Bank of Canada unveils tool to help sound financial institutions endure liquidity shocks
Reuters
Published Nov 13, 2019 11:37AM ET
Bank of Canada unveils tool to help sound financial institutions endure liquidity shocks
By Kelsey Johnson
OTTAWA (Reuters) - Canada's central bank said on Wednesday it is developing a new liquidity tool aimed at helping sound, regulated financial institutions weather shocks to liquidity that come from an abnormal source, such as a cyber attack.
Under the Standing Term Liquidity Facility (STLF), eligible provincially and federally regulated members of Payments Canada challenged by idiosyncratic shocks like natural disasters, system failures, and cyber attacks would be given access to central bank liquidity for a 30-day term, renewable at the Bank of Canada's discretion.
The new program, the bank said, is designed to "provide greater confidence" while laying out required terms in advance.
Accepted collateral would include Canadian dollar non mortgage and residential mortgage loans made to Canadian residents. Pricing would be two-tiered, with institutions paying a higher price relative to routine term repo operations and the central bank's Standing Liquidity Facility program, which facilitates overnight settlement in the payments system.
Institutions showing soundness concerns, the Bank said, would not be eligible for the new liquidity tool.
Targeted consultations will be conducted in the coming weeks to finalize the terms of the new tool, including pricing details, the bank said. At this time, there is no cap on the amount of liquidity available under the program.
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Written By: Reuters
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