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The Bank of Canada as Lender of Last Resort

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As the ultimate provider of Canadian-dollar liquidity to the financial system, the Bank of Canada has the unique capacity to create Canadian-dollar claims on the central bank and the power to make secured loans or advances to chartered banks and other members of the Canadian Payments Association. The Bank supplies overnight credit on a routine basis through the Standing Liquidity Facility (SLF) to direct participants in the Large Value Transfer System, and Emergency Lending Assistance (ELA) to solvent deposit-taking institutions that require more substantial and prolonged credit. The authors review the policy framework that guides the Bank's lender-of-last-resort function, including the key issues, terms and conditions, and eligibility criteria associated with its SLF and ELA activities. Also discussed are foreign currency ELA, the relationship between SLF and ELA, systemic risk and Bank of Canada intervention, and the potential provision of liquidity to major clearing and settlement systems.

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  • Fred Daniel & Walter Engert & Dinah Maclean, 2005. "The Bank of Canada as Lender of Last Resort," Bank of Canada Review, Bank of Canada, vol. 2004(Winter), pages 3-16.
    • Handle: RePEc:bca:bcarev:v:2005:y:2005:i:winter04-05:p:3-16
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    Cited by:

    1. Mariam El Hamiani Khatat, 2016. "Monetary Policy in the Presence of Islamic Banking," IMF Working Papers 2016/072, International Monetary Fund.
    2. Walter Engert & Ben Fung, 2020. "A Uniform Currency in a Cashless Economy," Staff Analytical Notes 2020-7, Bank of Canada.

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