The History of the Bank of Canada
The BOC has four main areas of responsibility: monetary policy, which dictates the supply of money circulating in the Canadian economy; currency, the design and issuing of Canada’s bank notes, and managing funds. The BOC manages the Canadian government’s public debt and reserves of foreign exchange.
Canada’s former Prime Minister, William Lyon Mackenzie King, 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 government’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 serves seven-year terms. Governor Tiff Macklem has served since 2020 and is the bank’s 10th governor. The members of the board of directors are appointed by Canada’s Minister of Finance and serve for three-year terms.
The BOC and Interest Rates
Setting the interest rate is one of the BOC’s most important 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 interest 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 rate has risen three times to 1.25 percent as of April 2018 and 1.75 percent as of March 2020. This rate is the interest charged when banks lend money to each other. The BOC generally imposes rate cuts to boost 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 provide money that is difficult to counterfeit and has an authentication process in place. Canada contracts the printing of money to an outside printing 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 operated since 1980 after several relocations. Regional Bank of Canada offices are in Vancouver, Calgary, Toronto, Montreal, and Halifax.