## 1canea2022001 ## Source details **Canonical URL:** [1canea2022001](https://www.imf.org/-/media/files/publications/cr/2022/english/1canea2022001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1canea2022001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1canea2022001.pdf.json) --- ### Executive summary — Key recommendations - Provide transparency of the judicial review of BOC decisions, including disclosure of applicable review mechanisms for the BOC’s enforcement powers regarding supervision of retail payments providers. - Disclose the risk appetite statement and revise risk governance disclosures to boost transparency of the risk management function. - Improve transparency of audit mechanisms by: - disclosing an external audit selection and rotation policy, including criteria for eligibility, independence, and compliance with international standards; and - clarifying the mandate and reporting structure of the internal audit function, and publishing the charter governing its operations. - Consider publishing a detailed summary of monetary policy deliberations by the Governing Council, enhance communication on ex-post evaluation of policy decisions, disclose alternative policy scenarios, and improve timeliness and accessibility of published macroeconomic projections. - Promote BOC’s financial stability messages more broadly to the general public by increasing the frequency of communication using “plain language.” - Put in place a framework to report how and to what extent financial stability measures, including market-wide exceptional liquidity support, contributed to achieving BOC objectives such as restoring market functioning. - Consider disclosure of internal AML/CFT controls with appropriate confidentiality and security safeguards. - Disclose more information on BOC involvement and deliberation in committees and bilateral collaboration with federal and provincial authorities relevant for financial stability. - Enhance disclosures on foreign exchange (FX) intervention and reserve management by releasing information on BOC’s involvement in committees and groups, and provide clear communication on the rationale for instrument choice in FX intervention. - Improve accessibility of information on risk management, monetary policy instruments, policy on FX interventions, and financial stability research and analysis. ### Scope, objective, and methodology - Mission: Central Bank Transparency Code (CBT) review at the request of the Bank of Canada (BOC); sixth under the pilot CBT review program. - Coverage: all CBT principles, excluding those not performed by the BOC (consumer protection, AML/CFT supervision, FX administration, FX reserve management, macroprudential policy) or those outside CBT scope because of established international standards (microprudential supervision and resolution, Financial Markets Infrastructure); these are denoted “Not Applicable.” - Five pillars examined: (i) governance; (ii) policies; (iii) operations; (iv) outcomes; and (v) official relations. - Objective: map BOC transparency choices against practices (core, expanded, comprehensive) and identify strengths and areas for improvement; CBT review is not an assessment of central bank policies. - Approach: desk review and in-depth discussions using public information and BOC Self-Review questionnaire; mission took place May 11–24, 2022; over thirty meetings with BOC management, staff, and external stakeholders; review principle-by-principle considering timeliness, periodicity, and quality of disclosures and stakeholder views. ### Background and operational context - Legal/institutional: - BOC is a special type of Crown corporation, owned by the Government, with considerable autonomy under the Bank of Canada Act; principal role “generally to promote the economic and financial welfare of Canada.” - Responsibilities include monetary policy, financial stability, currency, and funds management; Payment Clearing and Settlement Act gives oversight responsibility for payments and clearing/settlement systems. - Operational elements: - Early adopter of inflation targeting; inflation-control target reviewed every five years jointly with the federal government. - Day-to-day monetary policy conducted by Governing Council. - BOC identifies/monitors financial stability risks, provides liquidity including lender-of-last-resort facilities, oversees and acts as resolution authority for critical FMIs, manages bank notes, and acts as fiscal agent for public debt and foreign exchange reserves. ### Main findings — overall assessment and advanced practices - Overall: - BOC sets a high benchmark for transparency, broadly aligned with expanded and comprehensive practices of the IMF Central Bank Transparency Code; external stakeholders view the BOC as open, dynamic, and transparent. - Advanced transparency practices: - Active use of novel communication tools (layering of policy communications; soliciting feedback). - Disclosure of financial stability policy framework: objectives, strategy, instruments, and comprehensive risk assessment. - Comprehensive transparency on Emergency Liquidity Assistance (ELA): policy, objectives, terms, conditions, ongoing liquidity provision. - Transparency about interactions with foreign governments and international organizations. - Proactive communications on emerging topics (climate change, central bank digital currency (CBDC)), explaining relevance to legal mandate and objectives. - Full disclosure of reasoning, parameters, and expected results for large-scale asset purchase programs launched in 2020 and disclosure during the 2021 unwind. ### Transparency gaps and legacy issues - Governance transparency gaps: - Scope of judicial review of BOC decisions not explained in easily understandable manner on website — relevant given new retail payments supervision powers. - Risk management disclosures lack explicit published Risk Appetite Statement (footnote: mission noted that after the mission the BOC explicitly labeled Risk Appetite as a separate statement on its website). - Internal AML/CFT controls not publicly described; audit mechanisms (external audit selection/rotation policy; internal audit charter/mandate) not fully disclosed. - Confidentiality parameters could be better defined and communicated. - Monetary policy transparency opportunities: - Framework is comprehensive and communication strong (fixed announcement dates, MPR), but opportunities exist to: - disclose more on monetary policy deliberations, - enhance ex-post evaluation of policy decisions, - disclose alternative policy scenarios more regularly, - improve timeliness and accessibility of macroeconomic projections. - Recent mandate modification to consider broader labor market increases need for coherent communication. - FX policy disclosure: - BOC operates a flexible exchange rate regime; last intervention in September 1998. - Additional disclosure, coordinated with the Government of Canada, on rationale for instrument choice would enhance transparency. ### Key statistics and pandemic response measures - Extraordinary operations and liquidity: - Launched or expanded 11 special liquidity and asset purchase facilities (eight were entirely new). - In first three months of crisis response, liquidity facilities and asset purchases injected more than $377 billion in total liquidity. - Balance sheet nearly quintupled from $120 billion in March to roughly $550 billion by end-2020. - Settlement balances rose from $250 million pre-crisis to close to $350 billion by end-2020. - Operational tools: - QE purchases lowered longer-term interest rates and complemented policy rate cuts. - Expanded term repo program and Standing Term Liquidity Facility (STLF) to provide collateralized loans and public liquidity backstop, including access for smaller institutions by pledging assets (including mortgages). - Enhanced operations enabled continuity despite security/technology challenges and higher transaction volumes in 2020. ### Governance, risk management, and audit findings - Governance disclosures: - Comprehensive information on organizational structure, decision-making bodies, committees, and strategic planning published; however, website describes Governing Council as policy-making body though Annual Report describes it as advisory. - Recommendation: publish an annual synopsis of topics discussed in internal committees. - Risk management: - Risk exposures disclosed across four categories: (i) financial; (ii) operational; (iii) strategic; and (iv) environmental. - Disclosure lacks explicit reference to a Risk Appetite Statement and does not clearly delineate “Risk Management” and “Internal Audit” per the Three Lines Model. - Recommendations: (i) publish a Risk Appetite Statement; (ii) revise description of risk governance to reflect practices and clarify Internal Audit positioning. - Audit and accountability: - Financial statements prepared under IFRS with external audit opinion referring to Canadian Generally Accepted Auditing Standards. - Gap: Bank of Canada Act does not provide for applicable accounting and auditing standards — needs addressing via additional disclosures. - Recommendations: publish conditions for appointment of external auditors, consider an external audit selection and rotation policy; publish internal audit charter and mandate; clarify internal audit reporting and conformance with international standards. ### Communications, confidentiality, and access to information - Communications: - Communications department manages disclosure mandates, ATIA requests, and timing/sequence of publications and events; communications policy (2018), strategic plan (2019–2021), and process implementation plan are internal and could be disclosed (policy in full, others in summary). - BOC pioneered monetary policy transparency (MPR, fixed schedule for announcements) but does not publish minutes or summaries of monetary policy deliberations. - Confidentiality and ATIA: - BOC abides by the Access to Information Act; publishes annual report summarizing ATIA activity with a five-year time series and detailed appendices of sections cited as exemptions. - Stakeholders uncertain about confidentiality parameters; recommendation: draft BOC-specific confidentiality policy outlining continuum from always confidential to always disclosable. ### Financial stability, committees, and inter-agency relations - Institutional arrangements: - BOC chairs Heads of Regulatory Agencies (HoA) Committee and led creation of Systemic Risk Surveillance Committee (SRSC) in 2019; BOC does not hold macroprudential mandate (Minister of Finance responsible). - Disclosure on committee proceedings (e.g., Senior Advisory Committee (SAC), HoA, SRSC) is limited; recommendation: publish sanitized agendas, post-meeting summaries, and remits where feasible. - Financial stability communication: - BOC discloses Financial System Review (FSR), research papers and staff notes targeting specialists; recommended to increase frequency and plain-language communication (e.g., animations, social media) for general public. - Recommendation: publish ex-post evaluations of whether implemented measures achieved intended effects. ### Emergency Liquidity Assistance (ELA) and market-wide liquidity support - Current disclosures: - ELA framework disclosed: scope, objectives, rules, procedures, eligibility, requirements, amounts, maturity, financial parameters, and deviations from standard operations. - BOC has published ELA provided to individual institutions in the 1990s; bilateral ELA identities remain legally protected. - Suggested enhancement: - Put in place a framework to report how and to what extent market-wide exceptional liquidity support contributed to restoring market functioning and the economy. ### AML/CFT internal controls - Role and disclosure: - BOC does not perform external AML/CFT supervision but maintains internal AML/CFT controls; no public details on these controls, oversight, or resources. - Recommendation: - Publish an overview of potential ML/TF risks and corresponding internal AML/CFT controls framework with appropriate confidentiality and security safeguards; the BOC agreed and planned to publish its policy on financial crimes and/or a statement about its internal AML/CFT controls framework by the end of 2022. ### Foreign exchange reserve management and FX intervention - FX reserve management: - Performed by BOC on behalf of the federal government; core elements disclosed on Finance Canada and BOC websites; disclosures on FX reserve management need coordination with Government of Canada. - Recommendation: clearly explain BOC involvement in committees and bilateral collaboration relevant to foreign reserve and fund management. - FX intervention: - Policy is discretionary, only in exceptional circumstances; BOC has not intervened since September 1998. - Recommendation: include clear communication on choice of instruments for FX interventions and publish information on regular systemic testing and compliance with market codes (e.g., FX global code). ### CBDC, climate, and emerging topical workstreams - CBDC: - BOC building capability to issue CBDC; decision to issue rests with Parliament. - 2021 progress: conceptual and technical designs, cryptography research, accessibility expertise, engagement with three Canadian university project teams, and collaboration agreement with MIT for a twelve-month research project (announced March 2022). - BOC established a 2021 framework to oversee evolving payments and track digital money (stablecoins, CBDCs). - Climate change: - BOC developed Canadian macroeconomic scenarios, integrated climate considerations into macro simulations, combined regional disaster exposure with household vulnerability data in 2021 FSR, piloted climate scenario work with OSFI and six financial institutions, contributed to international fora, and committed to net-zero operational carbon emissions by 2050 with targets to reduce facility emissions by 40 percent (2025) and 80 percent (2030); shift to 100 percent renewable electricity in 2022. ### Authorities’ response and specific commitments - General: - BOC thanks IMF for review, welcomes recommendations, and commits to enhancing transparency. - Specific commitments and timelines: - Retail payments supervision and judicial review: - BOC intends to provide appropriate disclosure on applicable review mechanisms as retail payments supervision framework develops; RPAA approved June 29, 2021, expected to come into force in stages; regulations to be published in Canada Gazette. - Risk appetite and internal audit: - BOC has published its revised Risk Appetite Statement on its website. - By end of 2022, BOC will ensure risk governance description reflects current practices and will publish Internal Audit Charter approved by the Board’s Audit and Finance Committee on its website. - External audit selection and rotation policy: - BOC will publish a document describing the selection process for external auditors on its website by the end of 2022. - Monetary policy deliberation summaries and ex-post evaluation: - BOC will publish a summary of monetary policy deliberations after each policy decision, starting January 2023, with a lag of roughly two weeks following each policy decision. - BOC has published assessments of pandemic-related forecast errors (July 2022 MPR) and of policy actions (February 2022 Deputy Governor Tim Lane speech) and published staff assessments of some asset purchase programs. - Alternative policy scenarios and macroeconomic projections: - BOC has published alternative scenarios ad hoc (most recently in July 2022 MPR) and is open to providing such scenarios more regularly. - BOC will make projections more accessible (digital charts, downloadable data) and develop the MPR into a fully digital product by the end of 2023. - BOC publishes detailed staff economic projections provided to Governing Council with a five-year lag. ### Operational transparency and data disclosures - Daily and weekly reporting: - BOC publishes detailed daily information on Overnight Rate vis-à-vis Target, daily volumes and interest rates for asset purchases and open market operations, daily aggregated settlement balances, and weekly composition of assets and liabilities. - Balance sheet and extraordinary operations: - BOC discloses outstanding volumes including extraordinary operations; decompositions of forecast errors and comprehensive ex-post policy evaluations are limited and published on an ad-hoc basis (staff analytical notes). *Italic source: IMF staff summary of the chapter/section 1canea2022001 (Bank of Canada transparency review).