A man makes his way through the city’s financial district in downtown Toronto on January 28, 2014. The federal government committed hundreds of millions of dollars in its recent budget to help reinforce Canada’s cyber defences, but if the effort fails to prevent a major attack, Ottawa can always turn to its little-known $102-billion emergency stash. The rainy day fund of highly liquid assets is available to keep the government running for at least a month should the country ever find itself confronted by a severe crisis, such as a cyberattack that impairs access to financial markets. THE CANADIAN PRESS/Nathan Denette

Feds’ unheralded $102B rainy day fund kept for the improbable, like cyberattacks

The federal government committed hundreds of millions of dollars in its recent budget to help reinforce Canada’s cyber defences

The federal government committed hundreds of millions of dollars in its recent budget to help reinforce Canada’s cyber defences — but if the effort fails to prevent a major attack, Ottawa can always turn to its little-known $102-billion emergency stash.

The rainy day fund of highly liquid assets is available to keep the government running for at least a month should the country ever find itself confronted by a severe crisis, such as a cyberattack that impairs access to financial markets.

The assets are held in what the government calls its ”prudential liquidity plan,” part of which can be compared to a chequing account that offers Ottawa quick access to the funds, if necessary.

A recently released briefing note for Finance Minister Bill Morneau explained details about the unheralded plan.

“Canada holds liquidity reserves as a hedge against highly unlikely but potentially disruptive stress events,” said the August 2017 memo, obtained by The Canadian Press via the Access to Information Act.

“The (prudential liquidity plan) framework ensures that the government holds sufficient high quality liquid assets to cover a ‘survival horizon’ of at least one month.”

Related: Equifax says only 8,000 Canadians affected by data breach

The nest egg’s contents are made up of about $2 billion worth of cash balances at the Bank of Canada; $10 billion in cash balances that are auctioned off to financial institutions for durations of typically less than one week so they generate returns; a callable demand deposit of $20 billion at the Bank of Canada; and about $70 billion of foreign reserve assets from Ottawa’s exchange fund account.

In last month’s budget, the government earmarked $507.7 million over five years to strengthen the country’s protections and response capabilities in the event of an cyberattack. The investments will support a new national cybersecurity strategy, a new Canadian Centre for Cyber Security and the creation of a national cybercrime co-ordination unit by the RCMP.

Morneau’s plan also dedicated $2.2 billion over six years to improve the government’s IT services and infrastructure, an investment that includes support for efforts to proactively address cybersecurity threats.

“Cyberattacks are becoming more pervasive, increasingly sophisticated and ever more effective,” Morneau’s budget said.

“Successful cyberattacks have the potential to expose the private information of Canadians, cost Canadian businesses millions of dollars, and potentially put Canada’s critical infrastructure networks at risk.”

The Bank of Canada has also issued warnings about cyber threats. It has said the country’s interconnected banks are vulnerable to a cascading series of attacks, something that could undermine broad confidence in the financial system.

The central bank’s governor, Stephen Poloz, has described a severe cyberattack as his worst nightmare. Poloz has said he struggles to even imagine what such an event — and the extent of the resulting damage — might look like.

Canada has long maintained a liquidity management framework but, after the events surrounding the financial crisis of 2008, prudential liquidity was highlighted as a key issue, especially for financial institutions.

Ottawa decided it was important for the government too and introduced the current framework in its 2011 budget. The government calibrated its one-month target to be similar to international guidelines for large banks that followed the financial crisis.

Related: ‘Mega trends’ set to alter economy, society, security

The briefing note to Morneau outlined two objectives of the prudential liquidity plan.

The first is to ensure the government can continue operations and meet its payment obligations, even during stress events. The second objective for the plan is that its existence is intended to support market confidence in the government’s debt program.

The Finance Department recently completed a comprehensive review of the prudential liquidity plan to ensure it held enough liquidity to cover appropriate government liabilities for at least a month, the briefing note said.

Since the federal plan was implemented, the document said provinces, including Ontario and Quebec, have formalized their own liquidity reserves. Other countries, including the United States, maintain similar prudential liquidity reserves, it said.

J.P. Koning, a financial writer and monetary policy watcher, has written about Ottawa’s prudential liquidity plan. He says having the plan isn’t harmful for the government but he questions whether it’s needed since Ottawa could always seek extra funds once a crisis occurs.

“It seems like perhaps it might be a bit of a waste of time and resources,” said the former banker, who offered one possible explanation.

“After the credit crisis, a lot of paranoia set in.”

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Oil tanker ban to be reviewed by committee

Indigenous groups for and against Bill C-48 travel to Ottawa to influence the Senate’s decision

Man charged following Q.C. house fire that set off explosives

Thomas Daniel Kendall may face up to 14 years for causing bodily harm by breaching duty of care

Wind warning issued for Haida Gwaii today and overnight

Another wind warning has been issued for Haida Gwaii for today and… Continue reading

Haida leaders join coastal First Nations push for tanker ban

Elected and hereditary Haida leaders met some Ottawa senators last week, and… Continue reading

Grim situation in coming year for northwest, B.C. fisheries

Annual post-season review in Prince Rupert informs DFO on how to manage 2019 fishing season

Man caught on camera allegedly trying to defraud ICBC

Auto-insurer warns B.C. drivers to record info after crashes

Warning issued as forecast calls for 20-foot waves in Tofino

Dangerous waves, strong currents and upper-shoreline flooding expected for Tofino-Ucluelet area

An 800-pound pig named Theodore needs a forever home, B.C. society says

‘Theodore is not destined to be somebody’s bacon’

2,000 Canadians died of an overdose in first 6 months of the year

New data from the Public Health Agency of Canada shows the crisis is not subsiding

Teenager Alphonso Davies wins Canadian Men’s Soccer Player for the Year Award

Derek Cornelius and Chilliwack native, Jordyn Huitema were named Canadian Youth International Players of the Year

B.C. teen MMA fighter shows heart

Young Unity MMA competitors bring home Ws

Another B.C. city votes to ban single-use plastic bags

First six months of proposed ban would focus on education, not enforcement

UK Prime Minister Theresa May wins party no-confidence vote, but troubles remain

May won the vote of 317 Conservative legislators with a 200-117 tally

B.C. trustee’s anti-LGBTQ comments got him barred from schools

Barry Neufeld calls vote to leave him off liaison list ‘workplace discrimination’

Most Read