Funds management

The Bank’s funds management activities in 2021 largely continued at the same heightened pandemic-related levels as in 2020. The Government of Canada continued financing its COVID‑19 support measures, issuing still-elevated amounts of federal government debt into the market.

In 2021, the Bank maintained its operations across multiple sites to ensure resilience during the pandemic.

As outlined in the federal government’s 2021–22 debt management strategy, long-term debt issuance increased further and remained a significant portion of total Government of Canada debt issuance. The Canadian financial market proved resilient and was able to absorb the ongoing elevated issuance without any disruption to market functioning.

Providing funds management policy advice

Given shifts in the timing of adjustments to pandemic-related government support programs and the larger-than-expected rise in tax revenue, there was a higher degree of uncertainty in funding requirements. This made for a year of challenging work for the Bank as a fiscal agent.

The Bank advised the Government of Canada on funds management and remained involved in daily funds management activities. These included continuing to conduct more frequent and larger debt auctions than those held before the pandemic. The Bank continued to support the government’s ability to raise a significant amount of funds in a flexible manner. It also provided strategic advice on the government’s plans to issue its first green bond.

To further strengthen its strategic advice on managing the federal government’s debt, the Bank enhanced some of its financial modelling tools. These improvements will better support the objectives of the federal government’s debt management strategy, particularly as the government seeks to substantially increase its longer-term debt issuance to finance the additional fiscal requirements associated with the COVID‑19 pandemic. More generally, the strategy aims to raise stable and low-cost funding to meet the government’s financial requirements while maintaining a well-functioning market for Government of Canada securities.

Continuing to improve systems and automate processes

To reinforce its funds management function, the Bank further improved the systems it uses to conduct and support its fiscal agent role. This included enhancing and further automating several of its auctions and operations while managing Canada’s public debt programs. For both the Bank and financial market participants, these enhancements:

• modernized information technology processes
• increased operational scalability and flexibility
• reduced operational risk

From a systems perspective, auctions of Government of Canada securities (bonds, treasury bills and ultralong bonds) as well as other operations used to manage the government’s debt are all more efficient now.

The Bank made additional improvements to its systems and processes to reduce risk and further increase the efficiency and resilience of its banking operations. Specifically, the Bank:

• significantly mitigated its exposure to risk of financial crimes by successfully implementing manual and automated controls for unusual and high-risk payment activity
• implemented artificial intelligence and robotic process automation to:
  • make its back-office operations more scalable
  • eliminate low-value work
  • improve compliance and accuracy

Adapting to changing financial markets

As part of the worldwide effort to ensure that interest rate benchmarks are robust, global authorities are working with the private sector to transition from the London Interbank Offered Rate (LIBOR) to risk-free rates. The Bank enhanced its internal systems and reporting and tested these improvements with counterparties. It has now achieved operational readiness in its transition from LIBOR to the risk-free Secured Overnight Financing Rate (SOFR).

These efforts enabled the Bank to:

• reduce the Government of Canada’s current LIBOR exposure
• begin funding the government’s international foreign reserves with financial instruments referencing SOFR

Phasing out Canada Savings Bonds and repatriating operations

The Bank continued taking important steps to update its operations in response to the Government of Canada’s 2017 decision to discontinue Canada’s Retail Debt Program. All remaining outstanding retail bonds matured in 2021. The total outstanding retail debt declined from $4.996 billion in 2017 to $591 million as at the end of 2021.   

The Bank is on track in its efforts to shift the operations of the Retail Debt Program in-house.

Looking forward

In 2022, the Bank will:

• launch a competitive process to select a service provider to partner with the Bank to design, implement and support the next generation of its high-availability core banking platform
• draw on lessons learned from the experience of the COVID‑19 pandemic to inform the advice it provides to the Government of Canada on strategic debt and liquidity management
• implement a new technology solution that supports both unclaimed bank balances and retail debt products

More information

Government of Canada Announces Structuring Advisors to Assist with Inaugural Issuance of Green Bonds