* ### EXECUTIVE SUMMARY __________________________________________________________________________ 4 ### EXECUTIVE SUMMARY ### Key Recommendations - 1. Going forward, providing transparency of the judicial review of BOC decisions would benefit from disclosing information on the applicable review mechanisms for the BOC’s enforcement powers vis à vis its new function regarding supervision of retail payments providers. - 2. The disclosure of the risk appetite statement and revised risk governance will boost the transparency of the risk management function. - 3. Transparency of audit mechanisms would benefit from: (i) disclosing an external audit selection and rotation policy, including criteria for eligibility, independence, and compliance with international standards; and (ii) clarifying the mandate and reporting structure of the internal audit function, and publishing the charter governing its operations. - 4. Consider publishing a detailed summary of monetary policy deliberations by the Governing Council, as well as enhancing its communication on ex-post evaluation of the policy decisions, disclosing alternative policy scenarios, and improving the timeliness and accessibility of published macroeconomic projections. - 5. Promote BOC’s financial stability messages more broadly to the general public by increasing the frequency of its communication using “plain language.” - 6. Put in place a framework that provides information on how and to what extent financial stability measures, including market-wide exceptional liquidity support, contribute to achieving BOC’s objectives such as restoring market functioning. - 7. Consider the disclosure of its internal AML/CFT controls with appropriate confidentiality and security safeguards. - 8. Enhance the transparency framework by disclosing more information on the BOC involvement and its deliberation in various committees and groups, as well as bilateral collaboration with other federal and provincial regulatory authorities that are relevant for financial stability. - 9. Enhance the disclosures on foreign exchange intervention and reserve management by releasing information on BOC’s involvement in various committees and groups, and on BOC’s role in the context of foreign reserve and fund management. In context of FX intervention, a clear communication on the rationale for instrument choice would enhance transparency. - 10. Improve the accessibility of information on topics such as risk management, monetary policy instruments, the policy on FX interventions, and financial stability research and analysis. ### Scope and Objective - The mission conducted the Central Bank Transparency Code (CBT) review at the request of the Bank of Canada (BOC). - The review was the sixth conducted under the pilot CBT review program. - Coverage: all CBT principles, excluding those not performed by the BOC (consumer protection, AML/CFT supervision, FX administration, FX reserve management, macroprudential policy) or those outside the CBT scope because of established international standards (microprudential supervision and resolution, Financial Markets Infrastructure). These are denoted “Not Applicable” in the review. - The review examines BOC transparency across five pillars: (i) governance; (ii) policies; (iii) operations; (iv) outcomes; and (v) official relations. - Objective: map BOC transparency choices against a range of practices (core, expanded, comprehensive) and identify strengths and areas for improvement to strengthen dialogue with stakeholders and balance independence and accountability. - Note: the CBT review is not an assessment of central bank policies. ### Approach and Methodology - The mission’s approach combined a desk review and in-depth discussions with the BOC and key stakeholders. - The mission used publicly available information and the BOC’s Self-Review questionnaire as the basis for analysis. - The mission took place during May 11–24, 2022, and initiatives implemented after the review date have not been considered. - Over thirty meetings (hybrid and virtual) were conducted over two weeks with BOC management, staff, and external stakeholders (public and private sector, academia, think tanks, journalists). Meetings with external stakeholders were planned in coordination with the central bank; BOC staff did not attend those meetings. - The review was conducted principle-by-principle and considered timeliness, periodicity, and quality (accessibility and ease of understanding) of disclosures, as well as stakeholder views. ### Background - Legal and institutional context: - The BOC is a special type of Crown corporation, owned by the Government, with considerable autonomy to implement responsibilities defined in the Bank of Canada Act. - Principal role in the Act: “generally to promote the economic and financial welfare of Canada.” - The BOC’s responsibilities include monetary policy, financial stability, currency, and funds management. - Key operational elements: - The BOC was an early adopter of inflation targeting; the inflation-control target is reviewed every five years jointly by the BOC and the federal government. - Day-to-day monetary policy conduct is the responsibility of the BOC’s Governing Council. - The BOC identifies and monitors financial stability risks, provides liquidity including lender-of-last-resort facilities, and oversees and acts as the resolution authority for critical financial market infrastructures. - The BOC manages design, issuance, and distribution of bank notes, and acts as fiscal agent for public debt and foreign exchange reserves. - The Payment Clearing and Settlement Act gives the BOC responsibility for overseeing payments and other clearing and settlement systems in Canada to control systemic and payments system risks. ### Main Findings - Overall assessment: - The BOC sets a high benchmark for transparency, recognized by stakeholders, maintaining a high level of trust and accountability. - The BOC’s transparency practices are broadly aligned with expanded and comprehensive practices as defined by the IMF Central Bank Transparency Code. - External stakeholders view the BOC as an open, dynamic, and transparent public institution. - Advanced transparency practices identified: - Active use of novel communication tools, such as layering of policy communications, and soliciting feedback via different means. - Disclosure of financial stability policy framework, including objectives, strategy, instruments, and a comprehensive assessment of risks to financial stability. - Comprehensive transparency on Emergency Liquidity Assistance (ELA) regarding policy, objectives, terms, conditions, and ongoing liquidity provision. - Transparency about interactions with foreign governments and international organizations, disclosing comprehensive information on global engagements. - Proactive communications on emerging topics (climate change, central bank digital currency (CBDC)), explaining relevance to the BOC’s legal mandate and objectives. - Full disclosure of reasoning, parameters, and expected results for large-scale asset purchase programs launched in 2020 and disclosure during the 2021 unwind. - Transparency gaps (mostly legacy issues): - Key elements of governance transparency exist but require better reflection in published materials (see Recommendations 1–3). - Specific gaps include: - Scope of judicial review of BOC decisions, relevant given new powers for retail payment systems supervision. - Disclosure of risk management practices, including the risk appetite statement and revised risk governance. - Internal AML/CFT controls disclosure (with appropriate safeguards). - Transparency of audit mechanisms (external audit selection/rotation policy; internal audit charter, mandate, reporting). - Clearer definition of confidentiality parameters. - FX policy disclosure: - The BOC operates a flexible exchange rate regime and last intervened in FX almost 25 years ago; additional disclosure, coordinated with the Government of Canada, on the rationale for instrument choice would enhance transparency. - Monetary policy transparency: - The monetary policy framework is comprehensive, transparent, and understandable. - The BOC pioneered monetary policy communication, including fixed announcement dates and regular publications of policy framework, decisions, and operations in clear language. - Opportunities for greater transparency: - More information on monetary policy deliberations. - Enhanced ex-post policy evaluations. - Disclosure of alternative policy scenarios. - Improved timeliness and accessibility of macroeconomic projections. - Recent mandate modification to consider the broader labor market increases the importance of comprehensive and coherent communication on core objectives. - Relations with domestic financial agencies: - The BOC is not the sole authority for macroprudential policy and FX reserve management but is actively involved in discussions with federal and provincial authorities. - The BOC participates in committees and working groups with the Department of Finance and other domestic agencies, but basic information on proceedings is not regularly and timely disclosed. - Mindful of confidentiality and multi-agency involvement, the BOC could engage in consensus-based approaches to increase disclosure on committee activities and deliberations to benefit external stakeholders. *Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1canea2022001.pdf* ### 16. The BOC is an integral part of Canada’s financial stability architecture. Financial ### 16. The BOC is an integral part of Canada’s financial stability architecture. Financial ### Governance and institutional arrangements - The BOC shares financial oversight and resolution responsibilities with federal and provincial authorities through the Head of Regulatory Agencies (HoA) Committee, chaired by the BOC Governor, and including: the Department of Finance, Office of the Superintendent of Financial Institutions (OSFI), and four provincial securities regulators. - Following 2019 FSAP findings, the Systemic Risk Surveillance Committee (SRSC) was established in 2019; it includes all agencies that participate in the HoA, plus Canada Deposit Insurance Corporation (CDIC), Canada Mortgage and Housing Corporation (CMHC), and two provincial financial services regulatory authorities. - The BOC does not have a macroprudential mandate; the Minister of Finance is responsible for macroprudential policy. The Office of the Superintendent of Financial Institutions supervises and regulates all banks and other financial institutions. - The BOC and provincial securities commissions have overlapping mandates with respect to oversight of FMIs; the BOC is solely responsible for the resolution of FMIs. ### Economic and financial resilience during COVID-19 - A strong history of prudent policymaking and ample buffers helped Canada weather the COVID-19 shock; the economy rebounded strongly in 2021 following a large hit in 2020 due to severe economic and social restrictions, supported by massive fiscal and monetary expansion. - The 2019 FSAP concluded that Canada has a sound and resilient banking sector, adequately shielded against major macroeconomic shocks; this was affirmed during the pandemic. - The BOC launched a suite of liquidity facilities and asset purchase programs; a dedicated section on the BOC’s website and the BOC annual report communicated detailed information about these COVID-19 related actions. ### Bank of Canada extraordinary operations—key statistics and tools - The BOC launched or expanded 11 special liquidity and asset purchase facilities (eight of which were entirely new). - In the first three months of its crisis response, the BOC’s liquidity facilities and asset purchases injected more than $377 billion in total liquidity into the financial system. - The BOC’s balance sheet nearly quintupled, from $120 billion in March to roughly $550 billion by the end of 2020. - Settlement balances rose from $250 million before the crisis to close to $350 billion by the end of 2020. - The QE program initially helped core markets return to normal functioning, then pivoted to providing additional monetary stimulus to support the economy and achieve the BOC’s inflation target; QE purchases lowered longer-term interest rates, complementing policy rate cuts. - Short-term lending: the BOC significantly expanded its term repo program and accelerated the launch of the Standing Term Liquidity Facility (STLF) to provide collateralized loans and a public liquidity backstop, including access for smaller financial institutions by pledging assets (including mortgages). - Enhanced operations and extensive measures enabled continuity of critical BOC operations despite on-site security and technology challenges and a significantly higher transaction volume in 2020. ### Communication, transparency, and accountability - Under its Act, the BOC must submit an annual report and audited financial statements to the Minister of Finance through the Governor; the annual report is presented to Parliament by the minister and published in the Canada Gazette. - The Governor and Senior Deputy Governor make semi-annual appearances before the House and Senate Finance and Banking Committees. - The BOC pioneered monetary policy transparency practices with the Monetary Policy Report and a fixed schedule for interest rate announcements; however, the BOC does not publish minutes (or a summary) of monetary policy deliberations. - The BOC’s main communication channels are its website and flagship publications: Annual Report, quarterly Monetary Policy Report (MPR), and annual Financial System Review (FSR); the BOC is increasing use of social media and digital platforms and developing website and Museum products to engage broader audiences. ### Emerging mandates and topical workstreams - The BOC is addressing emerging issues beyond conventional objectives, including climate change, inequality, labor markets, digital currencies, and housing market developments, and is proactively communicating how these align with its legal mandate. - Climate change and related risks: - The BOC is ramping up efforts to understand climate change effects on the economy, inflation, and the financial system, publishing a separate section in its annual report and extensive website material, and using Governing Council speaking engagements. - Key 2021 highlights: - Developed Canadian macroeconomic scenarios to assess climate impacts and integrated climate considerations into macroeconomic simulations. - Combined data on regional exposure to climate-related natural disasters with household financial vulnerability data in the 2021 Financial System Review. - Conducted a pilot project with OSFI and six Canadian financial institutions using climate scenarios to assess transition risks to (i) increase understanding of potential exposure to climate transition risks; (ii) improve assessment and disclosure of climate-related risks; and (iii) build capability to conduct climate scenario analysis. - Contributed to international dialogue: sits on the steering committee for the Central Banks and Supervisors Network for Greening the Financial System; participated in FSB work on climate-related financial risks; contributed to a G20 Sustainable Finance Working Group roadmap. - Committed to net-zero operational carbon emissions by 2050 with targets to reduce emissions in its facilities by 40 percent (2025) and 80 percent (2030); completed site assessments of owned buildings and signed an agreement to shift to 100 percent renewable electricity in 2022. - Began developing a framework to measure and report its own exposure to climate-related risk in 2021; in 2022 the BOC will begin work on reporting its climate-related financial risks drawing on the Network for Greening the Financial System Guide. - Central bank digital currency (CBDC): - The BOC is building capability to issue a CBDC and is committed to being ready should the need arise; any decision to issue a CBDC ultimately rests with Parliament. - 2021 progress included work on conceptual and technical designs, investigating advances in cryptography to balance privacy with compliance and achieve high security, expanding expertise on accessibility, and engaging three Canadian university project teams for independent CBDC design ideas. - In March 2022 the BOC and MIT announced an agreement to collaborate on a twelve-month research project on CBDC with the MIT Media Lab’s Digital Currency Initiative. - The BOC established a framework in 2021 to oversee the evolving payments system and track new forms of digital money, including stablecoins and CBDCs issued in other countries. ### Main challenges going forward - Global economic uncertainty and domestic macrofinancial vulnerabilities are identified as main challenges for financial stability, including: - high household indebtedness, - housing market imbalances, - climate-change financial risks. *Source: IMF staff summary of the chapter "The BOC is an integral part of Canada’s financial stability architecture. Financial" in 1canea2022001.