About the Bank of Canada’s balance sheet

At the Bank of Canada, our balance sheet reflects the unique role we play as Canada’s central bank. Get an overview of how it’s used to acquire assets and support our core functions, and learn about the types of assets and liabilities we hold.

Purpose and function

At the Bank of Canada, our balance sheet differs from that of other financial institutions. Its size and composition have to do with the unique role we play as Canada’s central bank.1 Assets and liabilities on our balance sheet are key to supporting our core functions and ensuring our independence, rather than generating profit.

In normal circumstances, holdings of financial assets are mostly driven by our role as the exclusive issuer of Canadian bank notes:

• We supply financial institutions with the notes needed to satisfy the demand for currency by businesses and the public. Issuing bank notes creates a liability, typically one of the largest on our balance sheet.
• Government of Canada deposits represent another large liability.2
• To offset these liabilities, we hold financial assets, which are primarily Government of Canada securities. Given that the level of bank note or government deposit liabilities are determined by external factors, we acquire the assets to offset them, entirely in response to changes in these liabilities.

However, in exceptional circumstances, we may choose to actively and deliberately change the size and composition of financial assets on our balance sheet to meet objectives for monetary policy or financial stability.

Acquiring assets

Normal course

When we acquire assets to offset government deposits and the issuance of bank notes, we refer to these assets as being acquired under normal course. Accordingly, the size and composition of the asset side of the balance sheet is primarily being driven by what is happening on the liability side.

As laid out in the Statement of Policy Governing the Acquisition and Management of Financial Assets, asset purchases conducted under normal course are governed by three key principles: prudence, transparency and neutrality. These purchases are mainly debt securities issued by and securities guaranteed by the Government of Canada. We also acquire assets under regular term repurchase transaction (repo) agreements to help manage the balance sheet.

These assets help to promote operational independence and to carry out our responsibilities under the Bank of Canada Act.

Exceptional circumstances for policy purposes

We may also undertake a range of financial market transactions with eligible counterparties to help stabilize the financial system and achieve financial conditions consistent with our desired monetary policy stance. When we acquire assets in support of policy objectives, we say these assets are acquired under exceptional circumstances for policy purposes.

These transactions include long-term repos, where we temporarily lend to financial institutions and take a broader range of financial assets as collateral. They may also include purchases of longer-term assets or the extension of longer-term loans. For both repos and asset purchases, the composition of the balance sheet is asset driven, and the size and composition of the liabilities will respond to changes made on the asset side. We fund all or part of the operations through the creation of settlement balances—deposits from members of the payment system held at the Bank of Canada.

Table 1: The Bank of Canada’s balance sheet under different environments

When the exceptional support provided by lending and asset purchases is no longer needed—for instance, because financial markets resume functioning normally or the economy recovers—we can reduce our asset holdings and settlement balances toward their normal size.

Actions to normalize the balance sheet may involve:

• reducing or stopping the purchase of certain asset types
• allowing assets to mature
• selling certain assets

Growth in bank notes over time will naturally reduce the level of any excess settlement balances.

Supporting our core functions

Monetary policy

We can implement monetary policy through two different frameworks, depending on how we manage our balance sheet and supply liquidity to the payment system.

• In an interest rate corridor system, we supply limited settlement balances (close to zero) and actively manage the balance sheet to maintain a target level on a daily basis.3 Learn more about implementing monetary policy in this system.
• In a floor system, we create enough settlement balances to roughly match the demand for them in the financial system. This helps drive down the overnight rate to close or equal to the deposit rate. The Bank implemented this system in March 2020 to support monetary policy. When we conduct extraordinary lending and asset purchases for policy purposes, it is generally necessary to implement monetary policy using a floor system, with settlement balances growing to fund the purchases. In April 2022, we said we would keep using a floor system on a permanent basis to make our implementation of monetary policy more effective in all circumstances.

When we conduct extraordinary lending and asset purchases for policy purposes, it is generally necessary to implement monetary policy using the floor system, with settlement balances growing to fund these purchases.

Table 2: Key distinctions between the operational frameworks

Financial system

We have a range of tools to support the efficient functioning of Canadian financial markets. We can provide extraordinary liquidity for financial system stability, as we did during the COVID‑19 pandemic response. As well, when Government of Canada securities are in high demand, we can make a portion of our holdings available through our securities repo operations.

Types of assets

These are the major financial asset items on the Bank’s balance sheet.

Chart 1: Bank of Canada assets (month end)

Government of Canada treasury bills and bonds

Treasury bills are acquired at auctions on the primary market. This is done on a non-competitive basis—referred to as passive participation—by buying at the average yield of successful auction bids.

The Bank acquires Government of Canada bonds in the secondary market—meaning after initial issuance—by submitting competitive offers at reverse auctions.These bonds make up the largest holdings on our balance sheet (Chart 1).6 Before 2025, secondary market purchases for Government of Canada bonds were typically done for policy purposes. For example, during the COVID-19 pandemic, we acquired them through the Government of Canada Bond Purchase Program using a process known as quantitative easing. In January 2025, we announced we will do our normal-course bond purchases in the secondary market through reverse auctions. This aligns with best practices at other major central banks.

We report our normal-course bond holdings on our balance sheet at their amortized cost. This reflects the fact that these bonds are typically held to maturity. The value of these holdings corresponds primarily to the value of outstanding bank notes, which tends to increase steadily over time. In contrast, we record bonds acquired for policy purposes at their fair market value. This is because these bonds could be sold before they mature, as one of the options for eventually normalizing the balance sheet.

