What is the 'Bank Of Canada - BOC'?

The Bank of Canada (BOC) was established in 1934 under the Bank of Canada Act. The Act stated that the Bank of Canada was created “to promote the economic and financial welfare of Canada.” The BOC and its Governor are responsible for  setting monetary policies, printing money and determining the interest rate of Canadian banks.

BREAKING DOWN 'Bank Of Canada - BOC'

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 of 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 BOC Governor serves for a seven-year term and is elected by the board of directors. Governor Stephen Poloz has served since 2013 and is the bank’s ninth 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 the Interest Rate

Setting the interest rate is one of the most important roles of the BOC. 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% before being lowered, over time, to 1% in 2010. The rate was cut twice in 2015 to the current 0.5% level. This rate is the interest charged when banks lend money to each other. Rate cuts are typically imposed 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 that has an authentication process in place. Canada contracts the printing of money to an outside printing company. The Governor’s  printed signature appears 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 located in Vancouver, Calgary, Toronto, Montreal and Halifax.

  1. CAD (Canadian Dollar)

    CAD is the currency abbreviation or currency symbol for the Canadian ...
  2. Canada Savings Bond - CSB

    A financial product issued by the Bank of Canada. It offers a ...
  3. Sale and Repurchase Agreement - ...

    An open market operation, implemented by the central Bank of ...
  4. Canadian Securities Institute - ...

    Canada's leading provider of professional credentials and compliance ...
  5. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. ...
  6. Canada Revenue Agency - CRA

    A federal agency that collects taxes and administers tax laws ...
Related Articles
  1. Insights

    The 3 Biggest Canadian Banks (RY, TD)

    Examine some of the largest banks in Canada, which also rank among the largest and most important banks in the industry worldwide.
  2. Trading

    Why U.S. Dollars Aren't Accepted in Canada

    Is the U.S. dollar accepted in Canada? Learn about the legal and practical aspects of using U.S. dollars in Canadian transactions.
  3. Investing

    Why Bank Stocks May Keep Printing Money (BAC, C)

    Bank stocks could enjoy strong returns in 2017 according to a report published by Royal Bank of Canada.
  4. Personal Finance

    3 Reasons to Attend College in Canada

    Attending college in Europe might be the dream, but with low tuition fees and weakening currency, Canada is the financially responsible choice.
  5. Investing

    Canada's Commodity Currency: Oil And The Loonie

    When the price of oil goes up, don't worry about how much gas is going to cost - get even by making a play on the Canadian dollar.
  6. Insights

    So You Want to Move to Canada? Good Luck

    The prospect of a Donald Trump presidency had many blue staters eyeing a move to America's northern neighbor late on election day.
  7. Insights

    How Central Banks Control the Supply of Money

    A look at the ways central banks pump or drain money from the economy to keep it healthy.
  8. Insights

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
  9. Insights

    Target Finally Escapes Failed Canadian Experiment

    After years of cash infusions into a failing Canadian operation, has Target financially recovered? What are the long-term effects of Target Canada?
  1. Who decides to print money in Canada?

    Discover how the Bank of Canada and chartered banks in the country can create new money, and how creating new money causes ... Read Answer >>
  2. What are the most common market indicators to follow the Canadian stock market & ...

    Learn key indicators used by analysts to follow the Canadian stock market and to gauge the condition of the overall Canadian ... Read Answer >>
  3. Who decides when to print money in the U.S.?

    Learn who decides to print money in the United States. Many people relate credit creation, which is the Fed's job, with printing ... Read Answer >>
  4. Who determines interest rates?

    In countries using a centralized banking model, interest rates are determined by the central bank. In the first step of interest ... Read Answer >>
  5. Are Canadian Pension Plans inflation-protected?

    Learn about the Canada Pension Plan and how it adjusts its contributions and benefits each year for changes in inflation ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center