Government of Canada / Gouvernement du Canada
Symbol of the Government of Canada

Search

By-law No. 7 Respecting the Large Value Transfer System (SOR/2001-281)

Regulations are current to 2020-12-28 and last amended on 2020-07-16. Previous Versions

Settlement of Multilateral Net Positions

Settlement

  •  (1) After the end of the inter-participant payment message exchange period set out in section 8, the Bank of Canada shall make a single credit entry or, to the extent that funds are available in a participant’s settlement account, make a single debit entry to the settlement account of each participant to settle each participant’s multilateral net position.

  • (2) Settlement of a participant’s multilateral net position shall not be effected until settlement of the multilateral net positions of all participants can be effected.

  • SOR/2010-43, s. 12(F)

Provision of Liquidity

 If insufficient funds are available in the settlement account of a participant to settle that participant’s negative multilateral net position, that participant shall, immediately on demand by the Bank of Canada or within such time period as may be specified by the Bank of Canada, apply to the Bank of Canada for a discretionary advance to enable settlement of the participant’s negative multilateral net position.

Finality of Settlement

 Settlement on the books of the Bank of Canada is final and irrevocable.

Procedure on Default

Default of a Participant

  •  (1) A participant is in default for the purposes of the LVTS if, immediately on demand by the Bank of Canada or within any time period that may be specified by the Bank of Canada, it fails to obtain a discretionary advance from the Bank of Canada to enable it to settle its negative multilateral net position.

  • (2) The Bank of Canada shall notify the President of any participant in default and the President shall notify all participants of any such default.

  • (3) On the default of any participant, sections 57, 58 and 60 apply to ensure that settlement occurs.

  • SOR/2010-43, s. 13

Defaulting Participant

  •  (1) If a participant is in default for failure to settle its negative multilateral net position as set out in section 56, the Bank of Canada shall provide an advance of funds to the defaulting participant solely for the purpose of permitting it to settle.

  • (2) The advance shall be in an amount equal to the lesser of

    • (a) the absolute value of the defaulting participant’s negative multilateral net position less the amount of funds in the defaulting participant’s settlement account, and

    • (b) the sum of the defaulting participant’s maximum ASO and the absolute value of its tranche 1 net debit cap.

  • (3) The absolute value of the defaulting participant’s tranche 1 net debit cap is calculated in accordance with section 19, 20 or 21, as applicable.

  • (4) If the amount of the advance is sufficient to enable settlement of the defaulting participant’s negative multilateral net position, the Bank of Canada shall immediately debit the participant’s settlement account to effect settlement of its negative multilateral net position and shall simultaneously effect settlement of all other participants’ multilateral net positions.

  • (5) If the amount of the advance is insufficient to enable settlement of the defaulting participant’s negative multilateral net position, that position shall be settled according to the procedures set out in section 58.

  • (6) The repayment of any advances made by the Bank of Canada to the defaulting participant and the Bank of Canada’s rights with respect to the defaulting participant’s collateral are governed by the agreements between the defaulting participant and the Bank of Canada.

Remaining Participants

  •  (1) If the amount of the advance made by the Bank of Canada under section 57 is not sufficient to permit settlement of the defaulting participant’s negative multilateral net position, the remaining participants are obligated to meet their ASOs, as set out in section 27, by advancing funds to the defaulting participant, within the time limit and in the manner that are specified by the Bank of Canada.

  • (2) To the extent that a remaining participant has funds available in its settlement account, the Bank of Canada shall effect payment of that participant’s ASO by transferring funds from the remaining participant’s settlement account to the settlement account of the defaulting participant.

  • (3) To the extent that there is an insufficient positive account balance in a remaining participant’s settlement account to discharge the remaining participant’s ASO, the Bank of Canada shall provide the remaining participant with an advance of funds, by crediting the remaining participant’s settlement account, to enable it to pay its ASO and shall effect payment of the remaining participant’s ASO by transferring funds from the remaining participant’s settlement account to the settlement account of the defaulting participant.

  • (4) Immediately on transferring sufficient funds from the settlement accounts of the remaining participants to enable settlement of the defaulting participant’s negative multilateral net position, the Bank of Canada shall debit the settlement account of the defaulting participant to effect settlement and shall simultaneously effect settlement of all participants’ multilateral net positions.

  • (5) The repayment of any advances to remaining participants and the Bank of Canada’s rights with respect to the remaining participants’ collateral are governed by agreements between the participants and the Bank of Canada.

