Standing Term Liquidity Facility: Terms and Conditions

Operation details

  • STLF advances are made at the discretion of the Bank of Canada to eligible financial institutions subject to the conditions below.1

Eligible counterparties

  • Federally or provincially prudentially regulated members of Payments Canada for which the Bank of Canada has no concern about their financial soundness.
  • The Bank would need sufficient and timely information about the financial institution to make an informed judgment about any possible soundness concerns.

Process to access facility

Eligible collateral

  • Any marketable security eligible for the Standing Liquidity Facility (SLF)2
  • Canadian-dollar non-mortgage loans made to Canadian residents3
  • Insured Canadian-dollar residential mortgage loans to Canadian residents registered or held under the borrower’s name
  • Uninsured Canadian-dollar residential mortgage loans to Canadian residents registered or held under the borrower’s name with a loan-to-value (LTV) ratio at or below 80 percent

Margin requirements

  • Marketable securities and Canadian-dollar non-mortgage loans are subject to the same margin requirements as applied under the Standing Liquidity Facility (SLF).
  • Insured Canadian-dollar residential mortgage loans are subject to a 10 percent margin requirement.
  • Uninsured Canadian-dollar residential mortgage loans are subject to a margin requirement of between 10 percent and 50 percent based on the Bank of Canada’s estimate of the current loan-to-value (cLTV) ratio of the individual mortgages. The Bank will provide a collateral-to-portfolio value based on a weighted-average margin of the individual loans within the portfolio.

Margin calls

  • All outstanding loans will be subject to margin calls if the value of the posted collateral falls below a threshold acceptable to the Bank of Canada. All eligible collateral may be provided for margin calls.

Counterparty settlement instructions

  • Securities used as collateral must be pledged using CDSX of CDS Clearing and Depository Services Inc. or be physically delivered to the Bank in certificated form by 15:00 (EST) on the day of the advance. Securities to be delivered shall be confirmed with the Bank by noon on the day of the advance.
  • The Bank of Canada’s Canadian Depository for Securities (CDS) settlement customer unit identifier (CUID) is BOCB.
  • Eligible counterparties are encouraged to pre-position loan collateral with the Bank of Canada well in advance to facilitate timely provision of liquidity.

Term to maturity

  • Up to 30 calendar days, renewable at the Bank of Canada’s discretion

Interest rate

  • Borrowing collateralized by marketable collateral eligible for the Standing Liquidity Facility (SLF) is charged an interest rate equal to the one-month overnight index swap (OIS) rate plus 35 basis points.
  • Borrowing collateralized by other eligible (non-marketable) collateral is charged an interest rate equal to the one-month OIS rate plus 75 basis points.
  • In all cases, the minimum interest rate is the Bank rate.

Currency

  • Liquidity is provided in Canadian dollars only. Financial institutions are responsible for ensuring they have reliable arrangements for liquidity support in foreign currencies.

Interest calculation

  • Interest on the funds will be calculated on an actual/365-day basis.

Legal arrangements

  • Eligible counterparties must have made the appropriate legal arrangements with the Bank of Canada.
  • The Bank reserves the right to change the terms of the STLF by posting a revised version of these terms and conditions.
  1. 1. The terms and conditions of STLF advances are determined by the Bank of Canada Act, the Bank’s lending policies and its loan and security agreements. The terms and conditions are designed to provide the appropriate safeguards to protect the Bank from financial and legal risk and to mitigate moral hazard. View the Bank of Canada Rules Governing Advances to Financial Institutions for further information.[]
  2. 2. Marketable securities collateral will be subject to the same conditions as the Standing Liquidity Facility (SLF).[]
  3. 3. Specifically, as with the SLF, eligible non-mortgage loans would include those made to individuals for non-business purposes (e.g., consumer loans) and to individuals and others for business purposes (e.g., business loans).[]