* ### Box 3. The Bank of Canada’s Work on Central Bank Digital Currencies (concluded) ### Box 3. The Bank of Canada’s Work on Central Bank Digital Currencies (concluded) ### CBDC research, outreach, and international engagement - Research and laboratory experiments on two-sided payment markets were conducted to help estimating the likelihood of adoption of a CBDC. - Toward the end of 2021, the BOC launched a project to explore the potential value proposition of a CBDC for consumers to also ensure Canadians have an opportunity to share their views on this issue. - Engaging with federal institutions and financial sector stakeholders: - The BOC is working closely with the Department of Finance Canada to consult with: (i) relevant Government of Canada departments; (ii) other federal government agencies; and (iii) a range of financial institutions. - Outreach is in early stages and is helping the bank improve its understanding of the broader implications of a CBDC—including for the financial sector. - Contributing to international planning and dialogue: - In 2021 the BOC continued its work with a coalition of other central banks and the Bank for International Settlements (BIS) to identify and reflect on the most effective design elements of a CBDC. - These discussions led to the publication of three reports on: - System design and interoperability - User needs and adoption - Financial stability implications - The same group of central banks worked with their finance ministry counterparts on the publication of: (i) G7 statement on CBDCs and digital payments; and (ii) report laying out 13 shared principles of public policy for CBDCs. - Source: BOC 2021 Annual Report - Preparing for a Central Bank Digital Currency. ### MAIN FINDINGS — Pillar I: Transparency in Governance (paragraphs 22–34) - Legal Structure, Mandate, and Decision-Making - Paragraph 22: - The legal structure of the BOC, including its legal nature, mandate, and autonomy, are all well disclosed on the website of the BOC. - The BOC’s extensive transparency could be further enhanced by providing details of the limited scope of audits of the BOC by the Auditor General. - The website provides no explanation in an easily understandable manner for the public on the scope of the judicial review of BOC actions. - Disclosure on judicial review will become particularly relevant for the BOC’s enforcement powers in the context of its new function regarding supervision of retail payments providers. - Paragraph 23: - The BOC publicly discloses and discusses its objectives, functions, and powers. - The BOC’s objectives, five core functions and powers are all specified in the Bank of Canada Act, the Payment Clearing and Settlement Act, and the Retail Payment Activities Act, and are disclosed on its website and in its Annual Report. - The primary objective of monetary policy is explained as to “preserve the value of money by keeping inflation low, stable and predictable”. - Price stability prevails over the BOC’s other objectives. - Recommendation: provide on the BOC website some overview of public and private law powers, as well as prohibited activities. - Paragraph 24: - The BOC clearly discloses differing levels of autonomy with respect to its various core functions; the Bank of Canada Act, the Payment Clearing and Settlement Act, the Retail Payment Activities Act and the Financial Administration Act clarify the BOC’s level of autonomy. - These first three Acts are available via the BOC website. - The website discloses personal autonomy of officials, but does not discuss criteria and procedures for dismissal of officials (security of tenure) or provide an explanation of the scope of officials’ legal liability. - Paragraph 25: - The BOC publishes comprehensive information about organizational structure, decision-making bodies, committees, and strategic planning. - The BOC has developed good corporate governance practices that go beyond the Bank of Canada Act. - The website describes the Governing Council as the BOC’s policy-making body, but this does not seem to reflect the advisory nature of the Council (correctly described in the Annual Report). - Recommendation: publish an annual synopsis of topics discussed in internal committees (for example in the Annual Report). - Risk Management and Accountability Framework - Paragraph 26: - The BOC’s risk exposure is comprehensively disclosed across four categories of risks mapped to the bank’s mandate: (i) financial; (ii) operational; (iii) strategic; and (iv) environmental. - The bank places a particular focus on climate-related risks (see Box 1). - Disclosure lacks an explicit reference to a risk appetite statement and does not clearly delineate “Risk Management” and “Internal Audit” as separate functions per the “Three Lines Model.” - The BOC currently reflects the Internal Audit function as part of its risk management structure; “Enterprise Risk Management” is used more for integrated risk reporting than centralized risk management. - Recommendations: - (i) publishing a risk appetite statement; and - (ii) revising the description of risk governance arrangements to reflect current practices, including by clarifying the position of Internal Audit within this structure. - Note: footnote — “We took a note that after the mission to BOC was concluded, the BOC explicitly labeled Risk Appetite as a separate statement on its website.” - Paragraph 27: - The BOC discloses reasonably sufficient information on its financial activities and position in the annual financial statements. - The BOC publishes a complete set of independently audited financial statements as a part of the annual report. - Financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and accompanied by the external auditor’s report, which includes an external audit opinion referring to Canadian Generally Accepted Auditing Standards. - Gap: the Bank of Canada Act does not provide for applicable accounting and auditing standards, which needs to be addressed through additional disclosures. - Paragraph 28: - Additional disclosures on audit mechanisms are needed. - Recommendations: include on the website and in the annual report: - (i) the conditions for appointment of external auditors and related eligibility criteria (independence, reputation, experience) as well as the applicable auditing standards; consider establishing and publishing an external audit selection and rotation policy; - (ii) references to internal audit as part of internal accountability arrangements, including the role, mandate, approach, reporting structure, and a statement of conformance with international standards; consider publishing the charter governing the internal audit function. - Paragraph 29: - Transparency on governance and human capital management is comprehensive. - The BOC publishes references related to diversity and inclusion, staff development, recruitment, and retention, and reports annually on employment equity, pay transparency, multiculturalism, and official languages. - Paragraph 30: - The BOC discloses some information about anti-corruption legislation applicable to staff and decision-makers: Criminal Code, Financial Administration Act, and Conflict of Interest Act. - Published information makes clear relevant provisions of the Criminal Code and Conflict of Interest Act are applicable to employees and directors respectively, albeit without explicit reference to corruption or related offences. - Uncertainties: - It is not clear from published information that the Criminal Code applies to the Directors appointed by the Minister of Finance or that the Conflict of Interest Act applies to the Governor and Senior Deputy Governor. - Application of the Financial Administration Act to staff, management, and directors is not disclosed publicly. - Recommendation: explicitly set out the application without immunities of the relevant laws to staff, management, and directors, along with sanitized aggregated details of any proceedings and outcomes under these laws. - Footnote: “The Financial Administration Act covers provisions on the financial administration of the Government of Canada, establishment, and maintenance of the accounts of Canada and the control of Crown corporations, including provisions on bribery and frauds against the government.” - Paragraph 31: - The BOC fully discloses its Code of Business Conduct and Ethics (“COC”) and Code of Business Conduct and Ethics for Directors (“Directors’ Code”). - The Disclosure of Wrongdoing policy protects employees’ rights to confidentially disclose information concerning wrongdoing. - Limited public information on implementation of the codes. - Recommendations: provide details on investigation and sanctioning procedures for the COC and Directors’ Code; publish aggregated information on investigations and actions taken under the ethics codes and the Disclosure of Wrongdoing policy; highlight main changes made to ethics codes upon annual review. - Communications and Confidentiality - Paragraph 32: - The communications department pursues a multi-pronged strategy supporting transparency and disclosure. - Activities include: assuring compliance with disclosure mandates under the BOC Act; supporting Access to Information requests; improving communication processes; developing strategies targeted at main audiences; and tracking timing and sequence of policy decisions, publications, statistics, research, speeches, press conferences and interviews. - Paragraph 33: - Communication organizational structure details are disclosed, but communications policy, strategic plan and process implementation plan are not publicly available. - An organization chart is available showing communications reporting to the senior deputy governor. - The BOC has a Communication Policy (2018), Communications Strategic Plan (2019-2021) and Process Implementation Plan (2019-2021); these are internal documents and could be disclosed (policy in full, others at minimum in summary form). - Paragraph 34: - The BOC abides by the Access to Information Act’s (ATIA) confidentiality approach applicable to ‘government institutions,’ but some stakeholders remain uncertain of confidentiality parameters. - The BOC facilitates ATIA requests with a dedicated web page and cites specific ATIA provisions when redacting or withholding documents. - There is a subsequent complaint process through Canada’s Information Commissioner; litigation remains an expensive and lengthy option, and no BOC cases have been litigated in recent years, leading to questions regarding the parameters of confidentiality. - Recommendation: consider drafting a policy outlining the continuum of confidentiality and disclosure specific to the BOC and citing supporting historical cases. ### MAIN FINDINGS — Pillars II, III, and IV: Transparency in Policies, Operations, and Outcome (paragraphs 35–39) - Monetary Policy - Paragraph 35: - The BOC monetary policy framework is comprehensive, transparent, and understandable. - The BOC publishes extensive details on objectives and instruments, monetary operations, decision-making process, underlying analyses, and forecasts. - Key elements of policy communication include: Monetary Policy Report, quarterly press-conferences following interest rate decisions and publication of the MPR, regular speeches by Governing Council members, semiannual appearances before the House of Commons and Senate, and regular outreach events. - Public-facing communication channels include The Economy, Plain and Simple portal, and BOC Museum. - The BOC collects feedback via annual public opinion survey, quarterly lending and business surveys, and public consultations. - Paragraph 36: - External stakeholders praise BOC’s open, transparent, and dynamic policy communication but believe transparency would benefit from disclosure of more detailed information on monetary policy deliberations, especially in times of heightened uncertainty. - Recommendation: consider publishing (immediately or with some delay) a detailed transcript of policy deliberations by the Governing Council, providing a summary of non-attributed views of individual members without breaching consensus-based decision-making. - Additional recommendations: enhance communication on ex-post evaluation of policy decisions, disclose alternative scenarios, and improve timeliness and accessibility of published macroeconomic projections. - Paragraph 37: - The BOC is proactively communicating on modifications in its policy mandate. - Every five years the Bank of Canada and the Government of Canada review and renew their agreement on the monetary policy framework. - In the 2021 renewal the BOC openly discussed alternative policy frameworks, weighing these against the flexible inflation targeting (IT) regime. - The BOC stated the flexible IT regime will consider labor market developments while primarily focusing on delivering low and stable inflation rate. - The modification of the BOC’s mandate to consider broader labor market developments (and repeated calls to use monetary policy to promote greener economy, tackle income inequality and restrain housing prices’ growth) increases the importance of comprehensive communication on BOC’s core objectives. - Foreign Exchange and Reserves Management - Paragraph 38: - The policy of foreign exchange interventions is transparent and comprehensive. - The BOC explains interventions are discretionary, not systematic, and only in exceptional circumstances of short-term market dislocation or extreme movements macro-factors in the Canadian dollar. - Intended objectives and general rules are explained but accessibility can be improved; these are not on the landing page for core functions and policy objectives. - Recommendation: include clear communication on the choice of instruments regarding foreign exchange interventions in the policy description. - Paragraph 39: - The mechanics of foreign exchange interventions and ex-post reports are clear. - The BOC rarely intervenes in foreign exchange markets and has not intervened since September 1998. - The BOC regularly tests the operational framework and systemic infrastructure to ensure FX interventions would be smooth if needed. - Recommendation: include information on regular systemic testing and compliance with market code of conduct and the FX global code to enhance credibility and transparency. *Source: IMF staff summary of Box 3 and Main Findings as presented in the provided document excerpt.* ### 40. The foreign exchange reserve management is performed by the BOC on behalf of the ### 1canea2022001 - 40. The foreign exchange reserve management is performed by the BOC on behalf of the ### Foreign exchange reserve management - The foreign exchange reserve management is performed by the Bank of Canada (BOC) on behalf of the federal government, though the BOC is involved in various committees. - Core elements of the foreign exchange management framework are disclosed on Finance Canada and BOC website. - Recommended enhancements: - Clearly explain BOC involvement in various committees and groups relevant for foreign reserve and fund management. - Disclose bilateral collaboration relevant to foreign reserve and fund management. - Provide broader context to clarify the BOC’s involvement and shared responsibility in shaping foreign reserve management. - Coordination note: - The BOC conducts foreign reserve management on behalf of the Government of Canada; disclosures on FX reserve management issues need to be coordinated with the government. - Historical note: - The IMF observed that the BOC has not conducted FX intervention since 1998. ### Financial stability and macroprudential policies - Mandates and roles: - The BOC does not have the macroprudential policy mandate but provides underlying analysis and assessment of systemic risk. - The Minister of Finance is responsible for macroprudential policy; the prudential authority enforces macroprudential regulations. - Transparency concerns: - The BOC’s active involvement in deliberation and formulation of national macroprudential policy is not entirely transparent. - No available information on activities of the Senior Advisory Committee (SAC), the main forum that monitors and advises on macroprudential oversight matters and system-wide crisis prevention measures. - The BOC chairs the Heads of Regulatory Agencies Committee; public information on cross-agency committee activities is very limited. - Suggested disclosures: - Publish sanitized information on discussed items and outcomes of cross-agency committees after consulting parties involved. - Increase frequency and plain-language communication of financial stability messages (e.g., animations, social media) to reach general public beyond specialist audiences. - Current disclosures: - The BOC discloses its financial stability policy framework, including objectives, strategy, and instruments. - The BOC publishes the Financial System Review (FSR), research papers and staff notes targeting mainly specialist audiences. - Tools disclosed include stress testing and market-wide intervention designs and scope of application. - Ex-post evaluation recommendation: - Publish ex-post evaluations of whether implemented measures achieved intended effects. ### Emergency Liquidity Assistance (ELA) - Current disclosure: - The BOC discloses its ELA framework: scope, objectives, rules, and procedures for individual institutions and market-wide liquidity support. - Information provided includes eligibility, requirements, amounts, maturity, financial parameters, and how liquidity