Debt of the Defaulting Participant to Remaining Participants

 A defaulting participant is obligated to reimburse a participant for the amount that the participant advanced to the defaulting participant because of the participant’s ASO, and that amount constitutes a debt of the defaulting participant that survives irrespective of whether the defaulting participant has its status as a participant suspended or revoked.

Bank of Canada Commitment to Settle Accounts

  •  (1) If in an LVTS cycle more than one participant is in default for failure to settle as set out in section 56, the procedures on default set out in sections 57 and 58 shall be followed for each of the defaulting participants and the remaining participants are obligated to meet their ASOs as set out in section 29, subject to their respective maximum ASOs.

  • (2) Despite any maximum ASO that the Bank of Canada may have, if, after such procedures on default have been followed, the negative multilateral net positions of all participants that are in default have not been settled, the Bank of Canada shall advance funds to the defaulting participants to enable settlement of the negative multilateral net positions of those participants and the termination of the LVTS cycle.

Debt of Defaulting Participant to the Bank of Canada

 A defaulting participant is obligated to reimburse the Bank of Canada the amount that is advanced to it by the Bank of Canada in accordance with section 60 and that amount constitutes a debt of the defaulting participant that survives irrespective of whether the defaulting participant has its status as a participant suspended or revoked.

Declaration on Status of a Participant

Declaration Made during an LVTS Cycle

  •  (1) If, at any time during an LVTS cycle, an agent of Her Majesty in right of Canada, an agent or mandatary of Her Majesty in right of a province, a regulator or a supervisory body takes control of a participant or any of its assets or makes a declaration that a participant is considered to be no longer viable or that a participant is unable to meet its liabilities as they become due, the President may, after being advised of such an action having been taken or such a declaration having been made and with the concurrence of the Minister and the Governor of the Bank of Canada, suspend the participant from further participation in that LVTS cycle if its participation could adversely affect the efficiency, safety or soundness of the LVTS.

  • (2) If a decision is made to suspend a participant’s participation under subsection (1), the President shall suspend the participant’s participation as soon as feasible during the LVTS cycle in which the action or declaration is made.

  • (3) If a participant’s participation is suspended under subsection (1), the President shall notify all the participants of the suspension.

  • SOR/2010-43, s. 14
  • SOR/2020-167, s. 2

Declaration Made Outside of an LVTS Cycle

  •  (1) If, after the termination of an LVTS cycle and before the opening of the following LVTS cycle, an agent of Her Majesty in right of Canada, an agent or mandatary of Her Majesty in right of a province, a regulator or a supervisory body takes control of a participant or any of its assets or makes a declaration that a participant is considered to be no longer viable or that a participant is unable to meet its liabilities as they become due, the President may, after being advised of such an action having been taken or such a declaration having been made and with the concurrence of the Minister and the Governor of the Bank of Canada, suspend the participant’s status for the following LVTS cycle before that cycle begins if its participation could adversely affect the efficiency, safety or soundness of the LVTS.

  • (2) If a decision is made to suspend a participant’s status under subsection (1), the President shall suspend the participant’s status as soon as feasible before the beginning of the next LVTS cycle.

  • (3) If a participant’s status is suspended under subsection (1), the President shall notify all the participants of the suspension.

  • SOR/2010-43, s. 15
  • SOR/2020-167, s. 3

Notice

Form of Notice

 Any notice or other communication provided for or permitted under this by-law shall be in accordance with any procedures that may be set out in the rules.

Emergencies

Emergency Condition

 In the event that communications between the LVTS central site and one or more participants are interrupted, the ability of the LVTS central site to receive, transmit, send, approve or otherwise process a payment message or administrative message is impaired, the safe and efficient operation of the LVTS is placed into question or some other emergency affects its operations, the President may, with the prior agreement of the Bank of Canada and any other persons that may be designated by the Board,

  • (a) change the hours of operation of the LVTS;

  • (b) direct any, several, or all of the participants not to make payments through the LVTS pending resolution of the problem;

  • (c) order the immediate termination of the LVTS cycle and an immediate settlement of the LVTS cycle on the books of the Bank of Canada;

  • (d) prohibit the commencement of an LVTS cycle; or

  • (e) direct any other action that the President may deem necessary.

  • SOR/2010-43, s. 16
 
Date modified: