The Canadian Securities Administrators have issued coordinated blanket orders giving exemptive relief to investment funds eligible for access to the Bank of Canada’s contingent term repo facility (CTRF).
The orders were issued across Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan, and Yukon. They allow access to a potential liquidity risk management tool qualified investment funds can use to manage liquidity in severe market conditions, per the CSA.
They also eliminate limitations that would have kept funds from CTRF participation. The bank’s repurchase agreement facility was designed to help stabilize the Canadian financial system and to handle future market-wide liquidity stresses.
The fund provides Canadian dollar funding for a maximum term of 30 days on a standing, bilateral basis to eligible participants against securities issued or guaranteed by the federal government or provincial governments. The CSA indicated that investment funds exposed to the Canadian dollar money market and/or fixed income securities may require CTRF access for liquidity management.
Bank of Canada may either activate or deactivate the CTRF at will, and it regularly tests the facility for operational preparedness with approved counterparties whether the CTRF is active or not.
Those interested in CTRF participation must email a CTRF application to the bank; the application is then evaluated by the bank for compliance with eligibility criteria. Interested parties may apply even if the fund is inactive, and approved participants must then sign the Bank of Canada’s master repo agreement. Onboarded counterparties need not reapply when the fund is reactivated.
The bank may modify eligibility criteria and previous approvals any time.
In the CTRF’s active period, approved counterparties must notify the bank when they require access to the facility. They must send an email before 12:00pm ET of the business day on which they seek CTRF access.
Outstanding CTRF transactions are aggregated and reported each Friday on the Bank of Canada’s weekly balance sheet.