Citing continued improvement in short-term funding markets, the Bank of Canada is revising the collateral requirements for a key liquidity support program.
Starting Aug. 24, the central bank will reduce the limits on non-mortgage loans and securities that can be used as collateral for its standing liquidity facility (SLF) from 100% back to pre-crisis levels by Sept. 21.
The bank pointed to “the continued improvement in short-term funding conditions” as the reason for the change announced Monday.
Back in March, the Bank of Canada increased the limits as part of its efforts to support market liquidity and the financial system amid “deteriorating market conditions” that accompanied the Covid-19 outbreak.
For non-mortgage loans, the limit will gradually be reduced back to 20% of total collateral; for securities, the limit will be reduced to 40%.
The bank said it will “continue to monitor short-term funding conditions as well as global market developments” and “revise these concentration limits if necessary.”