support deviates from standard monetary operations. - The BOC has published information on ELA provided to individual institutions that took place during the 1990s. - Suggested enhancement: - Put in place a framework to report how and to what extent market-wide exceptional liquidity support measures contributed to restoring market functioning and the economy more broadly. ### Financial integrity (AML/CFT) - Role and disclosure: - The BOC does not undertake external AML/CFT supervision but maintains an internal AML/CFT controls framework to mitigate ML/TF risks arising from its operations. - No public details on internal controls, their oversight, or resources allocated to implementation. - Recommended disclosure: - Publish an overview of potential ML/TF risks and the corresponding internal AML/CFT controls framework, with appropriate security and confidentiality safeguards. ### Pillar V: Transparency in official relations - Legal and operational basis: - The Bank of Canada Act and other banking Acts underpin the BOC’s relationship with the Government of Canada covering consultations; loans, advances, deposits; fiscal agency; currency design; profit distribution; committees and information exchange; payment oversight; and management of unclaimed balances. - These Acts are communicated on the BOC website or by reference. - Platforms for transparency: - The BOC provides transparency via periodic financial statements, joint announcements with the Government of Canada, ad hoc operational and policy reports, dedicated website sections, the Annual Report, and the Financial System Review. - Committees and disclosure gaps: - The BOC has representatives on multilateral committees with Department of Finance and domestic agencies; disclosure by these committees is uneven. - Recommended improvements: codify committee remit agreements; timely release of agendas and post-meeting summaries. - The Senior Advisory Committee provides a modest level of disclosure regarding protocol and operations. - Informal, multilateral coordination outside committee context also needs increased disclosure. - International interactions: - The Bank of Canada Act envisions interactions with international organizations, foreign governments, other central banks, and other foreign agencies. - Related disclosures include summaries of services to international clients; details on bilateral liquidity swap arrangements; regional initiatives for the Basel Committee and Financial Stability Board’s Regional Consultative Group; participation in IMF, G20; and multi-lateral oversight arrangements such as CLS Bank and SwapClear. - Private entity interactions: - The BOC has disclosed interactions with private entities (e.g., participation in BIS; involvement in select private industry groups: foreign exchange, fixed income, reference rate). - Disclosures regarding industry groups are uneven and could be more balanced. - The BOC’s relationship with Payments Canada, operator of Lynx, a systemically important payment system, may warrant further disclosure. ### Authorities’ response and Bank of Canada commitments - General response: - The Bank of Canada thanks the IMF for the pilot review under the Central Bank Transparency Code (CBTC) and welcomes the recommendations. - The IMF’s Executive Board approved the CBTC in July 2020; it updates the 1999 Monetary and Financial Policies Transparency Code and aligns with the 2017 Joint Review recommendations. - The Bank commits to constantly enhancing transparency and values the review process and stakeholder input. - Highlights acknowledged by the IMF: - The Bank’s overall transparency framework is working well and resilient; key elements of governance transparency are in place. - The Bank discloses its financial stability policy framework, including objectives, strategy and instruments, and comprehensive risk assessments. - The Bank’s information related to Emergency Liquidity Assistance and ongoing liquidity provision is comprehensive. - Specific commitments and timelines: - Retail payments supervision and judicial review: - The Bank intends to provide appropriate disclosure on applicable review mechanisms for enforcement powers as the retail payments supervision framework develops. - The Retail Payment Activities Act (RPAA) was approved by Parliament on June 29, 2021, and is expected to come into force in stages; regulations are being developed and will be published in the Canada Gazette. - Risk appetite and internal audit: - The Bank has recently published its revised risk appetite statement on the Bank’s website. - By the end of 2022, the Bank will ensure its description of risk governance reflects current practices and will publish its Internal Audit Charter, approved by the Board’s Audit and Finance Committee, on the Bank’s website. - External audit selection and rotation policy: - The Bank will publish a document describing in detail the selection process for its external auditors on its website by the end of 2022. - Monetary policy deliberation summaries and ex-post evaluation: - The Bank will publish a summary of monetary policy deliberations after each policy decision, starting in January 2023, with a lag of roughly two weeks following each policy decision. - The Bank has published assessments of pandemic-related forecast errors (July 2022 MPR) and of the Bank’s policy actions during the pandemic (February 2022 Deputy Governor Tim Lane speech). - The Bank has published staff assessments of some asset purchase programs (Bankers’ Acceptance Purchase Facility and Government of Canada Bond Purchase Program) and commits to transparency on lessons learned. - Alternative policy scenarios and macroeconomic projections: - The Bank has published alternative scenarios on an ad-hoc basis (most recently in the July 2022 MPR) and is open to providing such scenarios more regularly while retaining flexibility. - The Bank is making projections more accessible (digital charts, downloadable data) and will develop the MPR into a fully digital product by the end of 2023. - The Bank publishes, with a five-year lag, the detailed staff economic projections provided to Governing Council in preparation for monetary policy decisions. *INTERNATIONAL MONETARY FUND* ### 5. Promote the BOC’s financial ### 1canea2022001 - 5. Promote the BOC’s financial ### 5. Promote the BOC’s financial stability messages more broadly to the general public by increasing the frequency of its communication using “plain language.” - The Bank introduced the Financial System (FS) Hub in 2019—a digital magazine-style resource to provide timely, plain language analysis of financial stability issues. - During the pandemic, prioritization shifted from the FS Hub to Governing Council speeches and media activities for frequent financial stability messaging aimed at the general public. - The Bank remains committed to ensuring that the FS Hub is the first stop for accessible, compelling Bank analysis of financial stability issues in a plain language format. - The Bank welcomes this recommendation as a reminder to shift focus back to the FS Hub. - The Bank is committed to improving how it communicates financial stability content to Canadians through its social media channels. - The Bank continually evaluates how its annual Financial System Review meets the needs of its audience, and it plans to review this publication in 2023. ### 6. Put in place a framework that provides information on how and to what extent financial stability measures, including market-wide exceptional liquidity support, contributed to achieving the BOC’s objectives such as restoring market functioning and the economy more broadly. - The Bank has communicated how various policy measures helped achieve financial stability and broader economic objectives. - Communications notably included how market-wide liquidity facilities contributed to the restoration of market functioning at the onset of the pandemic and how large-scale asset purchases supported the economic recovery. - This has been done through various speeches, through a recurring section of the MPR about the Bank’s balance sheet and through published staff assessments. - As the Bank proceeds with further internal work evaluating lessons learned from its pandemic actions, it is committed to being transparent about those evaluations with Canadians. - The Bank will consider this recommendation further in terms of whether a more formalized assessment framework is needed to communicate these evaluations. ### 7. Consider the disclosure of its internal AML/CFT controls with appropriate confidentiality and security safeguards. - The Bank agrees with the recommendation. - The Bank will publish on its external website its policy on financial crimes and/or a statement about its internal anti–money laundering (AML)/countering the financing of terrorism (CFT) controls framework. - This will be done by the end of 2022. ### 8. Enhance the transparency framework by disclosing more information on the BOC’s involvement and its deliberation in various committees and groups, as well as bilateral collaboration with other federal and provincial regulatory authorities that are relevant for financial stability. - The Bank welcomes this recommendation and endeavours to be transparent with respect to committees related to financial stability that it leads or chairs. - The Bank has published terms of reference for both the Heads of Regulatory Agencies (HOA) Committee and Systemic Risk Surveillance Committee, and it recently published the Memorandum of Understanding for the Confidentiality of Information for the HOA Committee. - The Bank chairs several industry groups, such as: - the Canadian Foreign Exchange Committee, - the Canadian Fixed-Income Forum, - the Canadian Alternative Reference Rate Working Group, and - the Canadian Financial Sector Resiliency Group. - Various terms of reference, meeting agendas, minutes and other background information for these groups are published on the Bank’s website. - The Bank works closely with other federal financial agencies, such as: - the Department of Finance Canada, - the Office of the Superintendent of Financial Institutions, - the Canada Deposit Insurance Corporation and - the Financial Consumer Agency of Canada, to provide more information on the respective role of each organization and how they work together to support financial stability in Canada. - The Bank is committed to seeking ways to further improve transparency, while balancing the sensitivity of information and issues discussed, and respecting the need to have effective forums where consulting and providing advice can occur. ### 9. Enhance the disclosures on foreign exchange intervention and reserve management by releasing information on the BOC’s involvement in various committees and groups, and on the BOC’s role in the context of foreign reserve and fund management. In context of FX intervention, clear communication on the rationale for instrument choice would enhance transparency. - The Bank conducts foreign reserve management on behalf of the Government of Canada, according to the government’s strategy and policies. - Comprehensive information is available on the Department of Finance Canada’s website about the government’s funds management framework and policies and about the role of the Bank of Canada as fiscal agent. - The Bank discloses its role with respect to foreign exchange intervention on behalf of the government and makes clear that any intervention is governed by an intervention policy, which the government establishes in close consultation with the Bank. - The Bank does not view adding more information on this function a priority, given that: - the current policy to intervene is on a discretionary, rather than systematic, basis and only in exceptional circumstances - the Bank last intervened in foreign exchange markets to affect movements in the Canadian dollar in September 1998 *From: 1canea2022001 - 5. Promote the BOC’s financial* ### 10. Improve the accessibility of ### 10. Improve the accessibility of ### Accessibility, searchability, and outreach - The Bank is committed to constantly seeking ways to improve the accessibility and navigational ease of its website, and it welcomes the suggestions contained in this recommendation. - The Bank has also been prioritizing efforts to improve the searchability of its content on the internet, recognizing that many users use internet search tools to find Bank content, rather than coming directly to the website. - The Bank is increasingly using social media platforms to disseminate its content. - "The Bank of Canada sincerely thanks the IMF Mission Team for undertaking this comprehensive review." The Bank "places a premium on transparency" and is "committed to implementing the main enhancements recommended by the IMF." *Source: 1canea2022001 - 10. Improve the accessibility of (PDF chapter/section).* ### Pillar I—Central Bank Governance: Principle 1.1 Legal Structure — Description - Legal Framework: - The Bank of Canada (BOC) discloses on its website and in its Annual Report that it is governed by Bank of Canada Act, the Payment Clearing and Settlement Act, and the Retail Payment Activities Act. - The Conflict of Interest Act is also applicable to the BOC and can be accessed via the Governance tab of the BOC’s Annual Report. - The Annual Report discloses the BOC’s compliance with the Employment Equity Act. - The BOC’s website explains that the BOC is also subject to the Privacy Act, the Access to Information Act, the Official Languages Act and the Canadian Multiculturalism Act. - The BOC website does not have links to the last two Acts but does have copies of annual reports on the BOC’s compliance with all of these Acts. - These annual reports cover 2016-2017 until 2020-2021 for the Privacy Act, and the Access to Information Act, while the annual reports for the compliance with the remaining two Acts cover 2018-2019 to 2020-2021. - A recent speech (May 2022) by Senior Deputy Governor Rogers, which is available on the BOC website, clarifies that the Auditor General of Canada has legal authority to investigate and audit some of the BOC’s activities and records. However, the website does not have a discussion of the (limited) scope of audits of the BOC that may be performed by the Auditor General. - Legal Nature: - The Bank of Canada Act defines the BOC as a body corporate. - The BOC website explains that the BOC is a special type of Crown corporation, owned by the Federal Government, but with considerable independence to carry out its responsibilities. - The Financial Administration Act, Part X, clarifies (Section 85(1)) which of the Act’s Divisions are applicable (or not) to the BOC. - Legal Protection: - The Bank of Canada Act, the Payment Clearing and Settlement Act and the Retail Payment Activities Act all contain clear provisions limiting the legal liability of Her Majesty, the Minister, any officer, employee or director of the BOC or any person acting under the direction of the Governor for anything done or omitted to be done in good faith in the administration or discharge of any powers or duties under said Acts. - The BOC is subject to judicial review. - The Payment Clearing and Settlement Act provides that no stay will be granted in case of a designation of a clearing and settlement system (following the opinion of the Governor that such a system could be operated in a manner that poses a systemic risk or a payments system risk) or of a directive pending the final disposition of the application. - This Act also contains provisions on legal protections for designated FMIs; these are summarized on the website. ### Principle 1.1 — Review and Comments - Review — Expanded: - The website and the BOC’s Annual Report contain clear information and links to the updated legal framework governing the BOC. - The scope of audits of the BOC conducted by the Auditor General—which is an important element of the BOC’s accountability and autonomy—might not be easily understandable for the general public as the details of the scope of such audits are missing on the website. - The Financial Administration Act is not accessible via a link on the BOC website (contrary to other applicable Acts). - Except for a stipulation clarifying that there is no stay in case of a judicial review of specific BOC decisions detailed in the Payment Clearing and Settlement Act, the BOC website provides no explanation in an easily understandable manner for the general public on the scope of the BOC’s judicial review. - This lack of a discussion of judicial review on the website would become particularly relevant in the context of the BOC’s enforcement powers in the context of its new function regarding supervision of retail payments providers. - Comments / Recommendations: - The BOC’s transparency with respect to its legal structure could be further enhanced by explaining the scope of the BOC judicial review on the BOC website. - The BOC’s new enforcement powers in the context of its supervision of retail payments providers will merit an explanation on the website. - The website