Vol. 150, No. 15 — April 9, 2016

GOVERNMENT NOTICES

BANK OF CANADA

FINANCIAL STATEMENTS (YEAR ENDED 31 DECEMBER 2015)

FINANCIAL REPORTING RESPONSIBILITY

The accompanying financial statements of the Bank of Canada (the Bank) have been prepared by management in accordance with International Financial Reporting Standards and contain certain items that reflect the best estimates and judgment of management. The integrity and reliability of the data in these financial statements are management’s responsibility. Management is responsible for ensuring that all information in the Annual Report is consistent with the financial statements.

In support of its responsibility for the integrity and reliability of these financial statements and for the accounting system from which they are derived, management has developed and maintains a system of internal controls to provide reasonable assurance that transactions are properly authorized and recognized, that financial information is reliable, that the assets are safeguarded and liabilities recognized, and that the operations are carried out effectively. The Bank has an internal Audit Department whose functions include reviewing internal controls, including accounting and financial controls and their application.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls and exercises this responsibility through the Audit and Finance Committee of the Board. The Audit and Finance Committee is composed of members who are neither officers nor employees of the Bank and who are financially literate. The Audit and Finance Committee is therefore qualified to review the Bank’s annual financial statements and to recommend their approval by the Board of Directors. The Audit and Finance Committee meets with management, the Chief Internal Auditor and the Bank’s independent auditors who are appointed by order in council. The Audit and Finance Committee has established processes to evaluate the independence of the Bank’s independent auditors and oversees all services provided by them. The Audit and Finance Committee has a duty to review the adoption of, and changes in, accounting principles and procedures that have a material effect on the financial statements, and to review and assess key management judgments and estimates material to the reported financial information.

These financial statements have been audited by the Bank’s independent auditors, Deloitte LLP and Ernst & Young LLP, and their report is presented herein. The independent auditors have full and unrestricted access to the Audit and Finance Committee to discuss their audit and related findings.

Ottawa, Canada, 11 February 2016

STEPHEN S. POLOZ
Governor

CARMEN VIERULA, CPA, CA
Chief Financial Officer and
Chief Accountant

Independent Auditors’ Report

To the Minister of Finance, registered shareholder of the Bank of Canada (the “Bank”)

We have audited the accompanying financial statements of the Bank, which comprise the statement of financial position as at 31 December 2015 and the statements of net income and comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2015 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Ottawa, Canada, 11 February 2016

DELOITTE LLP
Chartered Professional Accountants
Licensed Public Accountants

ERNST & YOUNG LLP
Chartered Professional Accountants
Licensed Public Accountants

BANK OF CANADA

Statement of financial position
(Millions of Canadian dollars)

  31 December 2015 As at 31 December 2014
ASSETS    
Cash and foreign deposits (note 4) 11.2 8.4
Loans and receivables    
Securities purchased under resale agreements (note 5) 6,089.4 2,764.8
Advances to members of the Canadian Payments Association (note 5) - -
Other receivables 7.3 3.6
  6,096.7 2,768.4
Investments (notes 6, 7, 8)    
Government of Canada treasury bills 18,220.3 19,386.5
Government of Canada bonds 75,763.5 71,084.7
Other investments 405.2 355.2
  94,389.0 90,826.4
Property and equipment (note 9) 431.4 283.9
Intangible assets (note 10) 37.9 43.8
Other assets (note 11) 180.7 181.2
Total assets 101,146.9 94,112.1
LIABILITIES AND EQUITY    
Bank notes in circulation (notes 7, 12) 75,496.9 70,023.5
Deposits (notes 7, 13)    
Government of Canada 22,617.3 21,526.6
Members of the Canadian Payments Association 500.4 150.1
Other deposits 1,475.2 1,518.9
  24,592.9 23,195.6
Other liabilities (note 14) 558.9 443.7
  100,648.7 93,662.8
Equity (note 16) 498.2 449.3
Total liabilities and equity 101,146.9 94,112.1

Commitments, contingencies and guarantees (notes 17, 18)

STEPHEN S. POLOZ
Governor

CARMEN VIERULA, CPA, CA
Chief Financial Officer and
Chief Accountant

DEREK D. KEY
Lead Director
Board of Directors

PHYLLIS CLARK
Chair
Audit and Finance Committee

(See accompanying notes to the financial statements)

BANK OF CANADA

Statement of net income and comprehensive income (Millions of Canadian dollars)

 

For the year ended

  31 December 2015 31 December 2014
INCOME    
Interest revenue    
Interest earned on investments 1,747.4 1,808.6
Dividend revenue 3.8 3.3
Interest earned on securities purchased under resale agreements 4.3 2.5
Other interest revenue 0.3 0.2
  1,755.8 1,814.6
Interest expense    
Interest expense on deposits (128.8) (218.2)
NET INTEREST INCOME 1,627.0 1,596.4
Other revenue 8.5 8.2
Total income 1,635.5 1,604.6
Expenses    
Staff costs 215.3 191.3
Bank note research, production and processing 72.5 99.6
Premises costs 32.3 51.0
Technology and telecommunications 35.5 34.6
Depreciation and amortization 38.2 37.6
Other operating expenses 65.9 63.7
Total expenses 459.7 477.8
Net income 1,175.8 1,126.8
OTHER COMPREHENSIVE INCOME (LOSS)    
Items that will not be reclassified to net income    
Remeasurements of the net defined-benefit liability/asset 13.7 (101.4)
Items that may be reclassified subsequently to net income    
Change in fair value of available-for-sale financial assets 48.9 14.1
Other comprehensive income (loss) 62.6 (87.3)
COMPREHENSIVE INCOME 1,238.4 1,039.5

(See accompanying notes to the financial statements)

BANK OF CANADA

Statement of changes in equity (Millions of Canadian dollars)

For the year ended 31 December

  Share capital Statutory reserve Special reserve Available-for-sale reserve Retained earnings Total
Balance, 1 January 2015 5.0 25.0 100.0 319.3 - 449.3
Comprehensive income for the period            
Net income - - - - 1,175.8 1,175.8
Remeasurements of the net defined-benefit liability/asset - - - - 13.7 13.7
Change in fair value of BIS shares - - - 50.0 - 50.0
Change in fair value of Government of Canada treasury bills - - - (1.1) - (1.1)
- - - 48.9 1,189.5 1,238.4
Transfer to Receiver General for Canada - - - - (1,189.5) (1,189.5)
Balance, 31 December 2015 5.0 25.0 100.0 368.2 - 498.2
Balance, 1 January 2014 5.0 25.0 100.0 305.2 - 435.2
Comprehensive income for the period            
Net income - - - - 1,126.8 1,126.8
Remeasurements of the net defined-benefit liability/asset - - - - (101.4) (101.4)
Change in fair value of BIS shares - - - 18.1 - 18.1
Change in fair value of Government of Canada treasury bills - - - (4.0) - (4.0)
- - - 14.1 1,025.4 1,039.5
Transfer to Receiver General for Canada - - - - (1,025.4) (1,025.4)
Balance, 31 December 2014 5.0 25.0 100.0 319.3 - 449.3

(See accompanying notes to the financial statements.)

