The Bank of Canada's Securities-Lending Program

The Bank of Canada wishes to announce that it will implement a securities-lending program to support the liquidity of Government of Canada securities by providing a secondary and temporary source of securities to the market. The program is described in a document titled "The Bank of Canada's Securities-Lending Program: Draft Terms and Conditions." The Bank is planning to implement the program this summer. Further details on the implementation schedule will follow.

On 27 August 2001, the Bank of Canada made public a discussion paper titled "Proposed Repurchase Program for the Bank of Canada's Holdings of Government of Canada Securities." This paper outlined a proposal to make available a portion of the Bank's portfolio of Government of Canada bonds and bills when there is a significant demand for these securities in the market, causing repo rates for these securities to fall appreciably. Feedback on the proposal indicated widespread support for such a program. During a consultation process, interested parties suggested modifications to the proposed program which have been taken into consideration.

The Bank's intention is to lend securities in a manner consistent with being a secondary source of securities; that is, the way the program will operate is not expected to alter the economic incentives for participants under normal market conditions. Based on historical data, under this framework, it is expected that the Bank would enter the market on an infrequent basis. The program will offer securities held by the Bank of Canada when market pricing moves beyond a specified point. Please refer to the terms and conditions for program details.

For further information, contact:

Tom Hossfeld
613 782-7529

Marc Larson
613 782-7836