Document Type

Case Study

Case Series

Broad-Based Emergency Liquidity

JEL Codes

G01, G33


With Canadian banks curtailing their funding in response to the Global Financial Crisis, liquidity dried up in money markets and bond markets. On October 14, 2008, the Bank of Canada (BoC) announced its first Private-Sector Term PRA facility to provide liquidity to large money-market participants, such as asset managers, who were not traditional BoC counterparties and could not access the BoC’s other emergency liquidity facilities (“PRA” is short for purchase and resale agreement, similar to a repo). The program accepted commercial paper, asset-backed commercial paper, and bankers’ acceptances as collateral. It complemented the BoC’s Term PRA for primary dealers (the “regular Term PRA”), which the BoC extended to major banks on the same day. The BoC was prepared to allocate CAD 1 billion (USD 0.8 billion) to weekly auctions for the Private-Sector Term PRA, but only CAD 25 million (the minimum amount) was taken up in any single week. On February 23, 2009, the BoC replaced this facility with its second Private-Sector Term PRA. The second facility added investment-grade corporate bonds as eligible collateral and expanded the list of eligible participants. The two Private-Sector Term PRAs saw much less use than the regular Term PRA, ultimately peaking at about CAD 3 billion outstanding in mid-2009. The BoC allowed the facility to expire on October 27, 2009.

Date Revised