tiff macklem : opening statement before the house of commons standing committee on finance opening statement by mr tiff macklem, governor of the bank of canada, before the house of commons standing committee on finance, ottawa, ontario, 16 june 2020. * * * introduction good afternoon, chair and committee members. it is an honour for me to appear before you as the 10th governor of the bank of canada. i look forward to working with parliamentarians over the next seven years through regular appearances before committees of the house and senate. these are an important part of the bank of canada ’ s accountability to canadians. today, senior deputy governor wilkins and i are pleased to be here as part of your study of the government ’ s response to the covid 19 pandemic. we particularly look forward to your questions and feedback on the foremost concerns of canadians at this very difficult time. the bank of canada is committed to doing everything we can to help the canadian economy recover from the enormous impact of covid 19. today i will talk about the bank ’ s four main functions and elaborate on how the bank is responding to the pandemic. then i will say just a few words about our operations in general. after that, we will be happy to answer your questions. currency let me begin with our most visible and tangible function — our bank notes. as a central bank, we provide a public good through a universally accepted means of payment. it is the bank of canada ’ s job to provide canadians with safe, secure, high - quality bank notes that they can use with confidence. we know covid 19 has changed the relationship some canadians have with cash, at least temporarily. the bank recently carried out a survey in collaboration with ipsos and statistics canada. we found that about one - third of canadians say they are using bank notes less frequently because of the pandemic. and we know that some retailers are asking canadians to use electronic payment methods instead of cash. the bank strongly advocates that retailers accept cash, for two reasons. first, some canadians don ’ t have a bank account, and many others have accounts that limit the number of debit transactions or subject them to fees. these are often canadians who are particularly vulnerable economically, and they depend on cash to make essential purchases. refusing cash puts an unfair burden on canadians who do not have the same ease of access to financial services that many of us take for granted. second, it is important to note that handling bank notes is no more

well. to do this, the bank has implemented a number of extraordinary measures, which brings me to our financial system function. financial system our third function is the promotion of a stable and efficient financial system. the bank is unique in that it has a system - wide perspective on the stability and efficiency of the financial system. we bring this perspective to our work with federal and provincial partners to make sure the financial system is working to support the real economy. credit is the lifeblood of market - based economies. in a crisis, central banks have the critical imperative to provide the liquidity the financial system needs to keep credit flowing. this traditional role for the central bank goes back hundreds of years. in the 1800s, british journalist walter bagehot famously said that in a crisis a central bank should lend freely, at a penalty rate, against good collateral. what he meant was that a central bank should always be ready to make sure the financial system has sufficient cash or liquidity during times of stress so that it can help the economy weather the storm, rather than becoming a headwind itself. the onset of the covid 19 pandemic was hugely disruptive to many vital financial markets. liquidity disappeared from markets, as participants sought to protect their own liquidity by increasing their cash holdings. amid the uncertainty, credit markets began to seize up. the bank ’ s priority from march to may was to restore proper functioning to financial markets so that canadian households, businesses and governments could access credit to withstand the crisis. this should also help set the stage for recovery. under the leadership of my predecessor, governor poloz, as well as senior deputy governor wilkins, the bank did an outstanding job restoring smooth functioning to key markets, ensuring ample funding and market liquidity. the bank revived some emergency programs used during the global financial crisis over a decade ago. and it brought into operation several new measures with remarkable speed and precision. 2 / 4 bis central bankers'speeches we are pleased to report that demand for liquidity is returning to normal levels, and market functioning has improved considerably. the bank has therefore scaled back the frequency of some operations because financial market participants are not using them. we stand ready to ramp up these programs again if we see that they are needed. monetary policy finally, let me say a few words about the conduct of monetary policy. our policy framework is set out in the inflation - targeting agreement established with the government and renewed every five years. the agreement sends an important signal that the democratically