The Bank of Canada is the nation’s central bank. Established in 1935 through the Bank of Canada Act, the BoC’s main goal is to promote the economic and financial interests of Canada.
Before the 1930’s there was no need for central banking due to Canada’s scattered and primarily rural economy. The branch bank network that existed in Canada was able to meet the nation’s needs. The larger banks were able to deal with government business with ease and the branch network developed a system for clearing cheques between banks.
However as the Great Depression set in, the political climate in Canada started to change. The Prime Minister at the time, R.B. Bennett, expressed concern over the lack of direct means in Canada for resolving international accounts leading the federal government to toy with the idea of establishing a central bank. In 1933, Prime Minister Bennett set up a royal commission to study the entire workings of Canada’s banking system in order to see if establishing a central banking institution was necessary.
The royal commission was headed by Lord Macmillan, a Scottish jurist, Bank of England director Sir Charles Addis, former Canadian Finance Minister, William Thomas White, Beaudry Leman, general manager of the Banque Canadienne de Montreal and Premier of Alberta, John Edward Brownlee. The commission published a report supporting the need for a central bank. Following the publication of the report the Prime Minister announced that the government of Canada would heed to the recommendations in the report and adopt a central banking system.
A portion of the report regarding the main features that would be necessary in order to establish a central bank for Canada would become the framework for the Bank of Canada Act. In March of 1935, the Bank of Canada opened its doors for the first time as a privately owned institution with shares sold to the public.
Shortly after the bank’s inception, an amendment was made to the Bank of Canada Act in order to nationalize the institution. In 1938, the Bank of Canada became publicly owned and has remained that way ever since.