could strengthen discussion of the BOC’s accountability and autonomy by providing details of the scope of audits of the BOC by the Auditor General. - Including a link on the BOC website to the Financial Administration Act would further enhance the BOC’s transparency. ### Principle 1.2 Mandate — Description - Objectives: - The Preamble of the Bank of Canada Act defines the BOC’s objectives to comprise regulating credit and currency “in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada.” - The website explains that the primary objective of monetary policy is to “preserve the value of money by keeping inflation low, stable and predictable”. - The website discusses the Joint Statement of the Government of Canada and the BOC on the Renewal of the Monetary Policy Framework of December 13, 2021. A PDF copy of this Joint Statement is available on the website and explains that the Government and the BOC have agreed to renew the inflation target. The monetary policy framework is renewed every five years. - Published documentation clarifies that the monetary policy prevails over other objectives (including financial stability). - The Payment Clearing and Settlement Act adds the objective of “controlling systemic risk and payments system risk,” while the Retail Payment Activities Act specifies the “safety and reliability of payment services” as an objective while protecting end users from specific risks. - The BOC promotes the economic and financial welfare of Canada by fostering a stable and efficient financial system, which includes banks and credit unions, the financial markets, and clearing and settlement systems; in other words, the BOC has a financial stability objective. - Functions: - The core functions of the BOC are: (i) conducting monetary policy; (ii) fostering a stable and efficient financial system; (iii) issuing legal tender banknotes; (iv) funds-management services for the Government of Canada; and (v) supervising payment service providers. - These core functions are all stipulated in the Bank of Canada Act, the Payment Clearing and Settlement Act and the Retail Payment Activities Act. - Retail payments supervision became a new core function of the BOC in 2021. - The BOC website explains how the BOC’s functions address new challenges such as climate change and digitalization (e.g., Financial System hub, work on digital currencies, and fintech). - Powers: - The Bank of Canada Act, the Payment Clearing and Settlement Act, and the Retail Payment Activities Act contain the BOC’s public and private law powers. - The website explains the BOC’s powers under the Payment Clearing and Settlement Act and the Retail Payments Activities Act and how these powers enable it to exercise its functions to achieve its objectives. - Documents on monetary policy powers available on the website include: Statement of Policy Governing the Acquisition and Management of Financial Assets for the Bank of Canada’s Balance Sheet, Bank of Canada Policy for Buying and Selling Securities Under Subsection 18.1(1) of the Bank of Canada Act, Framework for Market Operations and Liquidity Provision. - For financial stability, the website explains implementation via: (i) the provision of central banking services, including liquidity and lender-of-last-resort facilities; (ii) publishing analyses and research; and (iii) helping to develop and implement policy overseeing and acting as the resolution authority for financial market infrastructures (FMIs). - The BOC has published a Guideline describing its approach to FMI resolution: (i) preparation for resolution; (ii) initiating resolution; (iii) implementing resolution, including exiting from resolution; and (iv) post resolution responsibilities. - The BOC provides detailed information on its website regarding its various lender of last resort tools, policies and frameworks. - The Bank of Canada Act clearly articulates the prohibitions which prevent the BOC from conducting specific activities. However, these prohibitions are not discussed on the BOC website. - Engagement and consultations: - The BOC has established the Retail Payments Advisory Committee to provide advice and industry expertise as it designs and operationalizes its Retail Payments Supervisory Framework. - Other public consultations include: (i) public outreach as part of the review of the Monetary Policy Framework; (ii) cooperation with industry groups to achieve financial system objectives; and (iii) public consultation of selection, development and design of new (series of) banknotes (Principles for Bank Note Design). - The BOC publishes results of public surveys dating as from February 2018 of the public’s awareness, understanding, and trust in the BOC (the BOC also surveyed the public in 1999, 2010, and 2014, but the results are not directly comparable to the more recent surveys as a result of changes to the approach and questionnaire). ### Principle 1.2 — Review and Comments - Review — Comprehensive: - The BOC’s objectives, functions and powers are all clearly specified in the Bank of Canada Act, the Payment Clearing and Settlement Act, and the Retail Payment Activities. - They are also disclosed on its website and in its Annual Report. - The documentation published on the BOC website clearly explains that the primary objective of monetary policy is to “preserve the value of money by keeping inflation low, stable and predictable.” Price stability prevails over other objectives. - While the BOC’s public and private law powers are clearly listed in the Bank of Canada Act, these powers and the BOC’s prohibited activities are not discussed on the website of the BOC. - Comments / Recommendation: - The transparency of the BOC’s powers could be enhanced by listing and discussing in general terms the BOC’s powers and prohibited activities on the BOC website in a manner that is easily understandable for the public. ### Principle 1.3 Autonomy — Overview - The Bank of Canada Act, the Payment Clearing and Settlement Act, and the Retail Payment Activities Act all clarify the BOC’s level of autonomy for its core activities. - The Financial Administration Act defines the BOC as a special type of Crown corporation, owned by the Federal Government, but with considerable autonomy to execute its mandate. - The BOC website is transparent on the composition of the BOC Board and notes that the Deputy Minister of Finance is an ex officio non-voting member of the Board. - The website publishes Terms of Reference for the Executive Committee and provides detailed information on monetary policy decision-making and participants in policy decision-making (including a detailed document in the Bank of Canada Review, autumn 2013, available on the website). ### Principle 1.3.1 Institutional/Operational Autonomy — Description and Review - Description: - The Bank of Canada Act allows the Minister of Finance to issue a written directive to the BOC if the Minister and the Governor disagree on monetary policy (this power has never been used). - The Bank of Canada Act gives the Minister of Finance broad authority to “require the auditors to report to the Minister on the adequacy of the procedure adopted by the BOC for the protection of its creditors or shareholders and the sufficiency of their own procedure in auditing the affairs of the BOC, and the Minister may, at his discretion, enlarge or extend the scope of the audit or direct that any other procedure be established or that any other examination be made by the auditors as the public interest may seem to require.” - The website clarifies that the BOC is not on its own responsible for fostering a stable and efficient financial system, but inter alia “helps to develop and implement policy” and cooperates with federal, provincial, and international authorities as well as industry. - The Department of Finance leads development of regulations for the retail payment systems’ supervisory framework with support from the BOC. - The website explains that, as per the Bank of Canada Act, “the form and material of the notes of the Bank shall be subject to approval by the Minister [of Finance].” The Minister of Finance is consulted throughout the process of banknote design. - Review — Comprehensive: - The BOC’s legal framework is fully transparent on the BOC’s level of autonomy for its core activities. - The first three Acts are all available via the BOC website. - The BOC website contains detailed information explaining the varying levels of autonomy the BOC has with respect to its various core functions. ### Principle 1.3.2 Functional Autonomy - Description and Review: - See mutatis mutandis the discussion under Principle 1.3.1 on the scope of the BOC’s institutional and operational autonomy that clarifies the scope of the BOC’s autonomy with respect to its various core functions. - Comments: - See mutatis mutandis the discussion under Principle 1.3.1. ### Principle 1.3.3 Personal Autonomy — Description and findings - Description: - The Bank of Canada Act and the Conflict of Interest Act stipulate the eligibility and disqualification criteria for appointments. - Duration of appointments: - Members of the Board of Directors: three years renewable (appointed by the Governor in Council). - Governor and Deputy Governors: seven years renewable. - The website notes that the BOC has a Senior Deputy Governor and other Deputy Governors (as allowed by the Bank of Canada Act). - The Terms of Reference for the Board of Directors, available on the BOC website, detail the appointment of the Governor, Senior Deputy Governor, and other Deputy Governors. - The Governor, Senior Deputy Governor and Deputy Governors serve for a term of seven years “during good behavior,” a term which is not very clear. - CVs of members of the Board of Directors, the Governor, Senior Deputy Governor, and Deputy Governors are available on the website. - Directors are paid within the ranges established under the Remuneration Guidelines for Part-Time Governor-in-Council Employees in Crown Corporations as administered by the Privy Council Office. - The amount of directors’: (i) annual retainers; (ii) per diems for attendance at each Board meeting and Committee meeting of which the Director is a member; and (iii) reimbursement of expenses (the Governor and the Senior Deputy Governor do not receive directors' compensation) are all available on the website. - Ranges for the salaries of the Governor and the Senior Deputy Governor are disclosed on the website and are within ranges established by the Advisory Committee on Senior Level Retention and Compensation, subject to the approval of the Governor in Council (the Cabinet). - The website clarifies that the salaries of the Governor and the Senior Deputy Governor do not include any performance-based elements. - The website does not contain details on the remuneration of the other Deputy Governors. - The BOC publishes monthly reports on travel and hospitality expenses for the Chief Operating Officer and all members of the BOC's Governing Council and Board of Directors. - The Board requires its independent directors to follow the Code of Business Conduct and Ethics for Directors. A separate Code of Business Conduct and Ethics is applicable to BOC staff; the Governor and Senior Deputy Governor, as senior officers of the BOC, are subject to this latter Code. ### Principle 1.3.3 — Review and Comments - Review — Comprehensive: - The website and the Annual Report provide transparency on eligibility and disqualification criteria, appointment and dismissal rules, and tenure durations for the Governor, Senior Deputy Governor, Deputy Governors, and Board members. - CVs and remuneration frameworks (where specified) are available on the website; monthly travel and hospitality reports are published. - Comment: - The phrase “during good behavior” applying to seven-year terms is noted as not very clear. - The website lacks details on remuneration of the other Deputy Governors. ### 1.6 below). ### 1canea2022001 - 1.6 below) ### Transparency and Governance: Eligibility, Tenure, and Remuneration - The Bank of Canada Act explains eligibility and disqualification criteria for members of the Board, the Governor and Senior Deputy Governor, and discloses the duration of their appointments. - Dismissal grounds: - The dismissal grounds for the Governor and Deputy Governors are not formulated in a clear manner. - Dismissal criteria and procedures applicable to Board members are not provided for. - Website disclosures: - CVs of Board members, the Governor and Senior Deputy Governor are available on the website. - Detailed information on these officials’ remunerations and the applicable Codes of Business Conduct and Ethics are available on the website. - The website does not discuss the Bank of Canada Act’s clarification that no action lies against Her Majesty, the Minister, any officer, employee or director of the BOC or any person acting under the direction of the Governor for anything done or omitted in good faith in the administration or discharge of any powers or duties the Act. - The website does not discuss the Act’s disclosure of the extent of liability of the BOC, its decision-making bodies and employees for damages caused by acts or omissions. - The website does not contain details on the remuneration of the Deputy Governors. - Comments / Recommendations: - Enhance website transparency by including a general explanation of safeguards contributing to security of tenure, including dismissal grounds for Board members, Governor, Senior Deputy Governor, and other Deputy Governors. - Publish details on remuneration of the other Deputy Governors. ### Financial Autonomy (Principle 1.3.4) - Legal and operational framework: - The BOC is not subject to the Financial Administration Act (justice.gc.ca). - The BOC has operational independence to develop its own budget, subject to approval by the Board. - The Bank of Canada Act provides for financial resources required to fulfill its mandate, including arrangements regarding capital (Article17.1), general and special reserves and profit calculation and distribution (Article 27). - The Act includes explicit rules on monetary financing (Articles 18.i and 18.j). - The Act is silent on recapitalization rules for the central bank. - Planning and reporting: - The BOC prepares a three-year Strategic Plan and a high level three-year financial outlook approved by the Board; these serve as the basis for annual workplan and budget. - Neither the three-year financial outlook nor the annual workplan are published externally. - The annual budget-financial plan is adopted by the banks’ Council prior to the commencement of the financial year and communicated to Parliament for information. - The 2021 Financial results in the annual report provide an overview to be read with audited financial statements. - Financial statement disclosures: - Disclosures about capital, statutory and special reserves, investment revaluation reserve, and actuarial gains reserve are detailed in the audited financial statements (Note 16. Equity). - Disclosures include retained earnings and the ascertained surplus to be transferred to the Receiver General for Canada consistent with Article 27. - A “Remittance Agreement” with the Minister of Finance enables management of equity requirements considering volatility from fair value changes and remeasurements. - This agreement allows the Bank to withhold from its remittance to the Receiver General for Canada any increase in cumulative net unrealized losses on financial assets that are classified and measured at FVOCI, unrealized remeasurements of the net defined-benefit liability/asset on defined-benefit plans, and other unrealized or non-cash losses arising from changes in accounting standards or legislation. Any decrease in previously withheld cumulative net unrealized non-cash losses is added to the remittance. - Review / Comments: - Financial autonomy can be inferred from the Act, disclosures and Strategic Plan, but rationale is not explicitly communicated. - Recommendation: publish an explicit positioning and description of financial autonomy on the website explaining the rationale behind legal framework elements reflected in the financial statements. ### Decision-making Arrangement (Principle 1.4) - Organizational structure and bodies: - The Bank of Canada Act mentions the Board of Directors, Governor, Deputy Governors and an Executive Committee. - The website explains that the BOC also has a Governing Council and an Executive Council. - The Board provides general oversight of management and administration; a Lead Director exists with responsibilities including leading the Board’s annual self-evaluation. Terms of Reference for these bodies and the Lead Director are available on the website. - The website describes the Governing Council as the policy-making body and the Executive Council as charting strategic direction; however, the Governing Council’s website description does not seem to accurately reflect its advisory nature (the Annual Report correctly describes it as advisory). - The Bank of Canada Act clarifies