BoC Reassures Institutions on SLF Use

The Bank of Canada has reassured Canadian financial institutions that using its Standing Liquidity Facility (SLF) for overnight liquidity does not indicate stress. In a joint statement with the Office of the Superintendent of Financial Institutions, the BoC emphasized that SLF advances are considered normal.

According to Deputy Governor Toni Gravelle, 'We view an institution's use of the SLF for overnight liquidity as a normal part of day-to-day liquidity management, not as an exceptional event or a sign of stress.'

The SLF provides fully secured intraday and overnight credit to financial institutions participating in Canada's high-value payment system, Lynx. This facility helps institutions settle payments during the day and at the end-of-day operations.

The BoC is also working to update and strengthen its repo clearing infrastructure as it starts using a new tri-party platform. This will help develop the term repo market and attract new participants such as large corporate treasuries.