BANK OF CANADA

Statement of cash flows (Millions of Canadian dollars)

 

For the year ended

  31 December 2015 31 December 2014
CASH FLOWS FROM OPERATING ACTIVITIES    
Interest received 1,836.2 1,870.1
Dividends received 3.8 3.3
Other revenue received 3.7 13.0
Interest paid (128.8) (218.2)
Payments to or on behalf of employees/suppliers and to members of the Canadian Payments Association (391.1) (482.7)
Net decrease in advances to members of the Canadian Payments Association - -
Net increase (decrease) in deposits 1,397.3 (627.9)
Proceeds from maturity of securities purchased under resale agreements 42,363.0 21,321.1
Acquisition of securities purchased under resale agreements (45,687.2) (21,878.4)
Repayments of securities sold under repurchase agreements (115.1) (229.9)
Proceeds from securities sold under repurchase agreements 115.1 229.9
Net cash (used in) provided by operating activities (603.1) 0.3
CASH FLOWS FROM INVESTING ACTIVITIES    
Net decrease in Government of Canada treasury bills 1,136.6 2,180.4
Purchases of Government of Canada bonds (16,721.8) (18,109.8)
Proceeds from maturity of Government of Canada bonds 11,986.8 13,634.0
Additions of property and equipment (173.1) (76.8)
Additions of intangible assets (6.7) (3.9)
Net cash used in investing activities (3,778.2) (2,376.1)
CASH FLOWS FROM FINANCING ACTIVITIES    
Net increase in bank notes in circulation 5,473.4 3,407.6
Remittance of ascertained surplus to the Receiver General for Canada (1,090.4) (1,028.7)
Net cash provided by financing activities 4,383.0 2,378.9
EFFECT OF EXCHANGE RATE CHANGES ON FOREIGN CURRENCY 1.1 0.3
INCREASE IN CASH AND FOREIGN DEPOSITS 2.8 3.4
CASH AND FOREIGN DEPOSITS, BEGINNING OF YEAR 8.4 5.0
CASH AND FOREIGN DEPOSITS, END OF YEAR 11.2 8.4

(See accompanying notes to the financial statements.)

BANK OF CANADA

Notes to the financial statements For the year ended 31 December 2015

(Amounts in the notes to the financial statements of the Bank of Canada are in millions of Canadian dollars, unless otherwise stated.)

1. The business of the Bank of Canada

The Bank of Canada (the Bank) is the nation’s central bank. The Bank is a corporation established under the Bank of Canada Act, is wholly owned by the Government of Canada and is exempt from income taxes. The Bank does not offer banking services to the public.

The Bank is a Government Business Enterprise as defined by the Canadian Public Sector Accounting Standards and, as such, adheres to the standards applicable to publicly accountable enterprises as outlined by the Chartered Professional Accountants of Canada (CPA Canada). In compliance with this requirement, the Bank has developed accounting policies in accordance with International Financial Reporting Standards (IFRS).

The address of the registered head office is 234 Laurier Avenue West, Ottawa, Ontario.

The Bank’s mandate under the Bank of Canada Act is “to promote the economic and financial welfare of Canada.” The Bank’s activities and operations are undertaken in support of this mandate and not with the objective of generating revenue or profits. The Bank’s four core areas of responsibility are the following:

The Corporate Administration function supports the management of the Bank’s human resources, operations and strategic initiatives, as well as the stewardship of financial, physical, information and technology assets.

The Bank has the exclusive right to issue Canadian bank notes, and the face value of these bank notes is the most significant liability on the Bank’s balance sheet. The Bank invests the proceeds from the issuance of bank notes into Government of Canada securities, which are acquired on a non-competitive basis. These assets enable the Bank to execute its responsibilities for the monetary policy and financial system functions.

Interest income derived from Government of Canada securities is the Bank’s primary source of revenue each year. The income generated from the assets backing the bank notes in circulation (net of bank note production and distribution costs) is referred to as “seigniorage,” which provides a stable and constant source of funding for the Bank’s operations, enabling it to function independently of government appropriations. A portion of this revenue is used to fund the Bank’s operations and reserves; the remaining net income is remitted to the Receiver General in accordance with the requirements of the Bank of Canada Act.

2. Basis of preparation

Compliance with International Financial Reporting Standards (IFRS)

These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board and conform to the disclosure and accounting requirements of the Bank of Canada Act and the Bank’s bylaws.

The Board of Directors approved the financial statements on 11 February 2016.

Measurement base

The financial statements have been prepared on a historical cost basis, except for the available-for-sale (AFS) financial assets, which are measured at fair value, and the net defined-benefit liability/asset of employee benefit plans, which is recognized as the net of the fair value of plan assets and the present value of the defined-benefit obligation.

Significant accounting estimates and judgments in applying accounting policies

The preparation of the financial statements requires management to make judgments, estimates and assumptions based on information available at the statement date that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses, as well as related information. The Bank based its assumptions and estimates on information that was available when these financial statements were prepared. Existing circumstances and assumptions about future developments may change, however, in response to market fluctuations or circumstances that are beyond the control of the Bank. In such cases, the impact will be recognized in the financial statements of a future fiscal period.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant estimates are primarily in the area of the fair values of the shares in the Bank for International Settlements (BIS) (note 7), collateral taken (note 8) and employee benefits (note 15).

Functional and presentation currency

The Bank’s functional and presentation currency is the Canadian dollar.

Fiscal-agent and custodial activities

Responsibility for the operational management of the Government of Canada’s financial assets and liabilities is borne jointly by the Bank (as fiscal agent for the Government of Canada) and the Department of Finance. In this fiscal-agent role, the Bank provides transactional and administrative support to the Government of Canada in certain areas. The assets, liabilities, expenditures and revenues to which this support relates are those of the Government of Canada and are not included in the financial statements of the Bank.

Securities safekeeping and other custodial activities are provided to foreign central banks, international organizations and other government-related entities. The assets, and income arising therefrom, are excluded from these financial statements since they are not assets or income of the Bank.

3. Significant accounting policies

This section contains the Bank’s accounting policies that relate to the financial statements as a whole. Significant accounting policies specific to a note are included within that note. These specific accounting policies refer to loans and receivables (note 5), securities lending (note 6), financial instruments (note 7), property and equipment (note 9), intangible assets (note 10), other assets (note 11), other liabilities (note 14), employee benefits (note 15) and leases (note 17).

There were no new or amended standards adopted by the Bank during fiscal 2015 that had a material impact on its financial statements.

Translation of foreign currencies

Investment income and expenses denominated in foreign currencies are translated at the exchange rate in effect at the date of the transaction. Fair-value items denominated in foreign currencies are translated at the exchange rate in effect at the date of the fair-value measurement. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the exchange rates prevailing at the end of the reporting period. The resulting gains and losses are included in Other revenue. Gains or losses on equity investments classified as AFS, along with any gains or losses related to the exchange rate, are recognized in the available-for-sale reserve within Other Comprehensive Income.

Impairment of financial assets

For financial assets that are not classified at fair value through net income, the Bank assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of assets is impaired. Once impaired, financial assets carried at amortized cost are remeasured at the net recoverable amount, with the amount of impairment recognized in net income. Unrealized losses on impaired AFS financial assets are recognized in net income at the time of impairment.

Impairment of non-financial assets

Non-financial assets, including property and equipment and intangible assets, are reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying amount exceeds its recoverable amount.

Intangible assets under development are assessed for impairment on an annual basis.

Revenue recognition

Interest revenue earned on Government of Canada treasury bills and bonds is recognized in net income using the effective interest method. Dividend revenue on shares in the BIS is recognized as dividends are declared.

Realized gains (losses) on the sale of Government of Canada treasury bills are recognized in net income at the time of sale as a reclassification from Other Comprehensive Income and are calculated as the excess of proceeds over the amortized cost at the transaction date.

Interest earned on securities purchased under resale agreements is recognized using the effective interest method.

Other revenue is primarily composed of interest earned on advances to members of the Canadian Payments Association (CPA) and is recognized using the effective interest method.

Future changes in accounting policies

The following new standards issued by the International Accounting Standards Board (IASB) were assessed as having a possible effect on the Bank in the future. The Bank is currently determining the impact of these standards on its financial statements.

IFRS 9 Financial Instruments (IFRS 9)

In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments, bringing together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39, Financial Instruments: Recognition and Measurement.

IFRS 9 eliminates the existing financial asset categories and adopts a logical approach to the classification of financial assets driven by cash-flow characteristics and the business model in which an asset is held.

