A Short History of the Bank of Canada

Editors note: Part of the Mission of the Mises Institute of Canada will be to explore and expose the roots of our very own central bank, the Bank of Canada. The Canadian experience must be re-examined through the lens of the Austrian School.

The Bank of Canada was established in 1935 following the Bank of Canada Act. As a result, the Bank became Canada’s central bank, and is now responsible for conducting monetary policy, issuing bank notes, regulating the financial system, and managing the finances of the Government of Canada. Essentially, the Bank of Canada’s critical role, as stated in Bank of Canada Act, is “to promote the economic and financial welfare of Canada.”

Prior to 1935, Canada did not have a central Bank; chartered banks issued the majority of notes in circulation for Canadian’s economic activities.  However, during the great depression, several criticisms arose of the financial system. Prime Minister R. B. Bennett responded by setting up in 1933 Royal Commission on Banking and Currency. The Commission, conducted by Lord Macmillan, was to study “the organization and working of our entire banking and monetary system [and] to consider the arguments for or against a central banking institution.”

Lord Macmillan concluded that central bank should be established in Canada. Macmillan suggested that central banking would control the money supply and cost of credit in the market. With these powers, the Bank of Canada was put to work on a dual mandate of full employment and stable prices, however, since 1990s, the bank primary monetary policy has been reduced to price stability. The Bank of Canada is thus thought to provide a stabilizing role in the economy.

Nevertheless, there are several criticisms and proposals for reforming the Bank of Canada. For instance, critics argued that the Bank returned to his original mandate of full-employment and price stability and should not focus on a single mandate. In addition, there is increasing concern over the opaqueness and lack of regional representation in which the Bank of Canada operates its business.

In any event, to understand the past and current state of our economy, learning about the Bank of Canada is crucial. Below, you will find extensive resources on the history as well as assessments of the Bank of Canada.


National Post. (2011, March 11). Bank of Canada turns 75: The Governors’ Histroy. Retrieved from http://network.nationalpost.com/NP/blogs/fpposted/archive/2010/03/11/bank-of-canada-turns-75-the-governors-history.aspx

This article provides the history of the governors’ who held the position.

Time. (1930, Nov 20). Canada: Central Bank? Retrieved from http://www.time.com/time/magazine/article/0,9171,929585,00.html

This article looks at the new “Macmillan Report”, which subsequently recommended the creation of Bank of Canada. In the article, the author, briefly, provided career background of all the four contributors to the “Macmillan Report”. 2 out of the 4 authors were from England; thus, modeling our banking system heavily based on Bank of England’s style. In addition, the article makes it clear that there were several criticism of the recommendation to create a central Bank: central bank would soon get messed in Canadian politics.

Time. (1930, Nov 20). Canada: Canada’s Show. Retrieved from http://www.time.com/time/magazine/article/0,9171,930091,00.html

An in-depth look at the proceedings of the Royal Commission on Banking, outlining the important players and giving a history of the events leading up to that moment.

Time. (1934, March 05). Business: Bank of Canada. Retrieved from http://www.time.com/time/magazine/article/0,9171,747141,00.html

The days just leading to the voting of the bill Bank Act

Parkinson, Rhonda. (2002, Oct 1). The Bank of Canada. Retrieved from http://www.mapleleafweb.com/features/bank-canada#assessing

This provides overview of the Bank of Canada including history, it purpose, and past and current governors of the bank. Additionally, the selection titled “Assessing the Bank of Canada” is the most intriguing since it provides criticism and proposals for reforming the Bank of Canada.

Royal Commission. (1933). Proceedings of the royal commission on banking and currency, canada, ottawa,1933 . Retrieved from http://www.scribd.com/doc/9626270/Royal-Commission-on-Banking-and-Currency-1933-CANADA-Proceedings-Vol-1-to-6-Highlights

Royal Commission on Banking and Currency 1933 Proceedings. Furthermore, it provides the operation and the mandates the Bank will follow.

Royal Commission. (1933). The report of the royal commission on banking and currency in canada 1933. Retrieved from http://epe.lac-bac.gc.ca/100/200/301/pco-bcp/commissions-ef/macmillan1933-eng/macmillan1933-eng.htm

The original royal commission report.

Wilde, K. (2008). A monetary education for MPs. Retrieved from http://www.sustecweb.co.uk/past/sustec16-4/a_monetary_education_for_mps.htm

Basic introductory to Bank of Canada’s history, purpose, and duty.

Research and Scholarly Articles

Acheson, F. (1973). Bureaucratic theory and the choice of central bank goals: the case of the bank of canada. Journal of Money, Credit and Banking, 5(2), Retrieved from http://www.jstor.org/pss/1991386

Breton, A, & Wintrobe, R. (1978). A theory of ‘moral’ suasion. The Canadian Journal of Economics / Revue canadienne d’Economique, 11(2), Retrieved from http://www.jstor.org/pss/134345

Breton and Wintrobe  suggests the Bank of  Canada displays bureaucratic characteristics in it operation.

