Addendum III, March 2001

The framework for the implementation of monetary policy in the Large Value Transfer System environment

Addendum III

The Bank of Canada is changing two of its operational procedures relating to LVTS, effective 2 April 2001. First, the Bank will discontinue the second round of Special Purchase and Resale Agreements or Sale and Repurchase Agreements except in extraordinary circumstances. The need for a second round, which was initiated in September 1999 to reinforce the Bank’s objective for the overnight interest rate, has diminished markedly.

Second, the Bank of Canada will target a minimum daily level of settlement balances of $50 million (instead of zero) on a trial basis to reduce frictions in the system. The Bank will continue to target a higher level of balances on days when overnight funding is expected to be tight. As has been the recent practice, the target balance will be announced by 4:30 p.m. the previous day on the Bank of Canada's website.

For more information contact:

Marc Larson 613 782-7836
Wally Speckert 613 782-8102
Financial Markets Department