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The Bank of Canada is proposing a new liquidity facility that would provide loans to financial institutions that are suffering temporary shocks as a result of incidents such as cyberattacks, system failures and natural disasters.

The central bank has previously flagged the rising risk that cyberattacks pose to Canada’s financial system. Last spring’s biannual survey of financial-sector risk management experts cited cybersecurity incidents as the greatest risk to Canadian financial institutions, and a top Bank of Canada official said Tuesday that Canada should consider strengthening its regulations to protect the financial system from such attacks.

A recent report by professional services firm Accenture found that cybercrime costs financial services companies around the world an average of US$18.5-million annually.

The new loan facility, called the Standing Term Liquidity Facility, would provide 30-day liquidity to institutions that are suffering a temporary shock, where the Bank of Canada has no concerns at all about the institution’s financial soundness. Canadian-dollar non-mortgage and residential mortgage loans could be used as collateral.

The facility is not meant to address economy-wide shocks, such as a housing crash or stock market collapse, as the central bank has different tools for those situations.

Federally and provincially regulated members of Payments Canada, an organization that operates a payment clearing and settlement system, would be eligible. That includes domestic banks, foreign banks operating in Canada and credit unions. The central bank would require information from the financial institution in order to decide whether there are any concerns about its soundness.

The central bank said in a statement that the addition is “another step in the bank’s efforts to enhance the resilience of the Canadian financial system.”

The central bank will be conducting consultations over the coming weeks to get comments on the proposed design of the liquidity facility. It plans to publish a formal policy for the facility in the first-half of next year.

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