Bank of Canada Announces Changes to its Securities-Lending Program

The Bank of Canada released today the revised Standard Terms for its securities-lending program available to Primary Dealers (PDs) in Government of Canada securities. The Terms have been revised to enhance the design of the securities-lending program in light of the effective lower bound for the Bank of Canada's target rate and to promote the efficient functioning of the Government of Canada securities market. The new terms will be effective 1 June 2009 and participation in the program will be conditional upon PDs signing an amendment to the Securities Loan Agreement with the Bank of Canada.

The four key changes to the securities-lending program are:

• The minimum securities lending fee for bonds and treasury bills will be set at 25 bps when the target for the overnight rate is at the current level of 0.25%;
• The bidding limit per participant is increased to the greater of $100 million or 50 per cent of the amount being auctioned;
• Transactions in which counterparties fail to return the securities borrowed from the Bank may be extended by the Bank, at its discretion, at the greater of the overnight target rate or 3%, and;
• The net position report is modified to include the participant's funding position in the security.

The securities-lending program makes available, on an overnight basis, a portion of the Bank's portfolio of Government of Canada bonds and bills when there is strong demand for these securities in the repo market. The program will offer securities held by the Bank of Canada when market pricing moves beyond a specified point. The Bank's intention is to lend securities in a manner consistent with being a secondary source of supply.

For further information, please contact:

613 782-8782