Class Notes (835,342)
Canada (509,116)
UOIT (1,700)
Business (220)
BUSI 3410U (20)
Bin Chang (14)
Lecture 2

BUSI 3410U Lecture 2: Lecture 2

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School
Department
Business
Course
BUSI 3410U
Professor
Bin Chang
Semester
Winter

Description
Lecture 2: Bank of Canada and Monetary Policy Financial Institutions Bank of Canada Canadas central bank o Founded in 1934 as a private company in 1938 it became a Crown Corporation o 12 directors appointed by the government for three year terms, and they appoint a governor and senior deputy governor for sevenyear terms o Deputy Minister of Finance sits on the committee but does not vote o Governing council of the bank determines policy o 1967, ultimate monetary authority was given to the government But disagreement with the Bank, and the Minister of Finance has to issue a public letter of direction which has ever been done Functions To promote the economic and financial welfare of Canada, we o Conduct monetary policy in a way that fosters confidence in the value of money o Supply quality bank notes that are readily accepted and secure against counterfeiting o Promote the safety and efficiency of Canadas financial system o Provide efficient and effective fundsmanagement services Fund management the bank is the fiscal Agent for the Govt. Role of the fiscal agent encompasses several responsibilities relating to the management of public funds: Govt Banker and Treasury Manager, Foreign Exchange Reserves, Debt Management( Tbills and marketable bonds) and Retail Debt (Canadian Saving bonds and Canadian Premium Bonds) o Communicate our objectives openly and effectively and stand accountable for our actions Major Activities 1. Note Issue and Seignorage (function 2) o Buy government securities by issuing bank notes Pays the royal mint 0.12 for a 1 coin Prints 20 notes at a cost of 0.06, each one lasts on average two years. If 20 is invested at 5 then over two years the notes generate 2 revenue at a cost of 6 cents for 1.94 profit o Money is anything widely accepted as a mean of payment Canadian currency is legal tender in Canada (fiat) Prior to 1970 notes said I promise to pay the bearer on demand) o Government monopoly (counterfeit) prior to 1935 50 of notes in circulation were issued by chartered banks o Seignorage something claimed by a sovereign or superior as a prerogative o Fiat an authoritative decree, sanction, or order 2. Payments Systems (function 2 ) o Barter trade by exchange of commodities rather than by the use of money o Canadian Payments Association(CPA) privately run by the banks Cheques are cleared when banks exchange cheques between each other Cheques are settles when banks pay for what they owe by writing a cheque on their Bank of Canada deposit accounts o Large Value Transfer System (LVTS, launched in 1999) Wire transfer of large items that occurs throughout the day; (150 billion a day) Major payments of securities for example go through LVTS o Automated Clearing Settlement Systems (ACSS) Debit, automatic bank payments 20 paper, 80 electronic (20 billion a day) o Bank of Canadas Role in CPA
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