BoC and OSFI tell banks overnight SLF draws are routine, not a stress signal

The Bank of Canada and the Office of the Superintendent of Financial Institutions say overnight advances from the Standing Liquidity Facility should be treated as ordinary payment-system housekeeping, not a red flag that a Lynx participant is in trouble.

In a joint statement dated Sept. 29, the two agencies stressed that the SLF supplies secured intraday and overnight liquidity so high-value Lynx payments clear. If a participant ends the day short of cash after unexpected flows, it automatically receives an overnight SLF advance — a non-discretionary step the Bank and OSFI call “a normal part of a participant’s daily payment system activity, not a sign of liquidity stress.” Overnight SLF draws “are not considered exceptional liquidity measures,” they wrote, and participants may use the facility as needed under the Bank’s advance rules.

Deputy Governor Toni Gravelle, speaking the same day at a Bloomberg Canadian Finance Conference in New York, said some institutions still feared SLF use could “send the wrong signal,” according to Financial Post coverage of Bloomberg News. He urged them to draw for end-of-day shortfalls rather than hoard extra reserves. Gravelle also said the Bank is regularly upsizing its two-week term repo operations ahead of quarter-ends and large bond maturities because it can “tolerate only so much upward pressure” on CORRA, which had been running about four to five basis points above the 2.25% overnight target. The Bank plans to join the Canadian Collateral Management Service in early 2027 and may push renewed Government of Canada bond purchases from 2027 into 2028 if currency-in-circulation growth stays soft.

This is not investment advice.

Sources: OSFI / Bank of Canada — SLF joint statement; Financial Post — Gravelle on CORRA and repos; Bank of Canada — term repos.