The Bank of Canada is the Central issuing Bank of the country.
It was established as a joint stock company, but holders of its shares could not be commercial banks and their employees, as well as foreigners. The government of Canada during the 1935-1938 he bought from private owners owned their shares, thereby strengthening the Bank as the Central. It defines the activities of the Federal government, which appoints the Board of Directors. The Board of Directors includes the Deputy Minister of Finance. The Bank of Canada reports regularly to the Parliament on its activities.
The main functions of the Bank of Canada are: the regulation of monetary circulation and credit; the maintenance of a rate of national currency against other currencies; the mobilization of the level of prices, level of production and trade. The Bank of Canada has been issuing banknotes in circulation, provides advances to commercial banks, manages the cash reserves of commercial banks, regulates transactions between banks in clearing accounts, the state regulates the foreign exchange reserves.
The Bank of Canada is an agent of the Federal government, manages the securities of the state, its cash, provides communication with the Central banks of other States. The Bank of Canada buys shares of commercial banks, not credit or accept deposits from individuals and companies.
The main place in the assets of the Bank of Canada hold investments in government bonds. It also conducts operations with securities by placing them on the open market, the interest on which are the most important source of his income. The main item of liabilities of the Bank of Canada’s banknotes are manufactured by them. Some of them deposited in commercial banks as cash reserves. In addition, non-interest bearing deposits of commercial banks are also article reserve. In addition, the Bank of Canada acts as a “Bank of banks”, i.e. the lender of last resort for banks, which it provides short-term loans in small amounts , provides small investments in foreign securities. Commercial banks as creditors of the Bank of Canada in accordance with the law must keep it in their reserves. Deposits in the Bank of Canada kept the canadian government, major foreign Central banks.
The main activities of the Bank of Canada was formed in the period of strengthening of state-monopolistic tendencies, which contributed to increased state regulation of the monetary system. This was particularly evident in the postwar period, when the state switched to a focused counter-cyclical regulation of the economy. Most active in regulation of money circulation, the Bank of Canada showed in the second half of the 1950s as a regulator of economic activity was made by the discount rate, which was changed in 1944, and in 1950 in 1955 in the range of from 1.5 to 2.5%.
However, the low effectiveness of interest rate policy, its lack of flexibility forced the Bank of Canada in monetary-credit regulation pass to the operations with securities on the open market. For the first time such operations the Bank of Canada held for the salvation of the canadian dollar during the currency crisis of 1962. Currently, the policy of the Bank of Canada is viewed method of regulation of norm of obligatory reserves of commercial banks. Changing them, the Bank of Canada increased or decreased the amount of money commercial banks for lending. In addition, since 1971 the Bank of Canada sets limits on the increase in the money supply in circulation. However, these measures do not always contribute sufficiently to regulate the economy.