Question

SUBJECT-Macroeconomics

Q1- Analyze and explain Banking in Canada and the role and structure of Banks. (30 points).

Answer 1

Answer :- Canadian banks are really essential for it's economy and it is involved in insurance and securities market in today's world. Banking is classified into financial activities which is involved in depositing of public money, lending and transfer of funds. Their main purpose is to circulate the money in the economy to boost business activities. Over the decades their have been tremendous evolution of technology as well as regulation governing it .

There are only two types of bank in Canada that are commercial banks ( chartered banks) and central banks . Bank of Canada ( central bank) is operated by federal government and it carry fiscal and monetary policy. It's main purpose is to act as last resort lending money to commercial banks. Holds deposit of federal government and commercial banks and issue money.

Commercial banks takes deposit from public and lends it for personal, business purpose. Near banks are also perform these type of function . Banks are the only financial institutions that increase and contract the money supply in the economy as per need. Banks also perform services such as providing international banking services, real estate operations and investment banking.

Main purpose of banks is to transfer funds from public ,government and organisation to those who are ready to invest those funds for economic activities. It acts as financial intermediaries. Banks of canada has vast impact on hows the Canada resources are allocated. It acts as government instrument for few political and social policies. On the other hand banks also aims to provide sufficient return on equity as well as to pay adequate dividends. If it is neglected investors will move on and will result in contraction of money supply or even government ownership.