that the Governor is the chief executive of the BOC. The website clarifies the decision-making process for monetary policy. - FMI oversight and resolution powers: - The BOC’s Oversight Risk Advisory Committee takes oversight decisions with respect to designated FMIs. - The Payment Clearing and Settlement Act empowers the Governor to designate an eligible FMI as subject to BOC oversight when he/she is of the opinion it may be operated in a manner that poses systemic or payments system risk and the Minister of Finance is of the opinion it is in the public interest to designate it. - The Governor has the power to determine that an FMI is no longer viable and to issue orders related to resolution actions. - Meetings, committees and documentation: - Terms of Reference and meeting details of decision-making bodies are published on a dedicated page. - The Board and its committees hold sessions without management or non-independent directors; they meet privately with external auditors, the Chief Internal Auditor, the Chief Financial Officer and Chief Accountant, and the Chief Risk Officer. - The website contains detailed lists of committees, composition, mandates and number of annual meetings (most recent information covers 2020). Terms of Reference of these committees are available as PDFs. - The BOC does not disclose minutes nor an annual synopsis of the committees’ activities. - Strategic planning: - The BOC’s 2020-2024 Strategic Plan is available on the website and defines goals, priorities, high-level indicators of progress and Board oversight of implementation. - Review / Comments: - The BOC publishes extensive materials on organizational structure and decision-making but should: - Provide an annual overview/synopsis of committees’ activities (e.g., in the Annual Report). - Align the website’s description of the Governing Council with the Annual Report by clarifying its advisory nature. - Clarify the Executive Committee’s role on the website. ### Risk Management (Principle 1.5 and 1.5.1 / 1.5.2) - Risk categories and disclosures: - The 2021 Annual Report (Risk Management section) provides information on four broad categories of risks: (i) financial; (ii) operational; (iii) strategic; and (iv) environmental and climate related. - Focus on climate: - In 2021, the BOC developed a framework intended to enable comprehensive assessment of risk exposures associated with climate change and align with the recommendations of the Task Force on Climate-Related Financial Disclosures. - The BOC indicates it will start reporting its climate-related financial risks in 2022. - Financial risk disclosures are provided in FY 2021 financial statements (Note 3. Financial Instrument and Note 6. Financial Risk Management), covering credit, market, and liquidity risks, mitigation strategies, quantified demands on financial resources/buffers, and methods used for quantification. - Operational risk disclosures highlight increased volumes in financial market and banking operations, system upgrades, investments in information technology and heightened cyber risks. - Risk information is outlined in a dedicated risk management webpage on the external website; risks are mapped to the bank’s mandate and managed in light of impact on credibility, reputation and capacity to achieve objectives, in conjunction with the Bank’s Risk Appetite Statement. - Risk framework and governance: - The annual report states “the bank’s risk management framework consists of three lines of defense.” The framework was revised in 2020 and is now known as the "Three Lines Model." - The BOC undertook a comprehensive assessment of ERM maturity; results are being integrated into a new ERM strategic plan to be finalized in 2022. - The 2022-2024 Strategic Plan sets an explicit strategic priority for risk management to “integrate comprehensive risk assessments into critical decision-making processes”. - The BOC does not have a dedicated webpage for risk management; risk content is embedded under Bank of Canada - Governance Documents. - The ERM policy promotes risk-informed decisions consistent with the Bank’s vision, medium-term plan and appetite for risk. - Risk governance roles: - Governor has ultimate responsibility for risk management, reporting to the Board of Directors. - Senior Deputy Governor and Executive Council oversee ERM implementation and review/approve changes to ERM policy, framework and risk appetite statement in consultation with the Board, Senior Management Council and the Risk Oversight Committee (ROC)—a subcommittee of the Senior Management Council. - Lines of defense: - The second line of defense sets standards, provides advice and challenges the first line; it consists of the CRO, Enterprise Risk Office, Financial Risk Office and other operational units with risk mitigation roles. - The ERM approach does not centralize all risk management into a single framework; the BOC maintains a separate framework for financial risk management and associated policies; ERM aims for integrated risk reporting. - Review / Comments: - The central bank’s exposures to key risks are clearly disclosed and explained; however, explicit description of the Risk Appetite Statement is not provided in the annual report or website for 2021. - Recommendations to enhance disclosures: - Reinstatement/publication of a brief Risk Appetite Statement on the website and in the annual report. - Establish a dedicated risk management section on the website for better accessibility. - Ensure descriptions of elements of risk management reflect current practices and organization (different frameworks, policies, and organizational arrangements). - Consider publishing Terms of Reference of the “Risk Oversight Committee”. - Revise the distinction between “risk governance” and “risk management lines of defense”, clarifying the position of the internal audit function within this structure. ### Accountability Framework (Principle 1.6 and 1.6.1) - External audit and financial reporting (statutory provisions): - The Bank of Canada Act provides for appointment of “two firms of accountants eligible to be appointed as auditors of a bank to audit the affairs of the bank” with staggered terms (Article 28). - Article 30-2 sets the statutory deadline for delivery of annual financial statements to the Minister of Finance. - Article 30-3 prescribes that the Minister shall lay the Annual Report and audited Financial Statements before Parliament on any of the first 21 days that either House of Parliament is sitting after the Minister receives it. - Article 30-2.2 states a copy of the signed and audited financial statements must then without delay be published in the Canada Gazette. - Articles 29-1 and 29-2 provide for weekly financial information and monthly balance sheet, respectively. - Each year the Bank publishes the annual financial statements within the statutory deadline. - Audit and internal audit: - The Act is silent about establishment of a Board Audit Committee, but the bank has an Audit and Finance Committee (AFC) of the Board overseeing audit mechanisms, financial reporting and internal controls; AFC Terms of Reference are published on the BOC’s website. - The Act is silent about establishment of an internal audit function. Existence and compliance of an internal audit function are implied in the BOC’s Risk Management Lines of Defense and in the AFC Terms of Reference. - Review / Comments: - Accountability arrangements related to external audit and financial statements are regulated in the Bank of Canada Act and disclosed in the annual report and audited financial statements. - Recommendation: Maintain clarity and accessibility of auditor arrangements, AFC Terms of Reference and internal audit function positioning in governance and risk frameworks. *Source: Extracted content from 1canea2022001 - 1.6 below).* ### references to the internal audit function (Sections 5.15 – 5.19). In practice, the BOC has an ### 1canea2022001 - references to the internal audit function (Sections 5.15 – 5.19). In practice, the BOC has an ### Internal audit and external audit disclosures - Findings: - The BOC has an independent Internal Audit department, governed by a Board-approved internal audit charter stating compliance with the IIA standards and functional reporting to the AFC. - Information disclosed about external auditors is not clear about the criteria for their appointments and does not provide for assurance on audit quality and independence. - The BOC indicated external auditors are rotated every five years and selection mainly targets independent audit firms of international repute, but selection criteria are not established in a dedicated published policy. - Apart from brief references via the AFC terms of reference, there is no explicit published section (annual report or website) describing the internal audit function, mandate, approach, reporting structure, or statements of conformance with international standards; the internal audit charter is missing (not published). - Recommendations: - Establish a dedicated website section describing external and internal audit mechanisms, including references to international standards underpinning these arrangements. - Adopt and publish an external auditor selection and rotation policy. - Publish the internal audit charter. ### Auditing, financial statements, and AFC role - Findings: - The annual report includes a complete set of independently audited financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and accompanied by an external audit opinion. - External audits are conducted in accordance with Canadian Generally Accepted Auditing Standards (as disclosed in the financial statements). - The Bank of Canada Act is silent about the standards governing the external audit and financial reporting; these standards are only referenced in the audited financial statements. - Audit mechanisms and financial reporting practices are overseen by the Board through the Audit and Finance Committee (AFC). The AFC reviews annual and interim financial statements, the audit plan, and recommends terms of engagement and remuneration for external auditors. - The AFC’s activities during the year are not summarized in the annual report or website; no annual overview/synopsis of committee activities is provided. - Recommendation: - Provide an annual overview/synopsis of committee activities (e.g., in the Annual Report). ### Anti-corruption measures and Codes of Conduct - Findings: - Applicable laws: Criminal Code, Financial Administration Act, and the Conflict of Interest Act. - The Conflict of Interest Act applies to the Governor, Senior Deputy Governor, and other members of the Board of Directors (as ‘public office holders’). - The BOC’s Code of Business Conduct and Ethics (“COC”) applies to all staff and management (including the Governor and Senior Deputy Governor) but does not expressly refer to bribery or corruption or provide definitions. - The COC does not explicitly reference the Conflict of Interest Act, creating potential confusion about its application to the Governor and Senior Deputy Governor. - The Directors’ Code incorporates by reference the Conflict of Interest Act but does not indicate Directors appointed by the Minister of Finance are subject to the Criminal Code provisions on bribery and corruption. - The COC and Directors’ Code are disclosed on the BOC website, but details on implementation (investigations, sanctioning procedures, aggregated data on breaches) are not published. - The BOC’s Disclosure of Wrongdoing Policy is consistent with the Public Servants Disclosure Protection Act, but details of implementation are not published. - Recommendations: - Disclose on the website all relevant anti-corruption legislation applicable to staff, management and directors with hyperlinks to relevant provisions. - Clarify that these legislations apply without immunities. - Provide aggregated information on proceedings or actions under applicable anti-corruption legislation. - Provide details on investigation and sanctioning procedures under the COC and the Directors’ Code and consider explicitly stating that the COC applies to the Governor, Senior Deputy Governor, and all Deputy Governors. - Include a high-level overview of the activities of the Compliance and Ethics Office and aggregate anonymized data on proceedings under the COC and Directors’ Code in the Annual Report or on the website. ### Human capital management - Findings: - The BOC’s website and annual report publish extensive information on human capital: current openings, diversity and inclusion programs, recruitment programs, scholarships, internships, recruitment campaigns. - The BOC published the Diversity & Inclusion Strategy to 2021 with key metrics from the most recent survey. - The 2022-2024 Strategic Plan includes a section “unlocking the potential of our people” with explicit commitments to (i) greater diversity and inclusion; (ii) accelerate the development of people ss the bank prepares for the future; and (iii) build a dynamic and supportive post-pandemic work environment. - The Board’s Human Resources Committee is explicit on accountability for human capital management. The BOC reports annually across dimensions like Employment Equity, Multiculturalism, Official Languages. - Assessment: - Review: Comprehensive. - Comment: No additional recommendation beyond continued disclosure. ### Communications and disclosure arrangements - Findings: - The Bank of Canada Act contains provisions directing disclosure and transparency, including Section 14(3), Section 18.1(2), Section 19, Section 21, Section 28(5),(6), Section 29(1),(2), Section 30(2), Section 35(2) with examples of recent disclosures cited (e.g., policy from March 2020, weekly balance sheets). - The BOC is subject to the Access to Information Act (ATIA). The website contains ATIA request options including an online portal. - Organizational placement of Communications is published (reports to the Senior Deputy Governor) and senior executives are listed. - A Communications Policy 2018 exists but is not publicly disclosed (considered internal). - The BOC drafted a 2019–2021 Communications Strategic Plan and implementation plan; these documents and results are internal and not published. - The BOC publishes principles for external communications by policymakers and blackout guidelines governing monetary policy. - The BOC discloses travel and hospitality expenses for Board and Executive Council members and discloses all contracts over $100,000.00 in a quarterly report. - The BOC has developed process-improvement efforts (dashboard, plain language writing, outreach, etc.) that are not summarized publicly. - Recommendations: - Consider publishing the Communications Policy 2018 in full and provide a summary of process improvement efforts to improve transparency and accessibility. - Reorganize and consolidate media pages under a main landing page for press, market participants and the general public. ### Confidentiality and Access to Information (ATIA / ATIP / Privacy Act) - Findings: - Bank of Canada Act confidentiality provisions are narrow (Section 16 and related schedule requiring oath/affirmation of fidelity and secrecy). - The ATIA applies to the BOC and provides limited exceptions to access (Sections 2 and 3). The ATIA was most recently revised and amended during 2018. - The BOC’s ATIP office (within Executive and Legal Services) processes ATIA requests, assigns to technical departments, redacts documents, and cites ATIA exemptions. - Example: ATIA request A-2020-00003 (44 pages) redactions cited: Section 13(1)(a); Section 13(1)(b); Section 15(1); Section 18(d); Section 19(1); Section 20(1)(b); Section 20(1)(c); Section 21(1)(a); Section 21(1)(b). - Under Section 10(1)(b) of ATIA, requesters have a right to complain to the Information Commissioner; the IC complaint process has resolved cases without litigation in recent cases for at least the last 15 years. - The BOC publishes an annual report summarizing ATIA activity with five years’ time series and detailed appendices of sections cited as exemptions. - The BOC is subject to the Privacy Act and discloses essential information; the COC provides additional handling obligations for confidential information. - Comment: - Stakeholders see litigation costs and delays as prohibitive; the BOC’s process for citation of reasons for confidentiality may not provide sufficient detail for requesters. - Recommendation: - Consider drafting a BOC-specific confidentiality policy (separate from ATIA) stating treatment of documents along a continuum from always confidential to always disclosable, and seek stakeholder input during development. ### Monetary policy transparency and framework - Objectives and framework: - The BOC discloses that the objective of monetary policy is to preserve the value of money by keeping inflation low, stable and predictable. - Key components: inflation-control target and flexible exchange rate; the target for the overnight rate is the key policy instrument. - Explanatory material and Monetary Policy Report (MPR) routinely