Bank of Canada announces Lynx’s new designation

Bank of Canada Governor Tiff Macklem has designated Lynx, a platform owned and run by Payments Canada, as a systemically important payment system. The designation was made in accordance to the Payment Clearing and Settlement Act.

Given the prominence of Lynx as Canada’s leading wholesale payment system, a disruption or failure of this system could greatly and negatively impact the financial system and economy. This new designation makes Lynx subject to formal Bank oversight.

In line with Canada’s vision to transform its payment system, Lynx replaces the Large Value Transfer System (LVTS). It will be used to reinforce the Bank’s policy interest rate, to settle obligations from other financial market infrastructures (FMIs) and also to channel liquidity from the Bank to lenders during crises.

As a payment system under Bank oversight, Lynx is mandated to comply with the CPMI-IOSCO Principles for Financial Market Infrastructures as laid out by the Bank for International Settlements’ Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions.

The principles are given to assure proper risk monitoring and mitigation. The designation also provides legal cover regarding payment finality. It also puts Lynx under BoC’s resolution regime. This means Lynx can still maintain operation in the event that it is deemed non-viable.

Lynx joins the rank of four systemically important FMIs and two prominent payment systems currently under Bank of Canada’s oversight.