IFRS 9 introduces a new impairment model that results in a single impairment model being applied to all financial instruments. In addition, this new expected loss impairment model will require more timely recognition of expected credit losses.

IFRS 9 also includes a new hedge accounting model, together with corresponding disclosures about risk-management activities for those applying hedge accounting. The new model represents a substantial overhaul of hedge accounting that will enable entities to better reflect their risk-management activities in their financial statements. The most significant improvements apply to those entities that hedge non-financial risk.

The IASB has set 1 January 2018 as the mandatory effective date for the adoption of IFRS 9, although early adoption is permitted. The Bank is currently evaluating the impact of IFRS 9 on its financial statements.

IFRS 15 Revenue from contracts with customers (IFRS 15)

IFRS 15, as issued in May 2014, relates to the recognition of revenue that applies to all contracts with customers (except for contracts that are within the scope of the standards on leases, insurance contracts and financial instruments).

IFRS 15 establishes a five-step model to apply to revenue from contracts and extensive requirements for revenue disclosure. The standard also addresses the recognition and measurement of gains and losses on the sale of some non-financial assets that are not an output of the entity’s ordinary activities.

The IASB has set 1 January 2018 as the mandatory effective date for the adoption of IFRS 15, although early adoption is permitted. The Bank is currently evaluating the impact of IFRS 15 on its financial statements.

IFRS 16 Leases (IFRS 16)

On 13 January 2016, the IASB issued IFRS 16 that provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. It supersedes IAS 17 Leases and its associated interpretive guidance.

Significant changes were made to lessee accounting with the distinction between operating and finance leases removed and assets and liabilities recognized in respect of all leases (subject to limited exceptions for short-term leases and leases of low value assets). In contrast, IFRS 16 does not include significant changes to the requirements for lessors.

IFRS 16 is effective 1 January 2019 with earlier application permitted for companies that have also adopted IFRS 15, Revenue from Contracts with Customers. The Bank is currently evaluating the impact of IFRS 16 on its financial statements.

4. Cash and foreign deposits

Cash and foreign deposits is composed of cash on hand as well as highly liquid demand deposits in foreign currencies with other central banks or international financial institutions. Included in this balance is Can$10.3 million (Can$7.9 million at 31 December 2014) of foreign deposits. Credit risk related to these foreign deposits is discussed in note 8.

5. Loans and receivables

Loans and receivables is composed primarily of securities purchased under resale agreements and, if any, advances to members of the CPA. These transactions are fully collateralized in accordance with publicly disclosed collateral eligibility and margin requirements. The duration of securities purchased under resale agreements generally ranges between 1 and 90 business days. Financial risks related to these instruments are discussed in note 8.

Accounting policy

Securities purchased under resale agreements are reverserepo-type transactions in which the Bank purchases securities from designated counterparties with an agreement to sell them back at a predetermined price on an agreed transaction date. For accounting purposes, these agreements are treated as collateralized lending transactions and are recognized on the Statement of Financial Position at the amounts at which the securities were originally acquired, plus accrued interest.

Securities purchased under resale agreements

Balances outstanding at 31 December 2015 consist of agreements with original terms to maturity ranging from 22 to 85 days (24 days at 31 December 2014).

Advances to members of the Canadian Payments Association

Advances to members of the Canadian Payments Association (CPA) are typically composed of liquidity loans made under the Bank’s Standing Liquidity Facility. These advances mature the next business day. Interest on overnight advances is calculated at the Bank Rate. The Bank Rate is the rate of interest that the Bank charges on one-day loans to major financial institutions.

As at 31 December 2015, there were no Advances to members of the Canadian Payments Association ($Nil at 31 December 2014).

6. Securities-Lending Program

The Bank operates a Securities-Lending Program to support the liquidity of Government of Canada securities by providing the market with a secondary and temporary source of these securities. These securities-lending transactions are fully collateralized by securities and are generally one business day in duration.

Accounting policy

The securities loaned continue to be accounted for as investment assets. Lending fees charged by the Bank on these transactions are included in Other revenue at the maturity date of the transaction.

Securities lending

As at 31 December 2015, there were no loaned securities in the Bank’s investments (investments included loaned securities with fair market value of $185.8 million and amortized cost of $175.0 million at 31 December 2014).

7. Financial instruments

The Bank’s financial instruments consist of cash and foreign deposits, securities purchased under resale agreements, advances to members of the CPA, other receivables, investments (consisting of Government of Canada treasury bills, Government of Canada bonds and other investments), bank notes in circulation, deposits and other liabilities (excluding the net defined-benefit liability for pension benefit plans, other employee benefit plans and lease contracts).

In Other investments, the Bank holds 9 441 BIS shares (9 441 BIS shares at 31 December 2014) in order to participate in the BIS. Ownership of BIS shares is limited to central banks, and new shares can only be acquired following an invitation to subscribe extended by the BIS Board of Directors. The shares are nontransferable unless prior written consent is obtained from the BIS. The fair value of the BIS shares totalled $405.2 million ($355.2 million at 31 December 2014).

Accounting policy

The Bank accounts for all financial instruments using settlement-date accounting. Financial instruments are measured at fair value on initial recognition, plus transaction costs, if any, for all financial assets not carried at fair value through net income. Subsequent to initial recognition, they are accounted for based on their classification.

Subsequent to initial recognition, financial assets classified as AFS are measured at fair value using quoted market prices, with the exception of the BIS shares, which are measured using significant non-observable inputs. Unrealized changes in the values of AFS financial assets measured at fair value are recognized in Other Comprehensive Income and accumulated in the Available-for-sale reserve in Equity until the financial asset is derecognized or becomes impaired. At that time, the cumulative unrealized gain or loss previously recognized in Other Comprehensive Income is reclassified from Equity to Net income. The Bank’s financial assets designated as AFS consist of Government of Canada treasury bills and investment in the BIS shares.

Financial assets that the Bank has the intent and ability to hold to maturity are classified as held-to-maturity (HTM). Subsequent to initial recognition, financial assets classified as HTM are measured at amortized cost using the effective interest method less any impairment losses. The effective interest method uses the rate inherent in a financial instrument that discounts the estimated future cash flows over the expected life of the financial instrument in order to recognize interest on a constant-yield basis. Government of Canada bonds are classified as HTM.

The Bank has not classified any of its financial assets at fair value through net income, other than cash and foreign deposits.

All other financial assets are classified as loans and receivables. Subsequent to initial recognition, these are measured at amortized cost less any impairment losses using the effective interest method.

The Bank derecognizes a financial asset when it considers that substantially all of the risks and rewards of the asset have been transferred or when the contractual rights to the cash flows of the financial asset expire. On derecognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in net income.

The Bank has classified its financial liabilities as other liabilities. These liabilities are initially recognized at fair value. Subsequent to initial recognition, financial liabilities are measured at amortized cost using the effective interest method, with the exception of bank notes in circulation, which are measured at face value. The Bank has not classified any of its financial liabilities at fair value through net income.

The Bank derecognizes financial liabilities when the Bank’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognized and the sum of the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in net income.

Securities sold under repurchase agreements are repo-type transactions in which the Bank sells Government of Canada securities to designated counterparties with an agreement to buy them back at a predetermined price on an agreed transaction date. For accounting purposes, these agreements are treated as collateralized borrowing transactions and are recognized on the Statement of Financial Position at the amounts at which the securities were originally sold, plus accrued interest.

Measurement of financial instruments

Cash and foreign deposits, Government of Canada treasury bills and BIS shares are measured at fair value. All other financial instruments are measured at amortized cost using the effective interest method, with the exception of bank notes in circulation, which are measured at face value.

Financial instruments measured at fair value

Financial instruments measured at fair value are classified using a fair-value hierarchy that reflects the significance of the inputs used in making the measurements:

The fair-value hierarchy requires the use of observable market inputs wherever such inputs exist. In measuring fair value, a financial instrument is classified at the lowest level of the hierarchy for which a significant input has been considered.

