Bank of Canada Removes Stigma from Overnight Liquidity Use
The Bank of Canada has urged financial institutions to use its Standing Liquidity Facility without fear of stigma. This comes after Deputy Governor Toni Gravelle addressed a Bloomberg conference in New York, where he clarified that using the SLF for overnight liquidity is considered standard practice.
The Standing Liquidity Facility provides fully secured intraday and overnight credit to financial institutions participating in the central bank's Lynx payment system. It enables these institutions to settle payments throughout the trading day and during end-of-day operations.
The Bank of Canada and Office of the Superintendent of Financial Institutions (OSFI) have jointly stated that SLF use by Lynx participants aligns with standard liquidity management practices. This means participating institutions can access the facility as required without fear of being seen as financially struggling.