office. In the case of a profound disagreement between the government and the Bank, the Minister of Finance can issue written instructions for the bank to change its policies. This has never actually happened in the history of the bank to date. In practice, the Governor sets monetary policy independently of the government.
Canadian banknotes bear the signature of the governor and deputy governor of the Bank of Canada.
The Bank of Canada has a large economic research staff which prepare reports independently from the Bank's Governing Council. This research may support the prevailing policy views of the Governing Council, but may also differ from official Bank views with the opinions expressed being those solely of the authors.
The analytical notes, discussion papers and working papers prepared by the Bank's economic staff are published on the Bank's website and in its online monthly Research Newsletter, several are published in the quarterly Bank of Canada Review.
The Bank of Canada has a team of chemists, physicists, and engineers it had assembled for the development of the Canadian Journey Series, who determine potential counterfeiting threats and assess substrate materials and potential security features for use in banknote designs. It is part of the "Four Nations Group" of central banks, which includes the Reserve Bank of Australia, the Bank of England, and the Bank of Mexico, that collaborate on banknote security research, testing, and development.
The American Express Company, also known as Amex, is an American multinational financial services corporation headquartered in Three World Financial Center in New York City. The company was founded in 1850 and is one of the 30 components of the Dow Jones Industrial Average. The company is best known for its charge card, credit card, and traveler's cheque businesses.
In 2016, credit cards using the American Express network accounted for 22.9% of the total dollar volume of credit card transactions in the US. As of December 31, 2017, the company had 112.8 million cards in force, including 50 million cards in force in the United States, each with an average annual spending of $18,519.In 2017, Forbes named American Express as the 23rd most valuable brand in the world (and the highest within financial services), estimating the brand to be worth US$24.5 billion. In 2018, Fortune ranked American Express as the 14th most admired company worldwide, and the 23rd best company to work for.The company's logo, adopted in 1958, is a gladiator or centurion whose image appears on the company's traveler's cheques, charge cards and credit cards.Bank of Canada Museum
The Bank of Canada Museum (since July 2017), formerly known as Canada's Currency Museum, opened in 1980 on the ground floor of the Bank of Canada building in Ottawa, Ontario, Canada. Temporarily closed in 2013 for major building renovations, the museum reopened in a new space on July 1, 2017, in a new building, with a completely new design and concept. It is, however, connected to the main building through the Bank of Canada's underground conference centre.
The museum used to be the public face of the National Currency Collection, which contains over 100,000 currency-related artifacts from around the world. These include coins, banknotes, dies, plates, and engraving tools, bank and government ledgers, weights and scales, cash registers, wallets, numismatic medals and cards and examples of counterfeit money. This collection was on display until 2013, and currently, most of it is in storage and is not available to visitors.The National Currency Collection also encompasses a library and archive, which contain over 8,500 books, pamphlets, catalogues and journals dating back to the Middle Ages.The Museum offers various educational programs for school groups and the general public, in both English and French.Banking in Canada
Banking in Canada is widely considered one of the safest banking systems in the world, ranking as the world's soundest banking system for six consecutive years (2007-2013) according to reports by the World Economic Forum. Released in October 2010, Global Finance magazine put Royal Bank of Canada at number 10 among the world's safest banks and Toronto-Dominion Bank at number 15. According to a report released by the office of the Minister of Finance in 2002 Canada's banks, also called chartered banks, have over 8,000 branches and almost 18,000 automated banking machines (ATMs) across the country. The report goes on to state "Canada has the highest number of ATMs per capita in the world and benefits from the highest penetration levels of electronic channels such as debit cards, Internet banking and telephone banking". More recent data published by the World Bank shows that as of 2017 Canada has 227.82 ATMs per 100,000 adults, which ranks the country third worldwide.Banknotes of the Canadian dollar
Banknotes of the Canadian dollar are the banknotes or bills (in common lexicon) of Canada, denominated in Canadian dollars (CAD, C$, or $ locally). Currently, they are issued in $5, $10, $20, $50, and $100 denominations. All current notes are issued by the Bank of Canada, which released its first series of notes in 1935. The current series of polymer banknotes were introduced into circulation between November 2011 and November 2013. Banknotes issued in Canada can be viewed at the Currency Museum of the Bank of Canada in Ottawa.Big Five (banks)
