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

Wolf Creek Schools raises Treaty 6 flag for first time

Chiefs, school officials took part in a ceremony that is aimed at acknowledging Treaty 6 land

Pair arrested in Ponoka with several weapons, face 98 charges

Two men nabbed after early morning suspicious vehicle reported, stolen weapons found

UPDATE: 18-year-old Rimbey teen dies in collision

A portion of Highway 53 west of Rimbey is down to one lane while crews investigate

Ponoka County approves $70,000 to dredge Parkland Beach

Parkland Beach to see some dredging support from Ponoka County

Ponoka sets bylaw on cannabis retail, pushes for quick public consumption regulation

Town passes first reading on retail outlet bylaw, questions staff on need to separate public usage

Video: Flyers new mascot ‘Gritty’ a bearded, googly-eyed terror

The Philadelphia Flyers unveiled their new mascot Monday, and as one would expect of the team that gave us the “Broad Street Bullies,” he’s far from cuddly.

Edmonton cannabis company revenues more than triples to $19.1 million

Aurora Cannabis revenues more than triple in fourth quarter

Seattle one step closer to NHL after arena plan approved

Seattle City Council unanimously approved plans for a privately funded $700 million renovation of KeyArena

Hockey league gets $1.4M for assistance program after Humboldt Broncos crash

Program will help players, families, coaches and volunteers after the shock of the deadly crash

Canada has removed six out of 900 asylum seekers already facing U.S. deportation

Ottawa had said the ‘overwhelming majority’ had been removed

Appeal pipeline decision but consult Indigenous communities, Scheer says

The federal appeals court halted the Trans Mountain expansion last month

‘I’ll never forgive you:’ Victim impact statements at hearing for Calgary killer

Curtis Healy was found guilty of first-degree murder Friday in the death of Dawns Baptiste.

Man accused of mailing bomb to his brother in B.C. has died

Leon Nepper was found in ‘medical distress’ at the Whitehorse Correctional Centre on Sunday

Most Read