A discussion paper prepared jointly by the Department of Finance and the Bank of Canada, and being made public today, is proposing changes to the government’s approach to auctioning and investing its Canadian dollar cash balances. The federal government is seeking comments on these proposals as part of its ongoing efforts to ensure that its financing and investing operations are efficient and cost-effective with due attention to risk management, and meet appropriate best practices.

The Government of Canada manages Canadian dollar cash balances as part of its ongoing financial operations. The government's main objectives in managing its cash balances are to ensure that it has sufficient cash available to meet its operating and liquidity requirements, and to invest the cash balances in a prudent, cost-effective manner. The investment of these balances is currently achieved through twice-daily auctions of funds, known as Receiver General balances, to participants in the Large Value Transfer System, a group of 13 deposit-taking institutions.

The two main issues examined in the discussion paper are an expansion of the list of institutions eligible to participate in the process and an enhanced risk management framework, which includes the requirement of collateral on a portion of these deposits. Under the proposals, access to federal government cash balances would be opened to additional institutions with significant domestic money market operations. The enhanced credit management framework involves modest credit lines and collateral arrangements.

Comments on these proposals are invited from interested parties.

For further information, contact:

Bill Mitchell
Department of Finance
613 992-9032
Thomas Hossfeld
Bank of Canada
613 782-7529