  Level 1 Level 2 Level 3 Total
Financial assets at fair value as at 31 December 2015
Government of Canada treasury bills 18,220.3 - - 18,220.3
BIS shares - - 405.2 405.2
  18,220.3 - 405.2 18,625.5
Financial assets at fair value as at 31 December 2014
Government of Canada treasury bills 19,386.5 - - 19,386.5
BIS shares - - 355.2 355.2
  19,386.5 - 355.2 19,741.7

There were no transfers of amounts between levels in 2015.

The fair value of the BIS shares is estimated to be 70 per cent of the Bank’s interest in the net asset value of the BIS at the reporting date. This formula is equivalent to the methodology applied by the BIS to determine the pricing of any new shares issued. While the Bank considers that the 30 per cent discount against the net asset value of the BIS continues to be the appropriate basis for valuation, the valuation inputs are not considered to be observable, and a 5 per cent change in the discount to the net asset value would not have a material impact on the fair value of the BIS shares. There were no changes to the valuation technique during the year.

The following table reconciles the estimated fair value of the BIS shares determined using Level 3 fair-value measurements:

  31 December 2015 31 December 2014
Opening balance at beginning of period 355.2 337.1
Change in fair value recorded through Other Comprehensive Income 50.0 18.1
Closing balance at period-end 405.2 355.2
Financial instruments not measured at fair value

Fair values of Government of Canada bonds are determined based on unadjusted quoted market prices in an active market (Level 1). The fair value of Government of Canada bonds was $81,116.9 million at 31 December 2015 ($75,630.7 million at 31 December 2014).

8. Financial risk management

The Bank maintains a strong risk culture and a comprehensive risk management and control framework to manage its risks. The Executive Council oversees risk management and the implementation of sound management processes to safeguard the Bank. The Board of Directors has an oversight role in the Bank’s performance of risk management.

The Bank is exposed to financial risk (credit risk, market risk and liquidity risk) associated with the management of the Bank’s financial assets and liabilities. The Financial Risk Office, which is independent of operations, monitors and reports on the financial risks relating to the Bank’s Statement of Financial Position. The following is a description of those risks and how the Bank manages its exposure to them.

Credit risk

Credit risk is the risk that a counterparty to a financial contract will fail to discharge its obligations in accordance with agreed-upon terms.

The Bank is exposed to credit risk through its cash and foreign deposits, investment portfolio and advances to members of the CPA and through market transactions conducted in the form of securities purchased under resale agreements and loans of securities. The maximum exposure to credit risk is estimated to be the carrying value of the items listed above. There are no past due or impaired amounts.

Advances to members of the CPA, securities purchased under resale agreements and securities loaned are fully collateralized loans. Collateral is taken in accordance with the Bank’s publicly disclosed eligibility criteria and margin requirements, which are accessible on its Web site. Strict eligibility criteria are set for all collateral, and the Bank requires excess collateral relative to the size of the loan provided.

In the unlikely event of a counterparty default, collateral can be liquidated to offset credit exposure. The credit quality of collateral is managed through a set of restrictions based on asset type, term to maturity and the credit ratings of the securities pledged.

Concentration of credit risk

The credit risk associated with the Bank’s investment portfolio, representing 93 per cent of the carrying value of its total assets (97 per cent in 2014), is low because the securities held are primarily direct obligations of the Government of Canada, which holds a credit rating of AAA.

The Bank’s advances to members of the CPA and securities purchased under resale agreements, representing 6 per cent of the carrying value of its total assets (3 per cent in 2014), are collateralized obligations of various Canadian-based financial institutions. The fair value of collateral held against securities purchased under resale agreements at the end of the reporting period is presented below.

  31 December 2015 31 December 2014
  $ % $ %
Securities issued or guaranteed by the Government of Canada 1,918.6 30.0 2,868.4 100.0
Securities issued or guaranteed by a provincial government 4,401.7 70.0 - -
Total fair value of collateral pledged 6,320.3 100.0 2,868.4 100.0
As a percentage of amortized cost   104%   104%

The Bank is exposed to credit risk through its guarantee of the Large Value Transfer System (LVTS) and through the execution of foreign currency contracts. The maximum exposure under guarantees and foreign currency contracts is described in note 18.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Bank’s investment in Government of Canada treasury bills and bonds counteracts the non-interest-bearing bank notes in circulation liability and supports the Bank’s operational independence to conduct monetary policy. These assets are acquired in proportions that broadly resemble the structure of the Government of Canada’s domestic debt outstanding in order to reduce interest rate risk from the perspective of the Government of Canada.

The Bank’s exposure to fair-value interest rate risk arises principally through its investment in Government of Canada treasury bills, which are short term, and Government of Canada bonds. The fair value of the Government of Canada treasury bills portfolio held by the Bank is exposed to fluctuations because of changes in market interest rates.

The Bank’s revenue will vary over time in response to future movements in interest rates. These variations would not affect the ability of the Bank to fulfill its obligations, since its revenues greatly exceed its expenses.

The figures below show the effect at 31 December of an (increase)/decrease of 25 basis points in interest rates on the fair value of the Government of Canada treasury bill portfolio and on Other Comprehensive Income.

  31 December 2015 31 December 2014
Government of Canada treasury bills (15.2) / 15.1 (17.5) / 16.9

The Bank’s exposure to interest rate risk in the form of fluctuations in future cash flows of existing financial instruments is limited to Government of Canada deposits and cash and foreign deposits since these instruments are subject to variable interest rates. The remainder of the Bank’s financial assets and liabilities have either fixed interest rates or are non-interest-bearing.

The figures below show the effect at 31 December of an increase/(decrease) of 25 basis points in interest rates on the interest expenses paid on Government of Canada deposits.

  31 December 2015 31 December 2014
Interest expense on Government of Canada deposits 56.7 / (56.7) 57.1 / (57.1)

For all financial instruments, except bank notes in circulation, the future cash flows of the Bank depend on the prevailing market rate of interest at the time of renewal.

The following table illustrates interest rate risk relative to future cash flows by considering the expected maturity or repricing dates of existing financial assets and liabilities.

As at 31 December 2015

  Noninterest-sensitive Within 12 months 1 to 5 years Over 5 years Total
FINANCIAL ASSETS          
Cash and foreign deposits - 11.2 - - 11.2
Loans and receivables (see note 1) 7.3 6,089.4 - - 6,096.7
Investments          
Government of Canada treasury bills - 18,220.3 - - 18,220.3
Government of Canada bonds (see note 2) - 14,378.0 35,714.9 25,670.5 75,763.4
Shares in the BIS 405.2 - - - 405.2
  412.5 38,698.9 35,714.9 25,670.5 100,496.8
FINANCIAL LIABILITIES          
Bank notes in circulation 75,496.9 - - - 75,496.9
Deposits          
Government of Canada - 22,617.3 - - 22,617.3
Members of the CPA - 500.4 - - 500.4
Other deposits 626.2 849.0 - - 1,475.2
Other financial liabilities 353.3 - - - 353.3
  76,476.4 23,966.7 - - 100,443.1
Interest rate sensitivity gap (76,063.9) 14,732.2 35,714.9 25,670.5 53.7

As at 31 December 2014

  Noninterest-sensitive Within 12 months 1 to 5 years Over 5 years Total
FINANCIAL ASSETS          
Cash and foreign deposits - 8.4 - - 8.4
Loans and receivables (see note 3) 3.6 2,764.8 - - 2,768.4
Investments          
Government of Canada treasury bills - 19,386.5 - - 19,386.5
Government of Canada bonds (see note 4) - 12,031.7 35,162.0 23,891.0 71,084.7
Shares in the BIS 355.2 - - - 355.2
  358.8 34,191.4 35,162.0 23,891.0 93,603.2
FINANCIAL LIABILITIES          
Bank notes in circulation 70,023.5 - - - 70,023.5
Deposits          
Government of Canada - 21,526.6 - - 21,526.6
Members of the CPA - 150.1 - - 150.1
Other deposits 577.3 941.6 - - 1,518.9
Other financial liabilities 238.9 - - - 238.9
  70,839.7 22,618.3 - - 93,458.0
Interest rate sensitivity gap (70,480.9) 11,573.1 35,162.0 23,891.0 145.2
Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Given the small size of the Bank’s net foreign currency exposure relative to its total assets, currency risk is not considered significant.