describe framework, tools, role of communications and inflation indicators. - The Bank of Canada and Government of Canada review and renew the agreement on Canada’s monetary policy framework every five years (since 1991). A special section on the Agreement exists on the BOC website. - The December 2021 Monetary Policy Framework Renewal report discussed broadening consideration of labor market indicators to seek the level of maximum sustainable employment needed to keep inflation on target. - Decision-making and communication: - Policy decisions disclosed at eight fixed announcement dates per year; disclosure comes at 10:00 am the next day after decision-making is completed. The calendar for interest rate decisions for the next year is published in the summer of the previous year. - Governing Council makes decisions by consensus (not votes). Role and composition of Monetary Policy Review Committee (MPRC) are disclosed. - MPRs and Opening Statements accompany decisions; press conferences and speeches average 15–20 per year. - The BOC used state-contingent forward guidance (e.g., hold key policy rate at the effective lower bound in 2020; forward guidance removed in early 2022). - Supporting analysis and forecasts: - MPR is the key communication tool with detailed global and Canadian outlooks; special analyses are included. - Staff Analytical Notes are regularly published; macroeconomic forecasts are published quarterly alongside policy decisions via the MPR. - With a five-year lag, the BOC publishes detailed staff forecasts used by Governing Council. - The BOC does not routinely disclose alternative policy scenarios, presenting normally only the baseline macroeconomic forecast; scenario analyses are published in times of heightened uncertainty (e.g., July 2020 MPR). - Details on forecasting models are available and regularly updated on the website. - Recommendations: - Consider publishing a detailed transcript of policy deliberations (immediately or with lag) or a summary of non-attributed views of GC members. - Consider disclosing the calendar of next year's interest rate announcement dates at least nine months before the start of the year. - Consider publishing alternative policy scenarios more regularly and disclosing the full set of macroeconomic forecasts promptly (or shortening the lag). ### Operational framework, instruments, and counterparties - Findings: - The BOC conducts monetary policy by setting a target for the overnight interest rate; operational objectives include reinforcing the target, supporting efficient market functioning, and providing backstop liquidity under extraordinary circumstances. - The operating band (interest rate corridor), standing deposit and lending facilities, and open market operations are disclosed; the Bank operates in a zero-reserve requirement system (since 1994) — disclosed in a Discussion Paper. - The BOC discloses types, characteristics, rules, procedures, terms and collateral framework for instruments; open market operations calibration is disclosed daily. - Monetary policy counterparties, terms and conditions for participation, and access rights (e.g., Canadian Primary Dealers) are disclosed on the website. - Recommendations: - Consider adding an explicit statement on the website that the Bank doesn’t use reserve requirement instruments. - Consider establishing a separate landing page consolidating information on conventional and unconventional policy instruments. ### Foreign exchange management and reserves - Findings: - Canada has a flexible exchange rate regime and free financial flows; the BOC does not control cross-border financial flows or foreign exchange administration. - The Bank of Canada Act preamble and Article 18 provide legal context for foreign exchange management. - BOC intervenes as agent for the federal government using the Exchange Fund Account (EFA); intervention policy is discretionary and aimed at exceptional circumstances of short-term market dislocation or extreme macro-factors. - Concerted interventions have occurred (e.g., March 2011). The intervention policy is published but is several clicks away in the Statistics tab. - The intervention policy has not been used since September 1998; amounts related to intervention are reported in the Government of Canada’s monthly Official International Reserves publication, and any intervention would be disclosed on the BOC website when occurring. - Foreign exchange reserve management is performed by the Bank on behalf of the Government of Canada; strategic planning and operational management responsibilities are shared with the Department of Finance. A Funds Management Committee (FMC) advises the Minister. - Recommendations: - Improve accessibility of the foreign exchange intervention policy link from the core functions and policy objectives landing page. - Clarify the governance and the role of government consultation in FXI decision-making; consider publishing MPRC terms of reference. - Disclose rationale for instrument choice and counterparties targeted by interventions. ### Financial stability, macroprudential engagement, and stress testing - Findings: - The BOC does not have primary responsibility for macroprudential policy (Minister of Finance has overall responsibility under the Financial Administration Act). The BOC is an active participant in the Senior Advisory Committee (SAC), Financial Institutions Supervisory Committee (FISC), Heads of Regulatory Agencies (HoA), and chairs the HoA. - The BOC discloses participation in these committees but does not publish meeting records or detailed activities of SAC, FISC or HoA. - The BOC publishes Financial System Review (FSR) annually, a Financial System Hub, and conducts Financial System Surveys twice a year. - The BOC runs macroprudential-style macrofinancial stress tests (every other year) covering Big Six banks and Desjardins Group (D-SIFIs) that account for 90 percent of total assets of Canadian deposit-taking institutions; stress tests assess system-wide resilience and contagion. - The BOC discloses stress testing methods, key assumptions, and scenario design; results are discussed in FSR and staff analytical notes. The BOC also runs stress tests on bond funds and household balance sheets (Household Risk Assessment Model). - The BOC uses stress test results to estimate credit and market losses under adverse scenarios and assess liquidity buffers, but linkage to concrete policy decisions for non-bank agents is less clear. - Recommendations: - Publish sanitized information on SAC, FISC and HoA meetings (agendas, minutes, outcomes) where feasible, maintaining necessary confidentiality. - Disclose key indicators and early warning indicators periodically and explain how they relate to the need for financial stability policy action. - Consider increasing the frequency and sectoral coverage of stress testing (including insurance, investment funds, central counterparties). - Clarify how stress test results have informed the BOC’s financial stability policy decisions. ### Emergency Liquidity Assistance (ELA) and market-wide liquidity facilities - Findings: - The BOC publishes the scope and objectives of Emergency Lending Assistance (ELA) and revised its ELA policy in 2015 with updates: (i) replacement of solvency requirement with credible recovery and resolution framework; (ii) expanded eligible collateral to include mortgages; (iii) clarified eligibility for provincially regulated institutions; (iv) clarified conditions for FMIs. - The BOC discloses rules, parameters and conditions for liquidity support, including institutional eligibility, conditionality, currencies and financial parameters; documentation is published (e.g., rules governing advances to financial institutions). - Market-wide liquidity options disclosed: increasing settlement balances, exceptional buyback transactions up to a maximum term of 380 days, lending to broader range of financial institutions for longer terms, outright purchases of expanded securities subject to criteria and Policy for Buying and Selling Securities under subsection 18.1(1), typically lending on market-wide basis but could lend bilaterally. - The BOC’s Contingent Term Repo Facility (CTRF) terms and conditions are published; results are reported when active. - For bilateral ELA, the BOC is legally prohibited from disclosing the identity of borrowing institutions; ELA amounts are included in monthly balance sheet and annual/quarterly financial statements at aggregate level; not included in Weekly Financial Statistics until public disclosures occur. - Recommendations: - Disclose whether interactions with other relevant agencies for ELA are formalized via memorandum of understanding or other means. ### AML/CFT internal controls and disclosure - Findings: - The BOC does not undertake external AML/CFT supervision; it has a detailed internal financial crimes policy covering risk assessments, customer due diligence, transaction monitoring, sanctions screening, and organizational/reporting structures. - The BOC has not proactively disclosed its internal AML/CFT controls framework externally; the Annual Report includes a statement that the BOC mitigates exposure to financial crimes through manual and automated controls for unusual and high-risk payment activity. - Public can request access to the financial crimes policy on a case-by-case basis, subject to security and confidentiality concerns. - Assessment: - Review: Not Applicable for external supervision; Not Implemented—while a detailed internal AML/CFT framework exists, disclosures in line with Principle 2.10/3.11 are not published. - Recommendations: - Provide a public description (with appropriate safeguards) of the internal controls framework for activities posing ML/TF risks, including confirmation that the policy is subject to internal audit and timely correction of identified weaknesses. - Consider publishing an overview of resources allocated to internal AML/CFT controls and aggregated activity data. ### Transparency of operations, balance sheet, and reporting - Findings: - The BOC publishes detailed daily information on the Overnight Rate vis-à-vis its Target, daily volumes and interest rates for asset purchases and open market operations, daily aggregated settlement balances, and weekly composition of assets and liabilities on the balance sheet. - The BOC discloses the level of the operational target daily and outstanding volumes including extraordinary operations. - Comment: - Post-evaluation of policy decisions is limited; the BOC does not routinely conduct comprehensive ex-post evaluations of policy decisions or publish decompositions of forecast errors, though MPR includes boxes on changes to projections. *Source: Extracted content from the supplied IMF PDF chapter/section on Bank of Canada transparency and governance (sections cited above).* ### 1986. https://www.bankofcanada.ca/wp-content/uploads/2016/11/boc-review-autumn16- ### 1canea2022001 - 1986. ### Market-wide exceptional liquidity support — disclosure and assessment - The BOC discloses terms and conditions, amount and types of entities that received market-wide exceptional liquidity support on an aggregate basis. - The framework does not provide information on how and to what extent liquidity support contributed to restoring/maintaining financial stability or market functioning; however, the BOC typically communicates openly about market liquidity conditions and explains how its support measures restored market functioning. - The BOC’s guiding principles for liquidity support: targeted, graduated, well-designed, efficient, non-distortionary, and mitigates moral hazard. - Empirical assessments cited: - An asset purchase program designed to improve market functioning in the Government of Canada bond market has lowered government bond yields. (Reference: https://www.bankofcanada.ca/2021/10/staff-analytical-note-2021-23/) - Announcement of the Bankers’ Acceptance Purchase Facility showed that the spread over the overnight index swap rates significantly declined. (Reference: https://www.bankofcanada.ca/2020/10/staff-analytical-note-2020-23/) - The BOC’s published balance sheet provides aggregate results: https://www.bankofcanada.ca/wp-content/uploads/2020/04/boc-balance-sheet-sup0320.pdf - Review: Comprehensive — the BOC disclosed the last time it provided bilateral ELA and discloses market-wide liquidity support at the aggregate level; assessment of impacts is published on an ad-hoc basis through staff analytical notes. - Comment / Recommendation: - The BOC may consider putting in place a framework that provides information on how and to what extent market-wide exceptional liquidity support measures contribute to restoring market functioning and supporting the economy more broadly. ### Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT) — internal oversight disclosure - Applicability: - The BOC does not undertake external AML/CFT supervision; therefore the first part of Principle 4.10 is not applicable. - The BOC’s internal policy sets out details of the oversight framework for financial crimes (including controls to mitigate ML/TF risks). - Oversight and reporting: - Regular reporting on the work on the framework is provided to management. - Effectiveness of internal controls for financial crimes (including AML/CFT controls) is subject to internal audit. - No information on this oversight framework is publicly disclosed; no part of reports made to management is published. - The public may make requests for access to information on oversight of internal AML/CFT controls; requests are considered case-by-case with security and confidentiality concerns. - Review: Not Applicable for disclosure; overall finding: Not Implemented. - While a detailed oversight mechanism exists internally, no information related to this oversight function has been disclosed as required in principle 4.10. - Comments / Recommendations: - The BOC should consider providing an overview of the oversight mechanism for its internal AML/CFT controls with appropriate confidentiality and security safeguards. - Potential disclosures could include aggregated numbers of actions taken under the AML/CFT framework (e.g., number of suspicious transactions reports filed, resulting financial intelligence, etc.). - The BOC may publish findings of internal audit on the effectiveness of AML/CFT controls, with appropriate confidentiality and security safeguards. ### Central bank — government relationship (Pillar V, Principle 5.1) - Legal and institutional disclosures: - Relationship detailed in the Bank of Canada Act and disclosed on the BOC website. - Key statutory provisions and roles disclosed include: - Section 14(1): Consultations — Minister and Governor shall consult regularly on monetary policy and its relation to general economic policy. - Section 18: Powers and Business — loans/advances to Government of Canada or province; accept deposits; pay interest on deposits. - Section 24: Fiscal agent duties and authorities. - Section 25(4): Note Issue and Removal — form and material of notes subject to Minister approval; notes printed in English and French. - Section 27: Reserve Funds — residue paid to Receiver General under specified conditions. - Financial statement disclosures relevant to fiscal agent and government interactions: - Financial Statement Notes: Note 1, Note 2, Note 3, Note 6, Note 12, Note 13, Note 16. - Fiscal agent and operational roles: - Fiscal agent responsibilities disclosed in annual financial statements and fiscal agent website section: - Financial Statement Note 1: Funds management services. - Financial Statement Note 2: Fiscal agent and custodial activities. - Financial Statement Note 3: Financial guarantee contracts. - Financial Statement Notes 3, 6, 12: Deposits of Government. - Financial Statement Notes 3, 6: Derivatives, indemnity agreements with the Government of Canada. - No explicit statutory provision contemplates a need for recapitalization of the BOC. - Committees, consultation and information exchange: - Financial Institutions Supervisory Committee (FISC) referenced in OSFI Act; members include Superintendent (chair), Commissioner of FCAC, Governor of BOC, CEO of CDIC, Deputy Minister of Finance. - No minutes published for FISC meetings; no disclosure of agenda or post‑meeting announcements of outcomes. - Other committees the BOC sits on (summary disclosures available, but often limited): - Heads of Regulatory Agencies (HoA): informal, chaired by Governor; terms of reference and MoU on confidentiality available. - Systemic Risk Surveillance Committee (SRSC): informal, chaired by Governor; terms of reference available. - Senior Advisory Committee (SAC): informal, chaired by Deputy Minister of Finance; no minutes kept. - FMI Resolution Committee: informal, chaired by Governor. - Review: Expanded — clear institutional relationships disclosed via statutes and financial statements; improved transparency needed for committee-level disclosures. - Comments / Recommendations: - Improve disclosures for committees: remits, agendas, press releases