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Bank of Canada and OSFI: Standing Liquidity Facility use is routine, not a stress signal
The Bank of Canada and the Office of the Superintendent of Financial Institutions issued a rare joint statement clarifying that the Standing Liquidity Facility (SLF) is a routine tool in the monetary policy operational framework, and that using it for overnight liquidity management is normal — not a sign of liquidity stress. Deputy Governor Gravelle spoke the same day on repo markets and policy implementation.
Why it matters
The central bank and the regulator are jointly removing the stigma around the SLF, so financial institutions do not avoid the facility for fear of looking troubled — keeping the policy rate transmission and the payments system working smoothly.
Key details
The statement says the SLF is a key tool in the Bank's operational framework for monetary policy implementation. It helps reinforce the policy interest rate and supports the effective functioning of Lynx, Canada's high-value payment system. The facility gives Lynx participants access to secured liquidity, both intraday and overnight, as part of their routine liquidity management.
If a participant ends the business day short of cash — for example due to unexpected payments or liquidity flows — it automatically receives an overnight SLF advance. Overnight advances are non-discretionary in Lynx and are a normal part of daily payment system activity, not a sign of liquidity stress. Both the Bank and OSFI consider SLF use consistent with routine liquidity management, and overnight draws are not treated as exceptional liquidity measures. The two agencies said they will keep engaging with Lynx participants to support a clear understanding of the SLF's day-to-day role.
The same day, Deputy Governor Toni Gravelle delivered remarks titled “Repo markets and monetary policy implementation,” outlining further details of the Bank's framework.
Source
Joint statement by the Bank of Canada and OSFI, September 29, 2026 (bankofcanada.ca)
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