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

QRRC open house this Saturday

Researchers from various universities will share their findings on investigations into the impacts of the 2014 Mount Polley Mine spill into Quesnel Lake.

UPDATE: Father and 9-year-old son killed in crash north of Williams Lake

RCMP confirm family of five hit by southbound pickup truck that crossed the centre line

New Year’s Day robbery and stabbing suspect to stand trial this week

Prolific offender Blake Johnny in Williams Lake Supreme Court

COLUMNS: All for a good cause

Didn’t get to see the chicken herders in action at the Stampede Grounds recently

West Fraser works with BC Wildfire Service, harvests 2017 burned timber

National Forest Week is a time to celebrate our forestry heritage and highlight our stewardship of the forests that supports our communities

VIDEO: Sandhill Cranes in abundance along Highway 97 south of Quesnel

Fall migration for Sandhill Cranes is underway

B.C. couple who went missing on flight from Edmonton named by family

Family released a statement Wednesday saying they’re still intent on finding the two-seater plane

VIDEO: a close-up look at what you were breathing during the wildfire season

Electron microscope images show soot and tar particles generated by worst B.C. fire season

B.C. woman donates $250,000 to ovarian cancer research for friends

Two of Patty Pitts’s friends passed away from the disease within a year

B.C. could provide clues as to how New Brunswick electoral results shake out

Premier Christy Clark faced a strikingly similar scenario following the province’s 2017 election

Ottawa working to iron out kinks in public alert system

The alerts are being credit with saving lives during last week’s tornadoes

Premier John Horgan ponders debate on voting system changes

B.C. Liberal leader Andrew Wilkinson wants one-on-one, no Green

Saganash drops F-bomb in Commons over federal approach to Trans Mountain

NDP’s reconciliation critic accused federal government of ‘wilfully’ violating constitutional duties

VIDEO: B.C. dairy farmer says Trump doesn’t understand the industry

‘They need supply management just as bad as we need to keep it’: sixth generation farmer Devan Toop

Most Read