Proposed Terms and Conditions for Auctions of Receiver General Cash Balances

On behalf of the Minister of Finance, the Department of Finance and Bank of Canada are releasing today draft terms and conditions for participation in Receiver General auctions. These auctions are the means by which the government invests its short-term Canadian dollar cash balances. The draft papers, Proposed Terms and Conditions Governing the Investment of Receiver General Cash Balances and Proposed List of Eligible Securities for Receiver General Repurchase Agreements, outline the proposed operational framework for the Receiver General auctions, including credit risk management policies governing the investment process, eligible securities and auction tendering and settlement procedures.

The government released a discussion paper on 18 July 2000 (entitled Proposed revisions to the rules pertaining to the auction of Receiver General term deposits) proposing changes to the framework for investing its cash balances. The two main changes proposed in the discussion paper were an expansion of the list of institutions eligible to participate in Receiver General auctions and the introduction of an enhanced risk management framework, which includes the requirement of collateral on a portion of these deposits.

Based on responses to the discussion paper and consultations with market participants, the government is making some modifications to the 18 July 2000 framework. In the principal auction conducted in the morning, broader uncollateralized access is being allowed, while overall uncollateralized limits are being lowered. Participation in the residual afternoon auction will be limited to participants in the Large Value Transfer System (LVTS) and no collateral requirements will be imposed for the afternoon auction at this time.

The 10 August 2001 papers are available at the Bank of Canada's web site. The 18 July 2000 paper and the comments received by the government are available at www.bankofcanada.ca/en/notices_fmd/2000/rg-comments.html.

The government invites comments on the operational elements of the draft terms and conditions. Comments are requested on or before 7 September 2001.

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