The Standing Liquidity Facility (SLF) is one of the Bank of Canada’s least discussed tools—and one of its most important. Embedded directly in Canada’s high value payment system, Lynx, the SLF operates quietly in the background every business day, ensuring the smooth settlement of payments and reinforcing the implementation of monetary policy. This Staff Discussion Paper demystifies the SLF by answering the questions that are most often overlooked: how intraday and overnight advances work, what their use does (and does not) signal about liquidity conditions, how collateral eligibility and haircuts are determined, and how the facility supports both monetary policy implementation and financial system resilience. By shedding light on this “business as usual” facility, the paper shows why the SLF is the cornerstone of Canada’s liquidity framework—addressing everything you wanted to know about the SLF (and a few things you may have been afraid to ask).
McRae et al. (Thu,) studied this question.
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