Bank of Canada Urges Use of Standing Liquidity Facility

The Bank of Canada and the Office of the Superintendent of Financial Institutions issued a joint statement on Tuesday encouraging financial institutions to utilize the Standing Liquidity Facility (SLF) for overnight liquidity. Regulators clarified that using the SLF is a normal component of day-to-day liquidity management and should not be interpreted as a sign of financial stress.

The SLF provides fully secured intraday and overnight credit to participants in the Lynx payment system. This mechanism allows institutions to settle payments without relying exclusively on reserve buffers.

In separate remarks delivered at a Bloomberg conference in New York, Deputy Governor Toni Gravelle announced that the Bank of Canada is updating its repo clearing infrastructure. The central bank is implementing a new tri-party platform to expand the term repo market and attract large corporate treasuries, an effort intended to improve short-term funding sources and the stability of government bond markets.