Advances

Under the Standing Liquidity Facility, we provide routine collateralized loans to payment system participants as necessary to cover a negative end-of-day cash position. This lending occurs at the top of our operating band or “bank rate.”

On a more exceptional basis, the Standing Term Liquidity Facility allows us to provide eligible, sound financial institutions with temporary collateralized term advances.7 While this program was implemented during the COVID‑19 response, it is a standing facility and was announced prior to the pandemic.

The Bank can also provide advances to financial institutions that have requested Emergency Lending Assistance (ELA) from the Bank. ELA is a last-resort, collateralized loan or advance provided by the Bank, at its discretion, to eligible financial institutions and financial market infrastructures that are facing serious liquidity problems.

Repos

The two types of repos that appear on the balance sheet in normal course serve different purposes.

Overnight repos

We use overnight repos largely to reinforce the target for the overnight rate.

Term repos

We also typically conduct regular one-month and three-month bi-weekly term repo operations to temporarily acquire assets to manage our balance sheet. The combined value of these assets and treasury bills on our balance sheet is driven by the value of outstanding floating-rate liabilities. Having the value of floating-rate assets roughly match the value of floating-rate liabilities minimizes the level of interest rate risk that the Bank assumes. As well, these operations provide information on conditions in short-term funding markets.

Term repos may also be used to inject extraordinary amounts of liquidity into the financial system and support funding conditions for financial institutions in times of stress. We used these operations this way during the global financial crisis of 2008–09 and again in the COVID19 response.

To support market functioning during COVID‑19, we expanded the term repos conducted with eligible participants by temporarily increasing the frequency, size, term and types of eligible securities. As well, we expanded the list of institutions eligible to access term repos through activating the Contingent Term Repo Facility, which provides Canadian-dollar term funding on a standing, bilateral basis.

Additions during the COVID‑19 pandemic

As part of the pandemic response, we added various financial asset types to our balance sheet via the following programs:

• Provincial Money Market Purchase Program
• Provincial Bond Purchase Program
• Bankers’ Acceptance Purchase Facility
• Commercial Paper Purchase Program
• Corporate Bond Purchase Program

Each program has an individual entry in the weekly publication of our financial position. The facilities were introduced to address specific needs that arose during the crisis. These programs have now been discontinued.

Indemnity agreements

During the second quarter of 2020, indemnity agreements with the Government of Canada were put in place so that we could support the provincial, corporate and Government of Canada bond markets. If the Bank decides to sell assets, any losses resulting from these sales within the Government Bond Purchase Program, Provincial Bond Purchase Program, Provincial Money Market Purchase Program, Commercial Paper Purchase Program and Corporate Bond Purchase Program are indemnified by the federal government. Gains on disposal are remitted to the government.

The indemnity agreements are accounted for as derivatives. At the time of the balance sheet publication, they appear on the balance sheet as one of the following:

• a liability if the market value adjustment of indemnified assets is in a positive position
• an asset if the market value adjustment of the indemnified assets is in a negative position

Other assets

Other assets on the balance sheet include property, equipment, intangible assets and other non-investment items.

Types of liabilities

These are the major liability items on the balance sheet.

Chart 2: Bank of Canada liabilities (month end)

Bank notes in circulation

Traditionally, bank notes in circulation represent the majority of total liabilities (Chart 2).8 Typically, the growth rate in bank notes broadly follows the growth rate in the economy (in terms of nominal gross domestic product), or roughly 5 percent yearly on average.

Seasonal fluctuations in the demand for bank notes (such as around year-end) must also be offset with additional assets in normal course. Given the temporary nature of these seasonal increases, we typically conduct term repos to offset them.

Deposits by the Government of Canada

As the central bank, we are the banker for the federal government. In normal course, a relatively small portion of deposits meets the government’s operational and day-to-day funding needs, while the majority is maintained for prudential liquidity purposes.9^, 10

Deposits by members of Payments Canada

Payments Canada members who are direct participants in Lynx—Canada’s wholesale payments system—maintain settlement accounts at the Bank of Canada. The funds in these accounts are generally referred to as settlement balances. Prior to the pandemic, we determined the total level of deposits across all participants, targeting $250 million. This allowed us to implement monetary policy via the interest rate corridor system.

On March 20, 2020, we announced that the Bank would cease targeting settlement balances during the response to the pandemic, allowing them to increase as asset purchases increased. As a result, we switched to implementing monetary policy using the floor system. In April 2022, we said we would continue using a floor system going forward. In a floor system, the Bank does not target a specific level of settlement balances. Our aim is to supply enough settlement balances to satisfy our best estimate of the demand for them from banks and other Lynx participants.11

Deposits by other entities

We hold cash accounts for a limited set of other entities. These include foreign central banks, international financial institutions, designated clearing and settlement systems, and other domestic federal government agencies.

While the amount of these deposits is small compared with other liabilities, it has grown in recent years, due in part to regulators’ desire to reduce financial system risk.12 By leaving their deposits with the Bank of Canada, rather than with commercial banks, these entities can avoid exposing systemically important infrastructures to banker risk.

Reverse repos

Historically, we have conducted overnight reverse repos mainly to reinforce the target for the overnight rate. We achieve this by selling securities holdings for cash on an overnight basis.

In 2020, we used securities repo operations (SRO) to provide primary dealers with a temporary source of Government of Canada nominal bonds and treasury bills that are scarce. This supported the efficient functioning of the securities financing market. These operations were discontinued in 2024 and replaced in 2025 with the securities lending program. Under this new program, we lend specific Government of Canada securities that are in high demand and receive other Government of Canada securities or fixed-rate Canada Mortgage Bonds as collateral, instead of receiving cash through repurchase agreements.

Endnotes