The Bank is exposed to currency risk primarily by holding shares in the BIS. These shares are denominated in Special Drawing Rights (SDRs). The SDR serves as the unit of account for the International Monetary Fund (IMF), and its value is based on a “basket” of four major currencies: the euro, the U.S. dollar, the British pound and the Japanese yen. SDRs are translated into Canadian-dollar equivalents at the rates prevailing on the date when the fair value is determined.

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from changes in interest and exchange rates), whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market.

The Bank is exposed to other price risk through its investment in the BIS. For accounting purposes, the Bank treats BIS shares as AFS and the fair value of these shares is estimated on the basis of the net asset value of the BIS, less a discount of 30 per cent. Accordingly, these shares are revalued to reflect movements in the net asset value of the BIS and in the Canadian dollar. The other price risk faced on BIS shares is incidental to the general reasons for holding them and is immaterial compared with other market risks faced by the Bank.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liabilities with no fixed maturity include Bank notes in circulation and Government of Canada deposits. Historical experience has shown that bank notes in circulation provide a stable source of long-term funding for the Bank. Government of Canada deposits are deposits held in the Bank’s capacity as the Government of Canada’s fiscal agent. As a counterpart to this non-interest-bearing liability with no fixed maturity, the Bank holds a portfolio of highly liquid, interest-bearing securities. In the event of an unexpected redemption of bank notes or a significant withdrawal from the Government of Canada’s deposit for the prudential liquidity-management plan, the Bank has the ability to settle the obligation by means of several tools.

As the nation’s central bank, the Bank is the ultimate source of liquid funds to the Canadian financial system and has the power and operational ability to create Canadian-dollar liquidity in unlimited amounts at any time. This power is exercised within the Bank’s commitment to keeping inflation low, stable and predictable.

The Bank is exposed to liquidity risk through its guarantee of the LVTS. The maximum exposure under this guarantee is described in note 18.

The following table presents a maturity analysis of the Bank’s financial assets and liabilities. The balances in this table do not correspond to the balances in the Statement of Financial Position, since the table presents all cash flows on an undiscounted basis.

In cases where counterparties to securities purchased under resale agreements substitute collateral after the outset of an agreement, portions of the carrying values presented may mature earlier than as presented, where the amount maturing early is dependent on the value of the collateral being substituted. Where collateral has been substituted, agreements are typically re-established under the same terms and conditions. The information presented in the following table is prepared according to agreements in place as at 31 December 2015 and 31 December 2014, respectively.

As at 31 December 2015

  No fixed maturity Within 12 months 1 to 5 years Over 5 years Total
FINANCIAL ASSETS          
Cash and foreign deposits 11.2 - - - 11.2
Loans and receivables - 6,096.7 - - 6,096.7
Investments          
Government of Canada treasury bills - 18,250.0 - - 18,250.0
Government of Canada bonds - 14,330.0 35,555.0 24,778.8 74,663.8
Shares in the BIS 405.2 - - - 405.2
  416.4 38,676.7 35,555.0 24,778.8 99,426.9
FINANCIAL LIABILITIES          
Bank notes in circulation 75,496.9 - - - 75,496.9
Deposits          
Government of Canada 22,617.3 - - - 22,617.3
Members of the CPA - 500.4 - - 500.4
Other deposits 1,475.2 - - - 1,475.2
Other financial liabilities - 353.3 - - 353.3
  99,589.4 853.7 - - 100,443.1
Net maturity difference (99,173.0) 37,823.0 35,555.0 24,778.8 (1,016.2)

As at 31 December 2014

  No fixed maturity Within 12 months 1 to 5 years Over 5 years Total
FINANCIAL ASSETS          
Cash and foreign deposits 8.4 - - - 8.4
Loans and receivables - 2,768.4 - - 2,768.4
Investments          
Government of Canada treasury bills - 19,450.0 - - 19,450.0
Government of Canada bonds - 11,986.8 35,040.0 23,123.8 70,150.6
Shares in the BIS 355.2 - - - 355.2
  363.6 34,205.2 35,040.0 23,123.8 92,732.6
FINANCIAL LIABILITES          
Bank notes in circulation 70,023.5 - - - 70,023.5
Deposits          
Government of Canada 21,526.6 - - - 21,526.6
Members of the CPA - 150.1 - - 150.1
Other deposits 1,518.9 - - - 1,518.9
Other financial liabilities - 238.9 - - 238.9
  93,069.0 389.0 - - 93,458.0
Net maturity difference (92,705.4) 33,816.2 35,040.0 23,123.8 (725.4)

9. Property and equipment

Accounting policy

Property and equipment consists of land, buildings, computer equipment, other equipment and related projects in progress. Property and equipment is measured at cost less accumulated depreciation, except for land, which is not depreciated, and is net of any related impairment losses. Projects in progress are measured at cost but are not depreciated until the asset is available for use. Cost includes expenditures that are directly attributable to the acquisition or construction of the asset.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Upon replacing a significant part of an item of property and equipment, the carrying amount of the replaced part is derecognized and any gain or loss recognized in depreciation.

Depreciation is calculated using the straight-line method and is applied over the estimated useful lives of the assets, as shown below. The estimated useful life and the depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Buildings 25 to 65 years

Computer equipment 3 to 7 years

Other equipment 5 to 15 years

Leasehold improvements (included in Other equipment) are depreciated over the lesser of the useful life or the term of the lease.

Carrying value of property and equipment
  Land and buildings Computer equipment Other equipment Total
2015        
Cost        
Balances, 31 December 2014 291.5 39.3 79.1 409.9
Additions 165.9 3.0 4.2 173.1
Disposals - (1.3) (0.4) (1.7)
Transfers to other asset categories - - - -
Balances, 31 December 2015 457.4 41.0 82.9 581.3
Depreciation        
Balances, 31 December 2014 (78.3) (16.7) (31.0) (126.0)
Depreciation expense (6.1) (5.5) (14.0) (25.6)
Disposals - 1.3 0.4 1.7
Transfers to other asset categories - - - -
Balances, 31 December 2015 (84.4) (20.9) (44.6) (149.9)
Carrying amounts        
At 31 December 2014 213.2 22.6 48.1 283.9
At 31 December 2015 373.0 20.1 38.3 431.4

Land and buildings includes the activities related to the Head Office Renewal Program. In December 2013, the Bank signed a memorandum of understanding with the construction manager that establishes a guaranteed maximum price for future construction at the head office facility. The commitments at 31 December 2015 are primarily associated with the Head Office Renewal Program.

Other equipment includes bank note inspection equipment that was obtained through a finance lease arrangement (note 17).

  Land and buildings Computer equipment Other equipment Total
Projects in progress 2015        
Included in Carrying amounts at 31 December 2015 255.3 6.4 4.1 265.8
Additions during 2015 165.9 3.0 3.7 172.6
Commitments at 31 December 2015 99.1 0.2 7.3 106.6

Projects in progress consists primarily of $255.3 million related to the Head Office Renewal Program (31 December 2014— $89.4 million) and $4.5 million related to the High Availability Renewal Program (31 December 2014—$5.1 million).

