Changes to Assets Eligible as Collateral under the Bank of Canada’s (the Bank) Standing Liquidity Facility

As part of an ongoing review of the Bank’s collateral policy related to the Standing Liquidity Facility (SLF), the Bank is announcing two changes effective immediately.  First, the Bank will introduce one new asset category (Other Public Sector), which combines the two previously-announced asset categories (Foreign Official Sector and Other Public Sector) into one category.  This change simplifies and generally retains the benefits of the details previously announced on July 23, 2018.    

To be eligible for the Other Public Sector asset category, notwithstanding current eligibility requirements:

1. Securities must be of sufficiently high quality as determined by the Bank. Sufficiently high quality for securities in the Other Public Sector will be broadly equivalent to a rating of AA-.
2. Securities must be issued by foreign governments, central banks, supranationals, foreign government related entities and domestic entities that are owned, controlled either fully or partially, or sponsored by a provincial or the federal government(s) such as Canadian federal and provincial pension plans.

The Other Public Sector category will have haircuts consistent with provincially issued and guaranteed securities. Current concentration limits under the SLF policy will not be formally applied to this asset category but the Bank’s expectation is that securities issued by Canadian federal and provincial pension plans should not constitute a substantial part of an LVTS participant’s pledged collateral.

Second, the Bank is putting into effect the changes previously announced on July 23, 2018, that allow LVTS participants to hold up to 40% of their pledged collateral in asset-types which are formally subject to concentration limits.  As such, LVTS participants who do not use their NMLP will be able to hold up to 40% in securities that are formally subject to concentration limits (currently limited to 20%). For participants that do use their NMLP, the 40% of collateral that is formally subject to concentration limits will include a maximum 20% NMLP (same as current), and 20% in securities that are formally subject to concentration limits (same as current).

For further information, please contact:

Scott Kinnear
Director
Financial Markets Department
Bank of Canada
613 782-7723

Media Relations
Bank of Canada
613 782-8782