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

Give a hoot and don’t touch baby birds

SORCO raptor rehab reminds residents to stop before they touch baby bird

Four Penticton residents arrested for violent attack on homeless

Four individuals have been arrested for a attack and robbery on two homeless men

PHOTOS: Spring has sprung in the Okanagan-Shuswap

The new season is bringing warm weather across the region

UBC Okanagan students to weigh into pipeline debate

The Roger Watts Debate will be held March 27 in Kelowna

VIDEO: Sunny skies in the forecast makes for a great start to spring

Mostly sunny skies with a chance of rain by Friday evening in the Okanagan Valley

Small landslide closes Vernon road

City crews estimate Okanagan Bench Row Road will reopen at about 2:30 a.m.

Canucks hang on for 7-4 win over Senators

Horvat nets 2 for Vancouver

Kelowna RCMP tackle man in Glenmore area

A witness saw RCMP make an arrest on Valley Road just after 6 p.m.

European, Canadian regulators to do own review of Boeing jet

Air Canada plans to remove the Boeing 737 Max from its schedule at least through July 1

Prime minister defends Liberal budget measures as sales effort gets underway

Conservatives under Andrew Scheer say it’s a spree funded by borrowing against the future

Mayor meets with B.C. health minister on homeless taxi transfers

Two homeless people were discharged from Surrey Memorial and sent to a Chilliwack shelter

Father, former child soldier, seeks better life for family in Shuswap

Salmon Arm volunteers begin fundraising effort to help family resettle in Canada

B.C. lottery winner being sued by co-workers

They claim he owes them $200,000 each, in a lawsuit filed in B.C. Supreme Court in Vancouver

Most Read