Changes to the Terms and Conditions Governing the Morning Auction of Receiver General Cash Balances

The Bank of Canada, on behalf of the Government of Canada, today announced changes to the Terms and Conditions Governing the Morning Auction of Receiver General Cash Balances (the Terms), effective 1 April 2014.

These Terms set forth procedures for the auctioning of Receiver General (RG) excess cash balances, which allow the government to earn a competitive market-driven rate of return on these balances.

The changes to the morning auction of RG cash balances reflect evolving market practices and will serve to reduce the government’s exposure to counterparty credit risk. The following changes are effective 1 April 2014:

• Access to the auction will be limited to federal or provincial government entities, federally or provincially regulated deposit-taking institutions and primary dealers of Government of Canada securities.
• Participants will be assessed based on a stand-alone credit rating methodology.  Participants assessed at a rating of “A” or better will be able to bid for up to 100 per cent of the amount being auctioned. Participants assessed at a rating of “BBB” and primary dealers assessed at a rating below “BBB” will be limited to a maximum of $2 billion outstanding at any time.
• Cash balances offered through the RG morning auction will only be available on a fully secured basis.
• The collateral framework will be updated to align closely with that of the Standing Liquidity Facility, and will be applied uniformly to all participants. Updates will include changes to the list of eligible securities, limits on eligible securities and margin requirements.

General updates and clarifications will also be made to the Terms and legal documents.

For further information, please contact:

Assistant Director
Funds Management and Banking Department
Bank of Canada
613 782-7836

Chief
Financial Markets Division
Department of Finance
613 992-6116

Media:

Bank of Canada
613 782-8782