Canada National Bank
Canada National Bank is the central bank of Canada. Although, it is important to know that it is not a government department. It is rather a crown corporation owned by the government. Though its activities are almost independent, its earnings go to the federal treasury and shares are directly held by the finance ministry. Besides that, it is not the federal public service agency but the bank itself that regulates the employees of this bank. It was after the introduction of the 1934 Bank of Canada Act that gave this bank the monopoly on the issuance of banknotes. The value of the Canadian dollar depends upon the actual amount of money created by this bank. Its main task is to promote the financial and economic well being of Canada. However, practically, a more narrow and specific objective is to print a certain amount of money in such a way that should keep the inflation stable between 1% and 3%. As per the reports, the average annual inflation rate of the Canadian currency has been 3.14% since the creation of the bank in 1934. Following is a brief overview on the roles and responsibilities of the Canada National Bank.
The Canada National Bank regulates the monetary supply in the country. They keep an eye on how much money is in circulation in the economy and how much their value is. The inflation control system is the cornerstone of the monetary policy framework. The bank uses this system to increase the predictability of inflation and keep the monetary policy effective as per certain measures as specified in the guidelines pertaining to the same. When demand is weak, the inflation decreases. So, to absorb the economic slack and to stimulate the economy, the bank reduces the interest rates. On the other hand, when the demand is strong, inflation tends to increase. So, to cool off the economy, the bank increases the interest rates. This way, it actually influences the short-term interest rates to maintain the effectiveness of the monetary policy.
The Canada National Bank is the only authority in this country that can issue bank notes. It is their responsibility to design, produce, and distribute the Canadian dollar. They take many years of time to finalize a design for bank notes. There are two Security Printing companies – BA International Inc and Canadian Bank Note Limited Company that print the notes. The distribution is done by supplying bank notes to different financial institutions in a way to meet the public demand. There is a particular Bank Note Distribution System that regulates the distribution process.
The financial system of Canada consists of financial markets, financial institutions, and payments and settlement systems. The financial markets consist of foreign exchange, derivatives, equities, bonds, and money. The Canada National Bank plays a very important role in the financial markets. Some of its activities that influence these markets include management and marketing of government securities, its activities in the foreign exchange market, and many other such things. The bank also regulates the “payment clearing and settlement system” in a way to enable the financial institutions participating in the system to engage in large transactions in a safe and efficient manner. Overall, it is the responsibility of the bank to promote the efficiency and safety of the financial system of Canada.
The Canada National Bank works as a fiscal agent for the Canadian Government, as they also engage in the activities pertaining to the management of public funds. For example, the government may seek advice from the bank on the efficient management of the public debt. The bank is also responsible for the management of the foreign exchange reserves of the Government. Besides that, they also manage the accounts of the Receiver General. It is their responsibility to ensure there is enough cash in these accounts to satisfy the daily requirements.
The headquarters of the Canada National Bank are located in Ottawa, Ontario, Canada. It is important to keep in mind that it is not a commercial institution. One cannot open a saving account here. It does not accept deposits from the general public and does not provide regular banking services. Its clientele are commercial banks, other central banks, and the federal government of Canada.