First Session, Forty-fourth Parliament, 70-71 Elizabeth II – 1-2 Charles III, 2021-2022-2023

SENATE OF CANADA

BILL S-275 An Act to amend the Bank of Canada Act (mandate, monetary policy governance and accountability)

FIRST READING, September 20, 2023

This enactment amends the Bank of Canada Act to clarify the Bank’s mandate, define the objectives of monetary policy, and establish a monetary policy committee while specifying that committee’s duties in order to better balance the Bank’s independence with its accountability to Canadians.

It also sets out assessment and transparency requirements and provides for an agreement between the Bank and the Government of Canada respecting monetary policy.

1st Session, 44th Parliament, 70-71 Elizabeth II – 1-2 Charles III, 2021-2022-2023

SENATE OF CANADA

BILL S-275

An Act to amend the Bank of Canada Act (mandate, monetary policy governance and accountability)

Preamble

Whereas monetary policy has an economic impact on growth, investment, productivity and employment in Canada;

Whereas monetary policy affects the finances of households and businesses and the public finances of every province and territory of Canada;

Whereas monetary policy and fiscal policy are tightly linked and Canadians are better off if those policies are mutually reinforcing;

Whereas monetary policy has measurable redistributive effects on Canadians’ incomes;

Whereas underlying economic trends over the coming decades will be shaped by demographic shifts, the climate crisis, technological change and global political uncertainty and are conducive to generating supply shocks to prices—shocks that are minimally affected in the short term by traditional monetary policy;

Whereas a gap currently exists between the Bank of Canada Act and the Bank’s practices respecting monetary policy;

Whereas this gap fuels the impression among some Canadians that there is a democratic deficit in monetary policy management;

Whereas the Bank of Canada Act makes no mention of the objectives of monetary policy and provides for neither a monetary policy committee nor accountability, assessment or transparency requirements;

Whereas the Bank of Canada Act does not include the five-year agreement between the Bank and the Department of Finance;

Whereas the International Monetary Fund has put forward governance and transparency best practices in its transparency code, which was adopted by its steering committee in 2020;

And whereas class 15 of section 91 of the Constitution Act, 1867 grants Parliament constitutional authority over banks;

Now, therefore, His Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

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Permanent Committee means the Permanent Committee on Monetary Policy; (comité permanent)

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Bank mandate

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4.‍1 The mandate of the Bank is to ensure the financial stability of Canada and of Canadian financial institutions and to promote sustainable and equitable prosperity and the well-being of all Canadians.

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Powers of Governor

8 (1) The Governor of the Bank is the chief executive officer of the Bank and Insertion start , Insertion end on behalf of the Board Insertion start , Insertion end has the direction and control of the business of the Bank Insertion start , Insertion end with authority to act in connection with the conduct of the business of the Bank in all matters that are not by this Act or by the by-laws of the Bank specifically reserved to be done by the Board Insertion start , by the Executive Committee or by the Permanent Committee Insertion end .

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Permanent Committee on Monetary Policy

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Constitution of Permanent Committee on Monetary Policy

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13.‍1 (1) The Bank is to have a permanent committee on monetary policy that is to be responsible for setting the monetary policy of Canada.

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Composition

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(2) The Permanent Committee is to be composed of the following nine members:

• (a) the Governor and the Deputy Governor;

• (b) a Deputy Governor responsible for economic analysis, or any equivalent duty, appointed under subsection 7(1); and

• (c) six external members appointed under this section.

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Chair

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(3) The Governor presides at meetings of the Permanent Committee.

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Observer member

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(4) In addition to the members referred to in subsection (2), the Deputy Minister of Finance may attend meetings of the Permanent Committee as an observer, without the right to vote.

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Disqualifications and restrictions — external members

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(5) No person may be appointed or continue as an external member of the Permanent Committee if they

• (a) are not a Canadian citizen at least 30 years of age;

• (b) are a member of the Senate or House of Commons or a member of a provincial legislature;

• (c) are employed in any capacity in the federal public administration or the public service of a province or holds any other office or position for which any salary or other remuneration is payable out of public moneys;

• (d) except as authorized by or under any Act of Parliament, are a director, partner, officer, employee or shareholder of

  • (i) the Canadian Payments Association,

  • (ii) a clearing house or participant, as defined in section 2 of the Payment Clearing and Settlement Act,

  • (iii) an investment dealer that acts as a primary distributor of new Government of Canada securities, or

  • (iv) an institution that controls or is controlled by an institution referred to in any of subparagraphs (i) to (iii);

• (e) have a criminal record or is a bankrupt within the meaning of the Bankruptcy and Insolvency Act; or

• (f) are not recognized in their field for their skills and knowledge in at least two of the following subjects:

  • (i) open-economy macroeconomics,

  • (ii) the financial system,

  • (iii) the labour market,

  • (iv) supply chains, and

  • (v) risk management.

