In remarks at the Bloomberg Canadian Finance Conference, Toni Gravelle, speaking on behalf of the Bank of Canada, confirmed that the Bank will begin using the Canadian Collateral Management Service for repo operations in the first quarter of 2027. He also clarified how the Bank manages pressures in repo markets to keep the Canadian Overnight Repo Rate Average aligned with its policy rate following the end of quantitative tightening. The tri-party platform is expected to improve settlement efficiency, collateral management and the scalability of the Bank’s repo operations. Canada’s repo clearing infrastructure is also being modernized, with most activity involving major Canadian market participants intended to become centrally cleared. Once that work is ready, which is expected largely in 2028, the Bank plans to clear its own repo operations through the Canadian Derivatives Clearing Corporation. The Bank will continue to tolerate modest deviations in the Canadian Overnight Repo Rate Average to preserve market incentives, using overnight repos when pressures become excessive after assessing their size, breadth, persistence and source. Weekly two-week term repos are now also increased ahead of expected or seasonal pressures, even if that temporarily moves settlement balances outside the estimated steady-state demand range of CAD 50 billion to CAD 70 billion. Separately, the Bank and the Office of the Superintendent of Financial Institutions clarified that use of the Standing Liquidity Facility for overnight funding is normal day-to-day liquidity management rather than a sign of stress.
Bank of Canada confirms first quarter 2027 tri-party repo adoption and clarifies monetary policy operations
The Bank of Canada will begin using the Canadian Collateral Management Service for repo operations in the first quarter of 2027 and later plans to centrally clear those operations once market infrastructure is ready. It also clarified that it uses overnight and two-week term repos to manage funding pressures, even if settlement balances temporarily move outside the CAD 50 billion to CAD 70 billion estimated range. The Bank and the Office of the Superintendent of Financial Institutions separately affirmed that overnight use of the Standing Liquidity Facility is routine liquidity management.