The Bank of Canada (BoC) serves as the central bank of Canada and is situated in Ottawa, the nation's capital. Its primary mission is to "promote the economic and financial welfare of Canada," as outlined in the Bank of Canada Act.

Established in 1934, the Bank commenced operations in March 1935. By 1938, it had transitioned into a Crown corporation under the federal government. Although the Bank of Canada Act has undergone several amendments, its preamble remains unchanged. The Bank continues to exist "to regulate credit and currency in the best interests of the economic life of the nation."

The Bank of Canada has four key areas of responsibility:

• Monetary policy: The Bank influences the money supply in the economy, utilizing its monetary policy framework to maintain low and stable inflation.
• Financial system: The Bank fosters safe, sound, and efficient financial systems both domestically and internationally, engaging in transactions in financial markets to support these goals.
• Currency: The Bank is responsible for designing, issuing, and distributing Canada’s banknotes.
• Funds management: The Bank acts as the "fiscal agent" for the Government of Canada, overseeing its public debt programs and foreign exchange reserves.

In practice, the Bank has a more specific internal definition of its mandate: to keep the inflation rate (as measured by the Consumer Price Index) between 1% and 3%. The most effective tool at the Bank's disposal for achieving this objective is its authority to set interest rates for borrowed money. Given the significant trade relationship between Canada and the United States, adjustments to interest rates are often influenced by those in the U.S. at the time.

The Bank of Canada is the exclusive entity authorized to issue currency in the form of banknotes in Canada, while coins are produced by the Royal Canadian Mint. Currently, banks are not required to maintain fractional reserves with the Bank of Canada. Instead, they must hold highly liquid assets, such as treasury bills, equivalent to 30 days of normal withdrawals (liquidity coverage), with leverage primarily linked to sufficient loss-absorbing capital, mainly Tier 1 (equity) capital.

Although the Bank of Canada operates under the Canadian government, it is ultimately owned by the public. Initially established as a private corporation in 1934, it became a Crown corporation and was subsequently taken over by the government within four years. Unlike other government agencies, the bank’s governor and senior deputy governor are appointed by the bank itself.

The Governing Council

The Bank of Canada is governed by the Governing Council, which is responsible for:

• Conducting monetary policy
• Promoting a safe and efficient financial system

The Governing Council consists of the Governor, the Senior Deputy Governor, and four Deputy Governors. Its primary tool for implementing monetary policy is the target for the overnight rate (also known as the key policy rate), which is typically set on eight fixed announcement dates each year. Decisions regarding the rate are made by consensus rather than individual votes, as is common in some other central banks.

The Executive Council

The Executive Council comprises the Governing Council and the Chief Operating Officer, collectively determining the strategic direction of the Bank.

The Governor

As the Chief Executive Officer of the Bank, the Governor has full control over its operations. Responsibilities include:

• Chairing the Board of Directors
• Leading the Bank’s Governing Council
• Conducting monetary policy to meet an inflation target agreed upon by the Bank and the Government of Canada

The Governor and the Senior Deputy Governor are appointed by independent directors with the approval of the Governor in Council (the federal Cabinet) for a seven-year term, allowing the Governor to maintain a medium- and long-term perspective essential for effective monetary policy.

The Senior Deputy Governor

The Senior Deputy Governor serves as the deputy executive of the Bank of Canada. Her responsibilities include:

• Overseeing the Bank’s strategic planning and operations
• Sharing responsibility for monetary policy as a member of the Governing Council
• Being a member of the Bank’s Board of Directors

The Board of Directors

The Board of Directors is appointed by the Minister of Finance for a three-year term, subject to the approval of the Governor in Council. It consists of the Governor, the Senior Deputy Governor, 12 outside directors, and the Deputy Minister of Finance (who does not have a vote). Their responsibilities include:

• Providing general oversight of the Bank's management and administration
• Reviewing the Bank’s general policies (excluding monetary policy) and approving the Bank’s corporate objectives, plans, and annual budget
• Keeping the Bank informed about prevailing economic conditions in their respective regions
• Appointing the Governor and Senior Deputy Governor

It is important to note that monetary policy is neither formulated nor implemented by the outside directors.