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Selection — external members

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(6) External members are to be appointed through an open and transparent process jointly conducted by the Governor, the Deputy Minister of Finance and a qualified third person selected by the Governor and the Deputy Minister of Finance.

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Term of office and continuation in office

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(7) External members serve a renewable term of three years. If no new external member is appointed after the end of an external member’s term of office, the external member may continue in office until a new external member is appointed under subsection (6).

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Votes

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(8) In the transaction of the business of the Permanent Committee, each member of the committee has one vote, excluding the observer.

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No remuneration

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(9) Nothing in this section is to be construed as entitling any person to remuneration or to benefits of any kind for the duties they perform on the Permanent Committee.

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Powers

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13.‍2 (1) Despite any provision of this or any other Act of Parliament, the Permanent Committee may

• (a) participate in discussions about setting the policy rate;

• (b) set the policy rate by vote;

• (c) adopt the annual cost-benefit analysis framework that supports policy rate decision-making;

• (d) supervise the assessment of the effectiveness of monetary policy — that is to say, whether the targets are met, what economic effects monetary policy has on prices, employment, growth, investment and productivity, and what financial and redistributive effects it has on households and businesses;

• (e) ensure that the use of non-traditional tools is consistent with the Bank’s mandate and the objectives of monetary policy; and

• (f) represent the Bank in negotiating and drafting the agreement with the Government of Canada provided by section 14.‍4 and include monetary policy targets in the agreement.

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Minimum number of meetings

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(2) The Permanent Committee must meet at least eight times per year, on dates announced in advance, to set the policy rate referred to in paragraph 13.‍2(1)‍(b).

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Monetary Policy

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Definition of full employment

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14 (1) In this section, full employment means the maximum sustainable level of employment.

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Objectives of policy

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(2) The objectives of monetary policy are to

• (a) achieve and maintain relative stability in the general level of prices over the medium term; and

• (b) achieve and maintain full employment.

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Policy rate

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(3) The Bank must publish the policy rate on its public website.

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Cost-benefit analysis

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(4) At least once every 12 months, the Bank must publish on its public website a cost-benefit analysis of the various scenarios the Permanent Committee contemplated for the policy rate.

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Disclosure to public

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(5) Despite any provision of this or any other Act of Parliament,

• (a) the Bank must publish on its public website the minutes of the meeting at which the policy rate was set and the result of the vote; and

• (b) the members of the Permanent Committee are authorized to disclose to the public, in writing, the reasons for the policy rate that they set.

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Assessment of monetary policy

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14.‍1 (1) At least once every three years, the Permanent Committee must assess the effectiveness of monetary policy.

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Matters to be taken into account

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(2) The assessment must take into account

• (a) the time frames for meeting monetary policy targets;

• (b) the specific economic effects of monetary policy on prices, employment, growth, investment and productivity; and

• (c) the financial impact on households, businesses and governments and the redistributive effects of monetary policy on the regions and groups specified by the Permanent Committee.

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Summary

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(3) Within 30 days after the assessment is made, the Permanent Committee must prepare a summary of the assessment and cause it to be tabled in each House of Parliament.

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Coordination of monetary and fiscal policies

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14.‍2 (1) At least four times per year, the Deputy Minister of Finance must meet with the Permanent Committee to discuss the interactions between monetary policy and fiscal policy and the consequences of those interactions.

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Summary

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(2) Within 10 days after each meeting, the Bank must publish a summary of the discussions on its public website.

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Agreement between Government of Canada and Bank

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14.‍3 (1) At least once every five years, the Minister must, on behalf of the Government of Canada, enter into an agreement with the Bank to renew the monetary policy framework.

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Content of agreement

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(2) The agreement must contain

• (a) the monetary policy framework;

• (b) the targets for monetary policy;

• (c) the methodology used to make the annual assessment of the economic and financial costs and benefits and the wealth distribution effects of monetary policy; and

• (d) the triennial process for assessing the effectiveness of monetary policy provided by subsection 14.‍1(1).

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• (i) buy and sell from or to any person securities and any other financial instruments — other than instruments that evidence an ownership interest or right in or to an entity — that comply with the policy established by the Insertion start Permanent Committee Insertion end under Insertion start section 14 Insertion end , and

Review

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36 Five years after this section comes into force and at the end of each subsequent period of five years, a committee of the Senate, of the House of Commons or of both Houses of Parliament shall be designated or established for the purpose of reviewing this Act.

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Clause 2: Text of the preamble:

WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada;

Clause 3: New.

Clause 4: New.

Clause 5: Text of subsection 8(1):

Clause 6: New.

Clause 7: Text of the heading and section 14:

Government Directive

Clause 8: Text of relevant portions of section 18:

Clause 9: New.