What Is The Bank of Canada?
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. I will state this as clearly possible; the Bank of Canada does NOT
give out banking products. None what so ever! 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. Royal Bank of Canada 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 it 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. The Bank is not a part of the 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 is
that this deputy has no vote. Plus a bunch of other indifferences 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.