Bordo , M. (1987). Why did the bank of canada emerge in 1935?. The Journal of Economic History, 47(2), Retrieved from http://www.jstor.org/pss/2122238

Chant, J. (2001). The bank of canada: moving towards transparency. Retrieved from www.bankofcanada.ca/wp-content/uploads/2010/06/chante.pdf

Chant was brought to the Bank to suggests measures to improve transparency and accountability as well as its approaches to communication.

Courchene, T. (1971). Recent canadian monetary policy: an appraisal. Journal of Money, Credit and Banking, 3(1), Retrieved from http://www.jstor.org/pss/1991435

Courchene, T. (1969). An analysis of the canadian money supply: 1925-1934. The Journal of Political Economy, 77(3), Retrieved from http://www.jstor.org/pss/1828909?mlt=true

Clark, J. (1996). The bank of canada, accountability and legitimacy: some proposals for reform. Canadian Public Policy / Analyse de Politiques, 22(4), Retrieved from http://www.jstor.org/pss/3551452

Curtis, C. (1934). The canadian macmillan commission. The Economic Journal, 44(173), Retrieved from http://www.jstor.org/pss/2224726

Dixon.F. (1935). Monetary and Banking Legislation in Canada. The American Economic Review Vol. 25, No. 1 , pp. 73-84. . Retrieved from www.jstor.org/stable/1812653

Gordon , H, & Read, L. (1958). The political economics of the bank of canada. The Canadian Journal of Economics and Political Science / Revue canadienne d’Economique et de Science politique, 24(4), Retrieved from http://www.jstor.org/pss/139084

McIvor, R. (1956). Book reviews: money, credit and banking; monetary policy; consumer finance; mortgage credit . The American Economic Review , 46(4), Retrieved from http://www.jstor.org.www.ubishops.ca:2048/stable/view/1814318

Wilson, R. (1994). Book |review: the bank of canada: origins and early history, george s. watts.. Retrieved from journals.sfu.ca/archivar/index.php/archivaria/article/download/../13011


Courchene, T. (1983). No place to stand? : abandoning monetary targets : an evaluation. Toronto: C.D. Howe Institute.

Courchene, T. (1976). Monetarism and controls: the inflation fighters. Toronto: C. D. Howe Research Institute.

Crow, J. (2002). Making money: an insider’s perspective on finance, politics, and canada’s central bank. Wiley.

Neufeld, P. (1955). Bank of canada operations, 1935-54. Toronto: Univ. of Toronto Press.

Powell, J. (2009). The bank of canada:challenges, confrontation, and change. McGill-Queens University Press.

Powell, J. (2005). Bank of canada. Ottawa: Bank of Canada

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3 Responses to “A Short History of the Bank of Canada”

  1. MBader says:

    The BoC was one of a number of big government institutions created in response to the depression. (Others include the CBC and the Canadian Wheat Board.) The Free Banking system that existed before the BoC, together with the gold standard, meant a systemic collapse of the monetary system was virtually impossible, and bank failures were virtually unknown in Canada. Keep in mind that when the BoC was created, countries all over the world were moving to a central bank system – conventional wisdom dictated it, even though the Canadian banking system was very strong through the depression. Central banks have done little damage in developed countries, but have been an unmitigated disaster in the developing world. George Selgin and Steve Hanke have written extensively on this and the the benefits of free banking. I have a co-authored article in the South African Journal of Economic History on this topic here. http://onlinelibrary.wiley.com/doi/10.1111/j.1813

    • Redmond says:


      Central Banks have done little damage in developed countries

      Really? What about the "great depression", 1970's stagflation, the tech bubble and subsequent housing bubble to name only the most obvious examples?

      Canada is currently on the cusp of a peak in housing prices, we can only hope that Canadians in general have more equity and less debt than the Millions of Americans who were wiped out in 2008.

      The 14 trillion dollar debt and unmanageable budget can also be seen as an "unmitigated disaster"… One that we all may have to pay for, as the USD is the reserve currency of the world.

      Thanks for the great comment – I'll be sure to check out the article!

  2. Ohhh Henry says:

    The Bank of Canada is truly a joke, if you believe that it is supposed to have anything to do with full employment, price stability or the stabilization of the financial system. The period since its creation has been one of high, chronic, so-called "structural" unemployment, which was an unknown phenomenon in the entire history of Canada from the time of the first Basque fish-drying camps right up to the 1930s. Price stability is also a joke, since clearly the CAD has lost most of its value since the creation of the B of C. Likewise the stability of the financial system. If the B of C is such a stabilizing influence, then why did the federal govt feel obliged to provide a multi-hundred billion dollar "backstop" to prop up Canadian banks' real estate "investments" ??? Why did the entire economy slide into a long period of stagflation in the 1970s if the B of C was such a hot bunch of whippersnappers? And why is the entire economy on the brink of an abyss right now? The only possible explanation is that the B of C and other central banks are nothing but a bunch of liars and incompetents.

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