  Land and buildings Computer equipment Other equipment Total
2014        
Cost        
Balances, 31 December 2013 221.4 35.8 80.5 337.7
Additions 70.1 3.4 3.3 76.8
Disposals - - (4.6) (4.6)
Transfers to other asset categories - 0.1 (0.1) -
Balances, 31 December 2014 291.5 39.3 79.1 409.9
Depreciation        
Balances, 31 December 2013 (72.4) (11.4) (21.5) (105.3)
Depreciation expense (5.9) (5.3) (14.0) (25.2)
Disposals - - 4.5 4.5
Transfers to other asset categories - - - -
Balances, 31 December 2014 (78.3) (16.7) (31.0) (126.0)
Carrying amounts        
At 31 December 2013 149.0 24.4 59.0 232.4
At 31 December 2014 213.2 22.6 48.1 283.9
  Land and buildings Computer equipment Other equipment Total
Projects in progress 2014        
Included in Carrying amounts at 31 December 2014 89.4 5.1 0.4 94.9
Additions during 2014 69.7 3.4 0.3 73.4
Commitments at 31 December 2014 199.5 0.3 1.0 200.8

10. Intangible assets

Accounting policy

Intangible assets are identifiable non-monetary assets without physical substance. The Bank’s intangible assets consist of computer software internally developed or externally acquired.

Costs that are directly associated with the internal development of identifiable software are recognized as intangible assets if, in management’s best estimate, the asset can technically be completed and will provide a future economic benefit to the Bank. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates.

Computer software assets that are acquired by the Bank and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

Amortization is calculated using the straight-line method and is applied over the estimated useful lives of the assets, which may vary from 3 to 15 years. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.

Carrying value of intangible assets
  Internally generated software Other software Total
2015      
Cost      
Balances, 31 December 2014 45.9 62.6 108.5
Additions 5.2 1.5 6.7
Disposals (2.0) - (2.0)
Transfers to other asset categories - - -
Balances, 31 December 2015 49.1 64.1 113.2
Amortization      
Balances, 31 December 2014 (38.5) (26.2) (64.7)
Amortization expense (4.5) (8.1) (12.6)
Disposals 2.0 - 2.0
Transfers to other asset categories - - -
Balances, 31 December 2015 (41.0) (34.3) (75.3)
Carrying amounts      
At 31 December 2014 7.4 36.4 43.8
At 31 December 2015 8.1 29.8 37.9
  Internally generated software Other software Total
Projects in progress 2015      
Included in Carrying amounts at 31 December 2015 7.0 1.4 8.4
Additions during 2015 4.5 1.4 5.9
Commitments at 31 December 2015 - - -
  Internally generated software Other software Total
2014      
Cost      
Balances, 31 December 2013 43.2 61.4 104.6
Additions 2.7 1.2 3.9
Disposals - - -
Transfers to other asset categories - - -
Balances, 31 December 2014 45.9 62.6 108.5
Amortization      
Balances, 31 December 2013 (33.8) (18.6) (52.4)
Amortization expense (4.7) (7.6) (12.3)
Disposals - - -
Transfers to other asset categories - - -
Balances, 31 December 2014 (38.5) (26.2) (64.7)
Carrying amounts      
At 31 December 2013 9.4 42.8 52.2
At 31 December 2014 7.4 36.4 43.8
  Internally generated software Other software Total
Projects in progress 2014      
Included in Carrying amounts at 31 December 2014 2.7 0.5 3.2
Additions during 2014 2.7 0.5 3.2
Commitments at 31 December 2014 - - -

11. Other assets

Accounting policy

Bank note inventory consists of production materials, including the polymer substrate and ink, and is measured at the lower of the cost or the net realizable value. The cost to produce finished bank notes is expensed as incurred.

Composition of other assets
  31 December 2015 31 December 2014
Bank note inventory 11.1 17.2
Net defined-benefit asset (note 15) 135.1 134.8
All other assets 34.5 29.2
Total other assets 180.7 181.2

Included in All other assets is a $20.0 million advance to CBRE Limited in connection with the Head Office Renewal Program, which is expected to remain in place through to the end of the construction period ($15.0 million at 31 December 2014). The advance is to facilitate the timely payment of subcontractor agreements.

12. Bank notes in circulation

In accordance with the Bank of Canada Act, the Bank has the sole authority to issue bank notes for circulation in Canada. A breakdown by denomination is presented below.

31 December 2015 31 December 2014
$5 1 232.5 1 188.0
$10 1 315.4 1 275.6
$20 18 729.3 17 801.4
$50 12 017.8 11 233.9
$100 41 032.2 37 323.9
Other bank notes 1 169.7 1 200.7
Bank notes in circulation 75 496.9 70 023.5

Other bank notes include denominations that are no longer issued but continue to be legal tender. Bank notes in circulation are non-interest-bearing liabilities and are due on demand.

13. Deposits

The liabilities within Deposits consist of $24,592.9 million in Canadian-dollar demand deposits ($23,195.6 million at 31 December 2014). The Bank pays interest on the deposits for the Government of Canada, banks and other financial institutions at short-term market rates, and interest expense on deposits is included in the Statement of Net Income and Comprehensive Income.

Deposits from the Government of Canada consist of $2,617.3 million for operational balances and $20,000.0 million held for the prudential liquidity-management plan ($1,526.6 million and $20,000.0 million, respectively, at 31 December 2014).

14. Other liabilities

Accounting policy

A provision is recognized if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably as at the statement of financial position date, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Composition of other liabilities
31 December 2015 31 December 2014
Accrued transfer payment to the Receiver General for Canada 249.5 150.4
Net defined-benefit liability (note 15)    
Pension benefit plan 37.4 32.0
Other benefit plans 168.2 172.8
All other liabilities and provisions 103.8 88.5
Total other liabilities 558.9 443.7
Accrued transfer payment

The following table reconciles the Accrued transfer payment to the Receiver General for Canada:

  31 December 2015 31 December 2014
Opening balance at beginning of period 150.4 153.7
Remittance of ascertained surplus to the Receiver General for Canada (1,090.4) (1,028.7)
Transfer to Receiver General for Canada 1,189.5 1,025.4
Closing balance at period-end 249.5 150.4
All other liabilities and provisions

Other liabilities consists of provisions, a finance lease obligation (note 17), accounts payable and accrued liabilities. As a result of the program to overhaul and modernize the head office building, provisions totalling $15.1 million for the final year of the five-year lease agreement for temporary office space and for site restoration costs were recognized in 2012 and are included under Other liabilities.

15. Employee benefits

Accounting policy
Short-term employee benefits

Short-term employee benefits include cash salary, bonus, annual leave, health benefits, dental care and statutory benefits and are measured on an undiscounted basis.

Long-term employee benefits

The Bank sponsors a long-term disability program.

The liability recognized in respect of this plan amounts to the present value of the defined-benefit obligation. The present value of the defined-benefit obligation is calculated by discounting estimated future cash flows using interest rates on high-quality corporate bonds with terms to maturity approximating the estimated duration of the obligation. The expense recognized for the period-end consists of current service costs, interest costs, remeasurement gains and losses, and past service costs.

The current service costs and the benefit obligations of the plan are actuarially determined on an event-driven accounting basis. Remeasurement gains and losses, as well as past service costs arising from plan amendments, are recognized immediately on the Statement of Net Income and Comprehensive Income in the period in which they occur.

Post-employment defined-benefit plans

The Bank sponsors a funded defined-benefit pension plan (the Bank of Canada Pension Plan) and a funded defined-benefit supplementary pension arrangement (the Bank of Canada Supplementary Pension Arrangement), which are designed to provide retirement income benefits to eligible employees. The Bank of Canada Pension Plan was established under the provisions of the Bank of Canada Act, 1934, and has remained in accordance with the Bank of Canada Act as subsequently amended. The Bank of Canada Pension Plan is a registered plan as defined in the Income Tax Act (Canada) (ITA) and, consequently, is not subject to income taxes. The Supplementary Pension Arrangement was created to pay pension benefits to Bank employees with annual earnings above the amount covered by the Bank of Canada Pension Plan, as provided under the ITA. The Supplementary Pension Arrangement is a Retirement Compensation Arrangement as defined in the ITA.

