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

New faces at Seven Hills Golf and Country Club

Seven Hills Golf and Country Club is getting ready for it’s 2019… Continue reading

Scotiabank faces disgruntled Port Alice crowd

Residents were told the ATM will not be staying, along with the vault and other physical attributes.

VIDEOS: North Island Bantam Eagles place second at Tier 3 Bantam Championships in Port Hardy

“This is now a piece of North Island history and will be talked about for many years to come.”

LETTER TO THE EDITOR: Tier 3 Bantam Championships

“The packed arena and electricity within was fantastic.”

Port Hardy RCMP issues warning about recent overdose

“Our primary concern is public safety. We are urging the public to be aware of what is circulating.”

VIDEO: The ‘most cosmopolitan’ of butterflies could migrate to B.C.

The painted lady butterfly will likely arrive this summer from Southern California

‘Too-young’ Vancouver Island woman successfully challenges eviction

Zoe Nagler, 46, had been given notice after living in seniors complex for six years

Inspirational Vancouver Island youngster dies after battle with brain cancer

Kaiden Finley ‘was seriously the strongest 11-year-old’

North Island Peewee Eagles go 2-2 at Tier 3 Championships in Powell River

All told, it was a pretty successful season for the North Island Peewee Eagles.

Is it a homicide? B.C. woman dies in hospital, seven months after being shot

Stepfather think Chilliwack case should now be a homicide, but IHIT has not confirmed anything

PHOTO OF THE WEEK: Zeballos Inlet

Check out this beautiful photograph of the Zeballos Inlet from Alanna Janisse!… Continue reading

Indecent caller handed 18-month conditional sentence

Vancouver Island man pleaded guilty to making indecent phone and video calls to women across B.C.

Sources say Trudeau rejected Wilson-Raybould’s conservative pick for high court

Wilson-Raybould said Monday “there was no conflict between the PM and myself”

First Nations public art piece stolen in Nanaimo

Spindle Whorl went missing over the weekend, according to Nanaimo RCMP

Most Read