Bank of Canada can trade UK securities

Summary#

This is the federal order titled Order Fixing January 31, 2020 or the Day on Which the United Kingdom Ceases to be a Member State of the European Union, as the Day on Which Section 220 of that Act Comes into Force: SI/2020-13. It sets the day that section 220 of the Budget Implementation Act, 2018, No. 1 comes into force — the later of January 31, 2020 and the day the United Kingdom stops being a member of the European Union. The change lets the Bank of Canada keep dealing in UK government securities after the UK’s withdrawal.

What it does#

• Brings into force section 220 of the Budget Implementation Act, 2018, No. 1 on the later of January 31, 2020 or the day the United Kingdom ceases to be a member of the European Union.
• Allows the Bank of Canada to continue to buy and sell securities issued or guaranteed by the UK government as part of its normal operations after the UK leaves the EU.
• Protects the Government of Canada’s access to liquidity held in the Exchange Fund Account by making sure pound‑sterling assets can still be converted or transacted through the Bank.

Who's affected#

• Bank of Canada — its legal authority to trade UK securities is preserved.
• Government of Canada and the Minister of Finance — they rely on the Exchange Fund Account for liquidity and foreign reserves.
• The public indirectly — because these rules affect how the government manages foreign reserves and short‑term liquidity.
• United Kingdom and European Union are referenced because the timing depends on the UK’s formal withdrawal date.

Why it matters#

• The order ensures Canada can keep using pound‑sterling assets in its foreign reserves as usual after the UK leaves the EU.
• As of September 30, 2019, pound‑sterling assets were about US$ 7.3 billion (Can$ 9.6 billion), or 9.8%, of Canada’s liquid foreign reserves. Letting the Bank continue to transact in UK securities helps preserve that liquidity.
• Without this measure, the Bank’s normal ability to trade UK‑guaranteed securities could have ended when the UK left the EU, which might have made it harder for the government to convert those holdings into Canadian dollars if needed.