Big Five is the name colloquially given to the five largest banks that dominate the banking industry of Canada: Bank of Montreal (BMO), Bank of Nova Scotia (Scotiabank), Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), and Toronto–Dominion Bank (TD). The term Big Six is sometimes used to include Canada's next largest bank, National Bank of Canada.All of the five banks are operationally based in Toronto. All five banks are classified as Schedule I banks that are domestic banks operating in Canada under government charter. The banks' shares are widely held, with any entity allowed to hold a maximum of twenty percent.According to a ranking produced by Standard & Poor's, in 2017, the Big Five are among the world's 100 largest banks, with Toronto–Dominion Bank, Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce at 26th, 28th, 45th, 52nd and 63rd place, respectively.Business Development Bank of Canada
The Business Development Bank of Canada (BDC; French: Banque de Développement du Canada) is a federal development bank structured as a Crown corporation wholly owned by the Government of Canada. Its mandate is to help create and develop Canadian businesses through financing, growth and transition capital, venture capital and advisory services, with a focus on small and medium-sized enterprises.The bank was founded in 1944, and its corporate headquarters is located in Montreal. BDC has more than 118 business centres across Canada and more than 49,000 clients. BDC's debt obligations, secured by the Government of Canada, are issued to public and private sector institutions.CTBC Bank (Canada)
CTBC Bank Corp. (Canada) is a Canadian commercial bank based in Vancouver, British Columbia with 4 branches. It is a subsidiary of CTBC Bank, one of the largest commercial banks in Taiwan, and incorporated in Canada under Schedule II of the Bank Act.Canadian Western Bank
The Canadian Western Bank (French: Banque canadienne de l'Ouest) is a bank that is based in Edmonton, and which operates primarily in western Canada. The bank serves personal and commercial clients in Western Canada.Canadian dollar
The Canadian dollar (symbol: $; code: CAD; French: dollar canadien) is the currency of Canada. It is abbreviated with the dollar sign $, or sometimes Can$ or C$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents (¢).
Owing to the image of a loon on the one-dollar coin, the currency is sometimes referred to as the loonie by English-speaking Canadians and foreign exchange traders and analysts, or as the huard (the word for the common loon in French) by French Canadians.
Accounting for approximately 2% of all global reserves, the Canadian dollar is the fifth most held reserve currency in the world, behind the U.S. dollar, the euro, the yen and the pound sterling. The Canadian dollar is popular with central banks because of Canada's relative economic soundness, the Canadian government's strong sovereign position, and the stability of the country's legal and political systems.First Nations Bank of Canada
First Nations Bank of Canada (FNBC) (French: La Banque des Premières Nations du Canada) is the first Canadian chartered bank to be independently controlled by Aboriginal shareholders. FNBC is a Schedule 1 Federally Regulated Bank in accordance with the Bank Act received its charter on November 19, 1996. The Bank headquarters are located in Saskatoon, Saskatchewan, Canada.HSBC Bank Canada
HSBC Bank Canada (French: Banque HSBC Canada), formerly the Hongkong Bank of Canada, is a bank in Canada that is a subsidiary of British banking giant HSBC - one of the largest banking groups in the world. HSBC Canada is the seventh largest bank in Canada, with offices in every province except Prince Edward Island, and is the largest foreign-owned bank in the country. Corporate headquarters are in the financial district of Vancouver, British Columbia. HSBC Bank Canada's Institution Number (or bank number) is 016.Laurentian Bank of Canada
The Laurentian Bank of Canada (LBC) (French: Banque Laurentienne du Canada) is a financial institution founded in 1846 that operates throughout Canada. The Bank caters to the needs of retail clients via its branch network based in Quebec. The Bank also stands out for its know-how among small and medium-sized enterprises and real estate developers owing to its specialized teams across Canada. Its subsidiary B2B Bank is, for its part, one of the major Canadian leaders in providing banking products and services and investment accounts through independent advisors and brokers. Laurentian Bank Securities offers integrated brokerage services to a clientele of institutional and retail investors.List of banks and credit unions in Canada
This is a list of banks in Canada, including chartered banks, credit unions, trusts, and other financial services companies that offer banking services and may be popularly referred to as "banks".Mark Carney
Mark Joseph Carney (born March 16, 1965) is an economist and banker. He holds Canadian, British and Irish citizenship and has been Governor of the Bank of England since 2013 and was Chairman of the Financial Stability Board from 2011 to 2018.Carney began his career at Goldman Sachs before joining the Canadian Department of Finance. He later served as Governor of the Bank of Canada from 2008 until 2013, when he moved to his current post. His term is due to expire in January 2020.National Bank of Canada
The National Bank of Canada (French: Banque Nationale du Canada) is the sixth largest commercial bank in Canada. It is headquartered in Montreal, and has branches in most Canadian provinces and 2.4 million personal clients. National Bank is the largest bank in Quebec, and the second largest financial institution in the province, after Desjardins credit union. National Bank's Institution Number is 006 and its SWIFT code is BNDCCAMMINT.
