Final answer:
The Canadian banking system is part of a fractional-reserve banking system where banks are required to keep a fraction of deposits as reserves, managed under the Bank of Canada, which serves a similar role to the Federal Reserve in the US.
Step-by-step explanation:
The Canadian banking system is not primarily characterized by the options provided (A) Gold-reserve system, (B) National-reserve system, (C) Target-reserve system, (D) Asset-backed reserve system, or (E) Treasury-bill reserve system. Rather, it is part of a broader category known as a fractional-reserve banking system, similar to that of the United States and many other countries. In this system, banks are required by the central bank, which in Canada is the Bank of Canada, to keep a fraction of depositors' money on hand as reserves. This means they hold a certain amount of money as cash in their vaults or at the central bank to ensure liquidity and stability in the financial system.
The reserves serve multiple purposes, including meeting withdrawal demands and as a buffer against bank runs. The concept of the reserve requirement is a key tool in monetary policy used by governments to influence bank behavior. The Bank of Canada uses this reserve requirement, among other monetary policy tools, to regulate the amount of money in circulation and to maintain a stable financial system.