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Resolution regime for Canada’s financial market infrastructures

The Bank of Canada is the resolution authority for Canadian financial market infrastructures (FMIs) that have been designated by the Governor under the Payment Clearing and Settlement Act (PCSA).

FMIs are systems for making payments and for clearing and settling financial transactions. They are a crucial backbone of the Canadian financial system, and their critical services must continue even in the face of extreme stress. Because of their importance, designated FMIs must have strong risk management in place and are overseen by the Bank of Canada. Therefore, it is highly unlikely that a designated FMI would ever fail. But it is still important to be ready and to have the tools to respond if necessary.

In its role as resolution authority, the Bank has the responsibility to develop plans on how to respond to the unlikely failure of a Canadian designated FMI. The Bank also has the power in a crisis to take temporary control of a failing FMI to limit the impact on Canada’s financial system and its economy.

Canada’s FMI resolution regime was developed in line with international guidance—the Key Attributes of Effective Resolution Regimes for Financial Institutions and Guidance on Central Counterparty Resolution and Resolution Planning—in a manner appropriate to the Canadian context and informed by consultation with stakeholders. For further information, see Establishing a Resolution Regime for Canada’s Financial Market Infrastructures.

The main policy objectives of the regime:

  • to promote financial stability
  • to maintain the continuity of FMIs’ critical services
  • to minimize the exposure of public funds to loss


FMIs within the scope of the resolution regime are domestic clearing and settlement systems designated by the Governor of the Bank of Canada as having the potential to pose systemic or payments system risk. Currently these FMIs are:

  • Lynx
  • CDSX
  • Canadian Derivatives Clearing Service (CDCS)
  • Automated Clearing Settlement System (ACSS)
  • Interac e‑Transfer®
  • Inter-Member Network (IMN)

Foreign-domiciled designated FMIs are not included in the scope. The Bank works with the home resolution authorities of these FMIs, coordinating bilaterally or through its participation in a crisis management group.


Resolution planning

The Bank carries out resolution planning for each designated domestic FMI. Resolution plans include:

  • a risk profile of the system
  • a resolution strategy
  • a financial resources assessment
  • an operational plan

In general, the plans for resolving a failing FMI are aligned with the FMI’s own rules and recovery plans. The Bank can also draw on additional tools as part of an FMI resolution if necessary to safeguard financial stability.

The Bank is required to review each resolution plan annually. As part of this process, the Bank will conduct resolvability assessments to evaluate the feasibility and credibility of the resolution plans and to identify any legal or operational impediments to resolvability. The Bank will consult with the provincial securities regulators throughout this process.

Initiating and executing a resolution

If the Governor has determined that an FMI is no longer viable, he or she must make a written declaration of non-viability and formally notify the Minister of Finance, relevant federal and provincial authorities and the FMI’s operator. It is likely the Bank would have consulted with authorities before the declaration of non-viability. The written declaration must be published in the Canada Gazette.

The declaration of non-viability results in the FMI entering resolution. Once the FMI is in resolution, the Bank would need to act quickly to stabilize the FMI to avoid any disruption in the FMI’s provision of its critical clearing and settlement functions. If necessary, the Bank could inject financial resources on a temporary basis.

While the FMI is in resolution, the Bank may decide it needs to access further powers by taking control of the FMI. Once the FMI has been declared non-viable and is in resolution, to take control, the Governor may issue an order appointing the Bank as the receiver in respect of the FMI or, alternatively, vesting the shares of the FMI in the Bank. From a practical perspective, both powers have the effect of transferring control of the FMI to the Bank and allowing the Bank to carry on the business of the FMI. The vesting or receivership order must be published in the Canada Gazette.

Consultation and information sharing

The Bank consults with relevant provincial and federal authorities in FMI resolution planning. The Bank would also share information and consult with these partners in an actual resolution event.

The Bank engages with its federal partners through a committee established by the PCSA (section 11.04). The FMI Resolution Committee is chaired by the Governor and includes representation from the Office of the Superintendent of Financial Institutions, the Canada Deposit Insurance Corporation and the Department of Finance Canada.

The Bank has established a memorandum of understanding (MOU) with the Autorité des marchés financiers, the British Columbia Securities Commission and the Ontario Securities Commission to facilitate cooperation on matters related to the resolution of the FMIs they oversee collaboratively. More specifically, this MOU relates to the CDSX system and the Canadian Derivatives Clearing Service, along with their respective operators, CDS Clearing and Depository Services Inc. and the Canadian Derivatives Clearing Corporation.

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