Spotlight

Bank of Canada designates Lynx as a systemically important payment system

@ Aminul Islam
Bank of Canada Governor Tiff Macklem has designated Lynx, which is owned and operated by Payments Canada, as a systemically important payment system under the Payment Clearing and Settlement Act. Given how important Lynx is as Canada’s wholesale payment system, a disruption or failure of this system could significantly and adversely affect the financial system and economy. This designation brings Lynx under formal Bank oversight.
As part of Canada’s payments modernization efforts, Lynx replaces the Large Value Transfer System (LVTS). It inherits the operational functions to:
reinforce the Bank’s policy interest rate
provide a means for settling obligations from other financial market infrastructures (FMIs)
channel liquidity from the Bank to financial institutions in times of crisis
Payment systems under Bank oversight must comply with the CPMI-IOSCO Principles for Financial Market Infrastructures issued by the Bank for International Settlements’ Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions. The principles ensure risks in the system are adequately monitored and controlled. Designation provides legal protection regarding payment finality. It also places Lynx under the Bank’s resolution regime, ensuring continued operations in the unlikely but plausible event that the payment system becomes non-viable.

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