Benefits provided under these plans are calculated based on years of service and average full-time salary for the best five consecutive years and are indexed to reflect changes in the consumer price index on the date payments begin and each 1 January thereafter. The Bank is the administrator of the pension plans. The Bank’s Board of Directors has established a Pension Committee and has delegated to it the responsibility for carrying out the Bank’s duties as administrator of the plans, including adherence to the guidelines established in the Statement of Investment Policy and Procedures (SIPP), which is approved annually by the Board. A separate trust fund has been established for each plan to receive and invest contributions and pay benefits due under the plans.

The most recent actuarial valuation for funding purposes of the Pension Plan was done as at 1 January 2015, and the next required valuation will be as at 1 January 2016.

The Bank also sponsors other unfunded post-employment defined-benefit plans, which include life insurance and eligible health and dental benefits, as well as a long-service benefit program for employees hired before 1 January 2003.

The net asset or liability of these plans is recognized on the Statement of Financial Position. The net asset or liability recognized at period-end in respect of these plans is composed of the present value of the defined-benefit obligation less the fair value of plan assets, when applicable. The present value of the defined-benefit obligation is calculated by discounting estimated future cash flows using interest rates on high-quality corporate bonds with terms to maturity approximating the estimated duration of the obligation. The expense recognized for the reporting period consists of current service costs, past service costs, net interest on the net defined-benefit liability/asset, gains or losses arising on settlement (if applicable) and administrative costs. Net interest is calculated by applying the discount rate to the net defined-benefit liability/asset.

The current service costs and the benefit obligations of the plans are actuarially determined using the projected unit credit method. Remeasurements comprise actuarial gains and losses, the return on plan assets, and the effect of the asset ceiling (if applicable). They exclude amounts included in net interest on the net defined-benefit liability/asset. Remeasurements are recognized immediately in Other Comprehensive Income in the period in which they occur. Past service costs are recognized at the earlier of when the plan amendment or curtailment occurs or when the entity recognizes related restructuring costs or termination benefits. Plan assets of funded benefit plans are determined according to their fair value at the end of the reporting period.

Termination benefits

A liability for termination benefits is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit or when the entity recognizes any related restructuring costs.

Net defined benefits

The changes in plan assets and defined-benefit obligations for the year are as follows:

  Pension benefit plans Other benefit plans
  31 December 2015 31 December 2014 31 December 2015 31 December 2014
Fair value of plan assets        
Fair value of plan assets at beginning of year 1,569.2 1,404.9 - -
Interest income 62.5 68.6 - -
Remeasurement gains/(losses)        
Return on plan assets (see note 5) (20.5) 105.0 - -
Bank contributions 25.4 28.3 - -
Employee contributions 13.5 11.8 - -
Benefit payments and transfers (51.2) (47.7) - -
Administration costs (2.1) (1.7) - -
Fair value of plan assets at end of year 1,596.8 1,569.2 - -
Defined-benefit obligation        
Benefit obligation at beginning of year 1,466.4 1,224.0 172.8 159.9
Current service cost 35.9 25.9 5.4 6.0
Interest cost 59.2 60.1 6.8 7.7
Employee contributions 13.5 11.8 - -
Remeasurement (gains)/losses        
Arising from changes in demographic experience 1.7 (3.3) - (3.1)
Arising from changes in financial assumptions (26.4) 195.6 (9.5) 12.9
Benefit payments and transfers (51.2) (47.7) (7.3) (10.6)
Defined-benefit obligation at end of year 1,499.1 1,466.4 168.2 172.8
Net defined-benefit asset/(liability) 97.7 102.8 (168.2) (172.8)
Net defined-benefit asset 135.1 134.8 - -
Net defined-benefit liability (37.4) (32.0) (168.2) (172.8)
Net defined-benefit asset/(liability) 97.7 102.8 (168.2) (172.8)
Pension benefit plans – Asset mix

The Plan’s SIPP requires that its investments be held in a diversified mix of asset types and also sets out requirements for investment eligibility. The diversification of assets serves to decrease the variations in the expected return performance of the portfolio. The current practice is to conduct an Asset-Liability Modelling (ALM) study every three years. The ALM assists the Pension Committee in establishing an asset allocation that is consistent with the pension plan’s objectives and the Bank’s risk tolerance. The latest ALM was approved by the Pension Committee in September 2015.

The Plan’s investments are subject to credit, liquidity and market risks. Of these risks, the most significant is asset volatility because plan liabilities are calculated using a discount rate set with reference to the yield on Canadian AA-corporate bonds. If plan assets underperform this yield, a deficit will be created. Requirements for asset diversification and investment eligibility serve as basic risk-management tools for the investment portfolio as a whole.

The pension benefit plan assets consist of the following:

  31 December 2015 31 December 2014
Quoted Unquoted Total In % Quoted Unquoted Total In %
Money market instruments 1.7 - 1.7 0.1 13.7 - 13.7 0.9
Equity instruments                
Canadian equity funds 308.7   308.7 19.4 324.7 - 324.7 20.7
Foreign equity funds 601.8   601.8 37.6 576.8 - 576.8 36.7
Debt instruments (see note 6)                
Securities issued or guaranteed by the Government of Canada 220.3   220.3 13.8 209.0 - 209.0 13.3
Other securities 354.2   354.2 22.2 343.2 - 343.2 21.9
Real estate funds - 76.7 76.7 4.8 - 70.0 70.0 4.5
Statutory deposit - 33.4 33.4 2.1 - 31.8 31.8 2.0
1,486.7 110.1 1,596.8 100.0 1,467.4 101.8 1,569.2 100.0
Defined-benefit obligations and expenses

The defined-benefit obligation, presented in terms of membership, is as follows:

  Pension benefit plans Other benefit plans
  31 December 2015 31 December 2014 31 December 2015 31 December 2014
Active members 584.1 591.3 46.4 88.7
Pensioners 821.2 788.3 121.8 84.1
Deferred members 93.8 86.8 - -
Defined-benefit obligation 1,499.1 1,466.4 168.2 172.8

Benefit plan expenses recognized in the Statement of Net Income and Comprehensive Income are composed of the following components:

  Pension benefit plans Other benefit plans
  31 December 2015 31 December 2014 31 December 2015 31 December 2014
Current service cost, net of employee contributions 35.9 25.9 5.4 6.0
Net interest expense (3.3) (8.5) 6.8 7.7
Actuarial gains arising from changes in financial assumptions - - - (4.3)
Administration costs 2.1 1.7 - -
Benefit plan expense recognized in Net Income 34.7 19.1 12.2 9.4
Remeasurement on the net defined-benefit liability/asset:        
Return on plan assets (excluding net interest) 20.5 (105.0) - -
Actuarial (gains)/losses arising from changes in demographic experience 1.7 (3.3) - 1.2
Actuarial (gains)/losses arising from changes in financial assumptions (26.4) 195.6 (9.5) 12.9
Remeasurement (gains)/losses recognized in Other Comprehensive Income (4.2) 87.3 (9.5) 14.1

Remeasurement gains and losses pertaining to post-employment benefit plans are recognized in Other Comprehensive Income and are accumulated in Equity in the Remeasurements reserve.

