Established in 1934 Current governor is Mark Carney
Purpose of the Bank of Canada
1.Banker to commercial banks
Chartered banks keep a fraction of their reserve in the Bank of Canada
Lender of last resort( prime rates is 3%, the rate at which you can borrow, they are set by banks it is usually higher because the difference is the profit margin for the banks;the bank rate, the rate of interest the boc charges the commercial banks for loan it's 1.25%(always 0.25% more tan the over night rate) Over night target rate, is the recommende interest rate at which banks lend to each other. it is always 0.25% lower than the bank rate it's 1%)
**Set reserve requirements
2. Controller of the money supply
Too much money leads to inflation
Too little money leads to unemployment
Only institution in Canada allowed to print money
3. Banker to the federal government
The federal gov’t keeps a chequing account with the bank of Canada
If the gov’t needs to borrow money, it issues bonds which it sells to the bank of Canada(buys it with ex nihilo money)
Fiscal agent( involves in financial matters to the govt)
4. Manager of the country’s monetary policy(lower interest rate /increase money supply)
Subject to approval by the federal gov’t( they have always operated independent of the federal government but the govt of Canada can veto their decision)
Sets the bank rate and target overnight rate(but not the prime rate)
5. Supporter of the fiduciary monetary system
Fiduciary monetary system is based on trust or confidence(boc is legally obligated to maintain trust)
People accept currency because they are confident others will accept it from them
Bank of Canada acts to prevent a run on the bank(where bank runs out of money, when there customers need them)
CDIC (Canada Deposit Insurance Corporation; a crown corporation)- insures personal bank accounts up to $100,000 per account( in US is per person up to 250000) ( all federally chartered b anks purchase insurance from CDIC while the near banks can get insurance from anyother insurance)
Established in 1934 Current governor is Mark Carney
Purpose of the Bank of Canada
1.Banker to commercial banks
- Chartered banks keep a fraction of their reserve in the Bank of Canada
- Lender of last resort( prime rates is 3%, the rate at which you can borrow, they are set by banks it is usually higher because the difference is the profit margin for the banks;the bank rate, the rate of interest the boc charges the commercial banks for loan it's 1.25%(always 0.25% more tan the over night rate) Over night target rate, is the recommende interest rate at which banks lend to each other. it is always 0.25% lower than the bank rate it's 1%)
- **Set reserve requirements
2. Controller of the money supply- Too much money leads to inflation
- Too little money leads to unemployment
- Only institution in Canada allowed to print money
3. Banker to the federal government- The federal gov’t keeps a chequing account with the bank of Canada
- If the gov’t needs to borrow money, it issues bonds which it sells to the bank of Canada(buys it with ex nihilo money)
- Fiscal agent( involves in financial matters to the govt)
4. Manager of the country’s monetary policy(lower interest rate /increase money supply)- Subject to approval by the federal gov’t( they have always operated independent of the federal government but the govt of Canada can veto their decision)
- Sets the bank rate and target overnight rate(but not the prime rate)
5. Supporter of the fiduciary monetary system**