Bank of Canada
Despite the fact that it started as a private corporation, the Bank of Canada has been a Crown Corporation since 1938. The primary responsibilities of the Bank of Canada include the design and distribution of currency, the maintenance of financial systems, stabilizing inflation with monetary policy and providing funds management for the federal government and other entities.
It does not operate in the same way as privately owned banks do, and as such you are not able to open an account with the Bank of Canada. Because it is a Crown Corporation, technically it is owned by the people of Canada. There is some distinction between this type of Crown Corporation and a department of the government. Because it does not act as a government department, it has considerable latitude in carrying out its roles and responsibilities. Because it is not a direct part of the government, it does not play a role in spending government funds.
Spotlight on Bank of Canada
About Bank of Canada
It is important for the Bank of Canada to remain at arm’s length from the government so that the policies it institutes are valid both in the short term and for the long run. If the Bank of Canada were to be controlled more directly by the government, the institution's longer-term monetary plans might be undermined. Obviously, problems would occur if the federal government and the Bank of Canada were closely linked, as there would be the temptation of a government in power to abuse the significant financial power and influence held by the Bank of Canada.
Many people are under the impression that the Bank of Canada is financed by the government of Canada. The fact is that the bank of Canada actually turns a profit every year. It makes its money by distributing currency. When the Bank of Canada produces currency, it is paid by the private banks when it distributes currency to them. This kind of operating revenue is enough to see a profit of billions of dollars each year.
While the Bank of Canada does not set the prime rate, it does set the overnight rate and the bank rate. These classifications will have an influence on the prime rate. It does act as a lender to large banks in Canada for large transactions over the short term, and for this it uses the overnight rate.
It is important to differentiate between monetary and fiscal policy when talking about the Bank of Canada. It will deal in monetary policy by influencing the supply of currency, but fiscal policy is handled by the federal government.