The other day I was asked exactly what does the Bank of Canada do? This person was upset that this “bank” does not give out chequing accounts. Well ladies and gentleman I shall, yes I just said shall. Clarify the big misconception with the Bank of Canada. Most consumers who are not familiar with the banking system in Canada just think the Bank of Canada is another Banking institution where you can get a chequing and savings account.
The Bank of Canada does NOT give out banking products. The Bank of Canada is the nation’s central bank with the goal to promote the economic and financial welfare of this great nation. The Bank of Canada focuses on monetary policies, bank notes, the financial system as a whole and fund management.
Time for a little bit of a history lesson, the Bank of Canada in 1934 (which was also the year it was founded) was a privately owned corporate enterprise. What is interesting to know is that Canada did not have a central bank during the Great Depression (or before). The large banks at the time would issue out their own currency with no government regulation on the nation’s money, though the banking system was regulated to a point by the Canadian Bankers Association that worked hand in hand with the Canadian Government. The federal finance department before 1938 would issue out only small and large amounts of bank notes. The other banks, principally the Bank of Montreal filled in the gap. The Bank of Montreal was the largest bank the nation had and it became the government’s banker.
Canada did not need a central bank at the time of its implementation. There were a handful of supports for a central bank but it was principally farmers pushing for a central government. They (as did many Canadian citizens) viewed and ultimately blamed the policies of the Canadian banks for making the Depression worse. The farmers ended up joining up with manufacturers and other industries in pushing for a central bank. What else is interesting and not too many people know about this but Royal Bank of Canada (RBC), who at the time was Bank of Montreal’s closest rival. Pushed for a central bank; this would ultimately sever the Bank of Montreal from being the Canadian Governments banker. The federal government also had issues with its inability to deal directly with its foreign debt. In 1938, Prime Minister William Lyon Mackenzie King made the Bank of Canada a Crown Corporation. This ultimately forced the other banks to stop creating their own currencies and centralized the Canadian Banking industry. We also need to understand the mentalities of people during this time and there views on banks. People in the 20s and 30s did not trust banks at all. Most people would keep there life savings in a box under there bed or under floorboards.
My history teacher would be proud of my performance right now…
The Bank of Canada is not a part of any government department and has no affiliation with the department of finance (which is a big misconception). Though the federal government (particularly the cabinet) do approve who will become the Bank’s Board of Directors. The Deputy Minister of Finance sits on the Board of Directors but what is most important to know is that this deputy has no vote. Plus a bunch of other indifference’s that further prove its not connected to the Federal Government.
The Bank of Canada is located in the nations heart (Ottawa). This is surprising since all the big domestic banks in Canada are located on Bay Street in Toronto.
Below is an exciting and vivid presentation on the Bank of Canada, it looks like it was filmed in the 80s and the commentator really has no emotion in this video.