after meetings, timely and detailed committee-specific summaries in annual report or periodic reports. - Consider protocols to balance confidentiality concerns (open/closed meeting format; aggregated disclosures; do not release institution-level confidential information). ### Policies, terms and instruments governing interactions with government (Principles 5.1.2–5.1.4) - Policies and terms and conditions: - Statement of Policy Governing the Acquisition and Management of Financial Assets for the Bank of Canada’s Balance Sheet (posted 2021) addresses: - Objective for holding assets. - Acquisition and use of Government of Canada securities issued or guaranteed. - Routine, secondary and primary markets purchases. - Securities lending program. - Loans and advances to the government. - Buyback transactions. - Relevant Bank of Canada Act sections referenced for policy and terms: Section 18, Section 24, Section 25, Section 27. - Financial statement notes referenced for policies and terms: Note 1, Note 2, Note 3, Note 6, Note 12, Note 13, Note 16. - Instruments and operational frameworks: - Memoranda of Understanding disclosed: - The Monetary Policy Framework. - Memorandum of Understanding on Treasury and credit risk management. - Memorandum of Understanding on the retail debt program. - The Bank’s Roles in the Markets and Government Securities Auctions page provides details on: - Repurchase program for BOC holdings of government securities. - Terms of auctions under the BOC securities lending program. - BOC margin call practices. - Framework for rare foreign exchange interventions on behalf of the Government of Canada is posted. - Disclosure of outcomes: - BOC Annual Report for 2020 discloses outcomes of interaction with government, including: - The inflation targeting agreement for 2021 (page 4). - The pandemic crisis response as published on the Financial System Hub (page 20). - Funds management activities as fiscal agent (page 26). - Increased debt issuance related to the pandemic crisis (page 26). - Funds management policy and advice (page 27). - Winding down of the Government of Canada’s retail debt program (page 28). - Bank note technology and security features (page 30). - Reducing the BOC carbon footprint in keeping with Government of Canada targets (page 60). - Advisory committee on Senior Level Retention and Compensation for the Government of Canada (page 65). - Financial risk and indemnification of the BOC’s losses (page 70). - Managing the balance sheet and results of operations (pages 75 to 77). - Financial System Review‑2021 references work of HoA and SRSC and topics addressed, including: - Vulnerabilities associated with the housing market and household debt. - Consumer protection regimes and issues affecting consumer confidence. - Crypto asset and stablecoin developments and regulatory coverage. - Trends in exposures to the commercial real estate industry. - Trends in business insolvencies. - Canadian and international policy work on climate change and sustainable finance. - Market liquidity issues in fixed‑income securities. - Review: Expanded — BOC discloses outcomes in interactions with government, providing a basis for judgments regarding accountability. - Comments / Recommendation: - Consider more timely disclosures specific to individual committees and more specificity regarding topics addressed. ### Relationships with domestic financial agencies (Principle 5.2) - Committee memberships and roles: - HoA: BOC as lead — discussion of financial sector issues. - SRSC: BOC as lead — collaborate and share information on vulnerabilities and risks to the financial system. - FISC: OSFI as lead — exchange of information on supervision of federal financial institutions. - SAC: Department of Finance as lead — financial stability and systemic vulnerabilities. - FMI Resolution Committee (FMI‑RC): BOC as lead — consultation and information sharing on resolution of Canadian FMIs. - Protocols and disclosures: - Not all committees have readily available disclosures regarding protocols, agendas, or post‑meeting announcements. - If policy decisions arise from committee work, a cover letter for the policy will articulate reasons for the policy, though not necessarily attribute the work to the committee. - Specific agency interactions: - OSFI: - Section 22.1(1): Inspection — the Bank may require the Superintendent of Financial Institutions perform, for a specified purpose, an inspection of any financial institution within the meaning of the OSFI Act. - This provision has not been invoked recently; no codified agreement reached regarding protocols for such a request. - CDIC: - CDIC is the resolution authority (Section 7 of its enabling Act). - Governor and Deputy Governor of the BOC are ex officio and alternative directors of the CDIC, respectively. - No operational MoU between BOC and CDIC; operational interactions primarily with OSFI. - Informal interaction: BOC solicits CDIC input regarding solvency of a troubled institution applying for ELA; ultimate ELA decision is discretionary and remains with the BOC. - No MoU to guide protocols for this ELA interaction. - Comments / Recommendation: - Define or disclose instruments and operational procedures where not yet developed or not yet disclosed (areas identified: loans and deposits, currency design, committee coordination through SRSC and SAC, payments, oversight of unclaimed balances). ### Payments, Retail Payment Activities Act, and unclaimed balances - Legal framework and responsibilities: - Payment Clearing and Settlement Act (1996) sets forth BOC responsibilities for oversight and resolution of designated payment, clearing and settlement systems and interactions with government on this function. - Includes systemic designation by the Governor, standing committee including Governor of BOC and Deputy Minister of Finance responsible for consultation and information sharing on resolution of FMIs, resolution planning, loans from Ministry of Finance to BOC, and required notifications to Minister of Finance. - Retail Payment Activities Act (approved 2021; full effect with regulations in 2023) establishes BOC functions and interactions with government regarding supervision of retail payment providers: - Section 12: Bank’s Objectives — supervise payment service providers performing retail payment activities; promote adoption of policies and procedures; monitor and evaluate trends and issues. - Section 14: Guidelines of the Minister — Minister may issue guidelines on application of select sections. - Oversight of unclaimed balances is detailed in the Bank Act: - Section 436: Unclaimed balances — deposits with no activity for ten years are to be paid to the Bank of Canada not later than December 31 each year, equal to principal plus interest. - The BOC has a dedicated website section for unclaimed balances with capacity to submit a claim. - Review: Expanded — statutory roles and responsibilities disclosed; implementation of Retail Payment Activities Act underway with regulations expected by 2023. - Comments / Recommendation: - Continue implementation and disclosure of policies, procedures and protocols under new retail payments regime to enhance transparency of roles and interactions with government and other agencies. *Source: 1canea2022001 - 1986.* ### Section 18(m1) of the Bank of Canada Act states that the Bank can “act as a custodian of the ### 1canea2022001 - Section 18(m1) of the Bank of Canada Act states that the Bank can “act as a custodian of the ### Cooperative oversight of FMIs and legal authority - Section 18(m1) of the Bank of Canada Act: the Bank can “act as a custodian of the financial assets of the Canada Deposit Insurance Corporation and of those of the Canada Mortgage and Housing Corporation.” - Cooperative oversight of FMIs is detailed on the BOC’s website with MoUs and notices referenced (examples given for resolution-related matters and oversight of FMIs). - The BOC is a party to multilateral arrangements for co-operative oversight of CLS Bank and LCH’s SwapClear: - Member of the Oversight Committee of CLS Bank. - Participation in SwapClear oversight cooperation led by the Bank of England. ### Interaction with domestic financial agencies — transparency and disclosure (Principles 5.1.1, 5.2.2, 5.2.4) - Review Core finding: relationships with domestic financial agencies are not always fully disclosed; improved transparency is needed beyond basic terms of reference and information sharing. - Comments: agendas, post-meeting press releases, and timely, detailed committee-specific summaries in the Annual Report or other periodic reports are often lacking. - Recommendation: The BoC, OSFI and CDIC should consummate an agreement regarding protocols and disclose their efforts to determine the viability of illiquid institutions and thus their qualification for emergency liquidity assistance. - Principle 5.2.2 — Description: - Main legal instrument: MoU governing interactions between BOC and other domestic agencies (e.g., Heads of Regulatory Agency Committee (HoA) and FMIs). - FISC interactions governed by the Office of Superintendent of Financial Institutions Act (members, chair, purpose, information-sharing). - CDIC considered an ‘eligible’ client for modest number of transaction services (small volume, but large value). - The “Bank” at the Bank of Canada summarizes policies/instruments used with CDIC (cash accounts and security safekeeping services). - Review Expanded: In cases where MoUs have been agreed, the BOC discloses them. - Principle 5.2.4 — Financial stability arrangements disclosed: - HoA: BOC as lead; discussion of financial sector issues; terms of reference; MoU regarding data sharing and confidentiality. - SRSC: BOC as lead; collaboration/share information on vulnerabilities and risks; terms of reference. - FISC: OSFI as lead; exchange of information relating to supervision of federal financial institutions; terms of reference based on the Office of the Superintendent of Financial Institutions Act. - FMI-RC: BOC as lead; consultation and information sharing on resolution of Canadian financial market infrastructures; terms of reference. - The BOC discloses arrangements on liquidity support (see Principle 2.7 described in source). - Comment: BOC ultimately holds discretion to make final determination on emergency liquidity assistance. ### Macroprudential policy and Senior Advisory Committee (Principle 5.2.3) - The BOC is not the macroprudential authority in Canada but contributes to macroprudential policy via membership on the Senior Advisory Committee (SAC). - Disclosure limitations: - Dedicated page for financial system committees provides only a very brief summary of SAC focus: “financial sector policy issues, including financial stability and systemic vulnerabilities.” - SAC is chaired by the Deputy Minister of Finance and members are the same as for the FISC. - Search for “senior advisory committee” on BOC website yields little more than passing references. - Enabling of SAC is not grounded in statute as FISC is. - No terms of reference or MoUs provided for SAC; no periodic announcements of agendas or post-meeting follow-up disclosed. - BOC contributions at SAC meetings may influence final released policies, but the extent is not discernible. - Review: Not Applicable (rating context from source). - Comment / Recommendation: Role, responsibility, and actions of SAC need clearer specification; agreement on and disclosure of an MoU accompanied by regular announcements of committee actions would improve disclosure. ### Interactions with foreign agencies and international groups (Principle 5.3) - Legal basis and disclosures: - Bank of Canada Act sections cited: - Section 4: Branches and Agencies — the Bank may establish branches...elsewhere than in Canada. - Section 18(m): Powers and business — the Bank may open accounts in a central bank in any other country or in the Bank for International Settlements; accept deposits from central banks in other countries, the Bank for International Settlements, the International Monetary Fund, the International Bank for Reconstruction and Development and any other official international financial organization; act as agent or mandatary, or depository or correspondent for any of those banks or organizations, and pay interest on any of those deposits. - The “Bank” at the Bank of Canada provides a summary of dealings with foreign central banks and international financial organizations, including a side-by-side comparison of services offered to foreign central banks versus other BOC clients. - BOC discloses bilateral liquidity swap arrangements converted into standing agreements. - International engagement: - Participation in regional initiatives: Basel Committee Outreach Group, Financial Stability Board’s Regional Consultative Group for the Americas, regional and global crisis management groups. - Contributions to international discussions, research collaboration, and technical assistance: - Participates in joint missions of the International Monetary Fund and the World Bank. - Contributes to Canada’s participation in G7 and G20 discussions on global economic stability. - Provides ongoing support for committees and working groups of the Bank for International Settlements and the Financial Stability Board. - Participates in the Central Banks’ and Supervisors Network for Greening the Financial System. - Review Expanded: BOC Act envisions interactions and services to international organizations and foreign agencies; BOC discloses details most prominently on its website. ### Relations with private and semi-public institutions (Principle 5.4) - Disclosed involvements: - BOC is a shareholder in the Bank for International Settlements (disclosed in Annual Report and Financial Statement notes: Note 3: Financial Instruments; Note 13: Commitments, contingencies, and guarantees). - Participation in private industry groups with varying levels of disclosure: - Canadian Foreign Exchange Committee (CFEC) — BOC discloses meeting minutes and presentations and chairs meetings. - Canadian Fixed Income Forum — BOC discloses meeting agendas. - Canadian Alternative Reference Rate Working Group — BOC discloses meeting agendas and a range of background and working group documents. - Canadian Financial Sector Resiliency Group (CFRG) — BOC disclosed initiation of the group; periodic references to activities; much of Cyber Security Strategy work undertaken by the group. - Payments Canada: - Payments Canada is owned by financial institutions and operates payment clearing and settlement systems in Canada, primarily Lynx (designated as a systematically important payment system). - BOC financial statements reflect collateralized loans, receivables and deposits of Payments Canada members: Note 3: Financial instruments; Note 5: Loans and receivables; Note 6: Financial risk management; Note 15: Commitments, contingencies and guarantees. - Corporate bond holdings: BOC holds a very small fraction of one percent of corporate bonds, disclosed in financial statements under notes 3 and 6, held “to support the liquidity and proper functioning of the corporate debt market.” - Review Expanded: BOC makes public its interactions with private institutions through the Annual Report, financial statements, details on meetings with industry groups, and disclosures of related documents. - Comment / Recommendation: Relationship with Payments Canada may warrant a dedicated page given Lynx’s central role. Level of detail for industry groups is uneven; most detail provided for CFEC and CFRG. ### Organizational listing (Appendix I) - Bank of Canada Senior Management and Staff (listed units and roles): - Governor; Senior Deputy Governor; Members of Executive Council; Members of the Board of Directors. - Operational and functional units: Banking and Payments; Canadian Economic Analysis; Chief Operating Officer; Communications; Currency; Executive and Legal Services; Financial Markets; Financial Stability; Financial Services; Financial and Enterprise Risk; General Counsel & Corporate Secretary; Human Resources; Internal Audit; International Economic Analysis. - External Stakeholders (listed examples): - Academia: McGill University, University of Toronto, Université du Québec à Montréal, University of Ottawa. - Canada Deposit Insurance Corporation; Department of Finance Canada; Financial Consumer Agency of Canada; House of Commons Standing Committee on Finance; Office of the Superintendent of Financial Institutions. - Media Representatives: Bloomberg, MNI Market News, Thomson Reuters, Postmedia. - Private Sector Chief Economists: BMO, Manulife, Scotiabank, VMBL. - Representatives of Market Dealers: National Bank of Canada, Bank of Montreal, Royal Bank of Canada, Scotiabank. - Members of the Canadian Foreign Exchange Committee (CFEC); Senate Standing Committee on Banking, Trade and Commerce; Think Tank (C.D. Howe Institute). *Source: 1canea2022001 - Section 18(m1) of the Bank of Canada Act states that the Bank can “act as a custodian of the* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1canea2022001.pdf_