As of October 31, 2017, National Bank had a network of 429 branches and 931 automated teller machines in Canada. It also had a number of representative offices, subsidiaries and partnerships in other countries, through which it serves Canadian and non-Canadian clients.
In 2011, National Bank was placed third in Bloomberg's list of "The World’s Strongest Banks".National Bank's business is concentrated in Quebec, and it is expanding in other provinces. For the year ending October 31, 2017, 59% of its total revenues were from Quebec, 30% from other provinces, and 11% from its international operations. Its total revenue for the year were allocated across business segments:
44.8% from Personal and Commercial Banking,
23.5% from Wealth Management,
23.8% from Financial Markets, and
7.9% from U.S. Specialty Finance and International.Rogers Bank
Rogers Bank (French: Banque Rogers) is a Canadian financial services company wholly owned by Rogers Communications. Rogers applied to the Minister of Finance under the Bank Act for permission to start a Schedule I bank (domestic bank that may accept deposits) in summer 2011.Royal Bank of Canada
The Royal Bank of Canada (RBC; French: Banque Royale du Canada) is a Canadian multinational financial services company and the largest bank in Canada by market capitalization. The bank serves over 16 million clients and has 80,000 employees worldwide. The bank was founded in 1864 in Halifax, Nova Scotia, while its corporate headquarters are located in Montreal, Quebec, and in Toronto, Ontario. RBC's Institution Number (or bank number) is 003. In November 2017, RBC was added to the Financial Stability Board's list of global systemically important banks.
In Canada, the bank's personal and commercial banking operations are branded as RBC Royal Bank in English and RBC Banque Royale in French and serves approximately ten million clients through its network of 1,209 branches. RBC Bank is the U.S. banking subsidiary which formerly operated 439 branches across six states in the Southeastern United States, but now only offers cross-border banking services to Canadian travellers and expats. RBC also has 127 branches across seventeen countries in the Caribbean, which serve more than 16 million clients. RBC Capital Markets is RBC's worldwide investment and corporate banking subsidiary, while the investment brokerage firm is known as RBC Dominion Securities. Investment banking services are also provided through RBC Bank and the focus is on middle market clients.
In 2011, RBC was the largest Canadian company by revenue and market capitalization. and was ranked at No. 50 in the 2013 Forbes Global 2000 listing, The company has operations in Canada, and 40 other countries and had US$673.2 billion of assets under management in 2014.Toronto–Dominion Bank
The Toronto-Dominion Bank (French: Banque Toronto-Dominion) is a Canadian multinational banking and financial services corporation headquartered in Toronto, Ontario. Commonly known as TD and operating as TD Bank Group (French: Groupe Banque TD), the bank was created on February 1, 1955, through the merger of the Bank of Toronto and The Dominion Bank, which were founded in 1855 and 1869, respectively.
In 2017, according to Standard & Poor's, TD Bank Group was the largest bank in Canada by total assets, the second largest by market capitalization, a top-10 bank in North America, and the 26th largest bank in the world.The bank and its subsidiaries have over 85,000 employees and over 22 million clients worldwide. In Canada, the bank operates as TD Canada Trust and serves more than 11 million customers at over 1,150 branches. In the United States, the company operates as TD Bank (the initials are used officially for all U.S. operations). The U.S. subsidiary was created through the merger of TD Banknorth and Commerce Bank, and it serves more than 6.5 million customers with a network of more than 1,300 branches in the eastern United States.Vancity Community Investment Bank
Vancity Community Investment Bank (VCIB), formerly known as Citizens Bank of Canada, is a Toronto-based chartered bank and subsidiary of Vancity credit union.
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|Historical currencies of Canada|
|Pre-confederation Tokens and Coinage|
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|Bretton Woods system|