The cumulative remeasurement losses recognized in Other Comprehensive Income are as follows:

  Pension benefit plans Other benefit plans
  31 December 2015 31 December 2014 31 December 2015 31 December 2014
Cumulative remeasurement losses recognized, beginning of year (220.7) (133.4) (26.1) (12.0)
Remeasurement gains/(losses) recognized in current year 4.2 (87.3) 9.5 (14.1)
Cumulative remeasurement losses recognized, end of year (216.5) (220.7) (16.6) (26.1)
Total cash payments

Regulations governing federally regulated pension plans establish certain solvency requirements that assume that the plans are wound up at the valuation date. Actuarial valuations for funding purposes are required annually under the Pension Benefits Standards Act. The actuarial valuation of the Pension Plan completed at 1 January 2015 reported a solvency surplus of $36 million and a three-year average solvency surplus of $13 million. Contributions in 2016 will be based on the actuarial valuation as at 1 January 2016 and are estimated to be $22 million ($21 million in 2015), consisting solely of regular contributions to cover current service costs.

Assumptions

The cost of the defined-benefit pension plans and other benefits plans and the present value of the benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actuarial developments in the future. These assumptions include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Owing to the complexities involved in the valuation and its long-term nature, a defined-benefit obligation is highly sensitive to changes in these assumptions.

The most recent actuarial valuation for funding purposes of the Pension Plan was done as at 1 January 2015, and the next required valuation will be as at 1 January 2016.

The significant assumptions used are as follows (on a weighted-average basis):

  Pension benefit plans Other benefit plans
  31 December 2015 31 December 2014 31 December 2015 31 December 2014
Defined-benefit obligation        
Discount rate 4.10% 4.00% 4.02% 3.99%
Inflation rate (see note 7) 2.00% 2.00% n.a. n.a.
Rate of compensation increase 3.20% 3.20% 3.20% 3.20%
  + merit + merit + merit + merit
Benefit plan expense        
Discount rate 4.00% 4.90% 3.99% 4.79%
Inflation rate (see note 8) 2.00% 2.00% n.a. n.a.
Rate of compensation increase 3.20% 3.20% 3.20% 3.30%
  + merit + merit + merit + merit
Assumed medical cost trend        
Medical cost trend rate n.a. n.a. 5.95–4.50% 6.01%–4.50%
Year that the rate reaches the ultimate trend rate n.a. n.a. 2029 2029

The parameter most subject to change is the discount rate, which is determined by reference to Canadian AA-corporate bonds with terms to maturity approximating the duration of the obligation.

The weighted-average duration of the defined-benefit obligation is approximately 17 years for the Pension benefit plans and 6 to 20 years for the Other benefit plans.

The mortality assumptions used in the plan valuations are based on tables issued by the Canadian Institute of Actuaries. Actuarial adjustments to the tables are applied when recommended by the plan’s actuaries. In 2015, the assumption for life expectancy for the plan valuations assumes that a male member reaching 60 will live for approximately 27 years (2014: 27 years) and a female member approximately 29 years (2014: 29 years).

Sensitivity analysis

The following table outlines the potential impact of changes in certain key assumptions used in measuring the defined-benefit obligations and benefit costs.

  Change in obligation (see note 9)
  Pension benefit plans Other benefit plans
Discount rate 4.10% 4.02%
Impact of 0.10 percentage point increase (24.1) (2.7)
Impact of 0.10 percentage point decrease 24.7 2.8
Rate of compensation increase 3.20% 3.20%
Impact of 0.10 percentage point increase 3.9 0.3
Impact of 0.10 percentage point decrease (3.9) (0.3)
Mortality rate    
Impact of 0.10 percentage point increase (29.7) (2.7)
Impact of 0.10 percentage point decrease 32.8 3.2
Inflation rate 2.00% n.a.
Impact of 0.10 percentage point increase 22.3 n.a.
Impact of 0.10 percentage point decrease (21.9) n.a.
Medical cost trend rates n.a 5.95%
Impact of 1.00 percentage point increase n.a 28.4
Impact of 1.00 percentage point decrease n.a (22.0)

16. Equity

The Bank manages its capital to ensure compliance with the Bank of Canada Act. There were no other externally imposed capital requirements at the end of the reporting year.

The elements of equity are shown in the table below:

31 December 2015 31 December 2014
Share capital 5.0 5.0
Statutory reserve 25.0 25.0
Special reserve 100.0 100.0
Available-for-sale reserve 368.2 319.3
Retained earnings - -
Total equity 498.2 449.3
Share capital

The authorized capital of the Bank is $5.0 million divided into 100 000 shares with a par value of $50 each. The shares are fully paid and have been issued to the Minister of Finance, who holds them on behalf of the Government of Canada.

Statutory reserve

The statutory reserve was accumulated out of net income until it reached the stipulated maximum amount of $25.0 million in 1955.

Special reserve

The special reserve was created in 2007 further to an amendment to the Bank of Canada Act to offset potential unrealized valuation losses due to changes in the fair value of the Bank’s available-for-sale portfolio. The amount held in the special reserve is reviewed regularly for appropriateness using value-at-risk analysis and scenario-based stress tests and may be amended, pursuant to a resolution passed by the Board of Directors. The value-at-risk analysis uses historical data to estimate the maximum possible extent of unrealized valuation losses of the Bank’s treasury bill portfolio. The scenario-based stress tests assess the impact of a rapid increase in interest rates on the value of the Bank’s treasury bill portfolio. This reserve is subject to a ceiling of $400 million; an initial amount of $100 million was established in September 2007.

Available-for-sale reserve

The available-for-sale reserve represents cumulative movements in the fair value of the Bank’s available-for-sale portfolios, as shown below:

  31 December 2015 31 December 2014
Government of Canada treasury bills 1.1 2.2
BIS shares 367.1 317.1
Available-for-sale reserve 368.2 319.3
Retained earnings

The net income of the Bank, less any allocation to reserves, is considered to be ascertained surplus and is transferred to the Receiver General for Canada, consistent with the requirement of section 27 of the Bank of Canada Act.

The Bank’s remittance agreement with the Minister of Finance was designed to enable the Bank to manage its equity requirements considering the volatility arising from fair-value changes and remeasurements (which are recorded in Other Comprehensive Income). This agreement allows the Bank to deduct from its remittances to the Receiver General and hold within Retained earnings an amount equal to unrealized losses on AFS financial assets, unrealized remeasurements of the net defined-benefit liability/asset on defined-benefit plans and other unrealized or non-cash losses arising as a result of changes in accounting standards or legislation.

During 2015, the Bank reimbursed $13.7 million for its previously withheld remittances ($101.4 million withheld during 2014) and, as at 31 December 2015, $113.3 million in withheld remittances was outstanding ($127.0 million as at 31 December 2014).

17. Leases

Accounting policy
Where the Bank is a lessee

Leases of equipment where the Bank has substantially assumed all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s inception at the lower of the fair value of the leased asset or the present value of the minimum lease payments. The corresponding lease obligations, net of finance charges, are included in Other liabilities. Each lease payment is allocated between the liability and finance charges to achieve a constant rate of return on the finance lease obligation outstanding. Equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life or the lease term.

Other leases are classified as operating leases. Payments made under operating leases are charged to the Statement of Net Income and Comprehensive Income on a straight-line basis over the period of the lease.

Where the Bank is a lessor

Leases granted on the Bank’s property were assessed and classified as operating leases because the risks and rewards of ownership are not transferred to the lessees. Operating lease income is recognized on a straight-line basis over the period of the lease.

Operating lease commitments

The Bank occupies leased premises in Ottawa, Halifax, Montréal, Toronto, Calgary and Vancouver. The minimum payments are determined at the beginning of the lease and may vary during the term of the lease. Contingent rent on premises leases is based on building operating costs; for office equipment leases, contingent rent is based on usage. The expiry dates vary for each lease, from May 2016 to October 2025.

At 31 December 2015, the future minimum payments for rent, real estate taxes and building operations are presented below.

  31 December 2015 31 December 2014
Due within one year 16.1 16.0
Due within one to five years 24.8 40.5
Due later than five years 1.7 2.2
Total premises lease commitments 42.6 58.7
Lease payments expensed 15.6 15.8
Finance lease commitments

As at 31 December 2015, the future minimum lease payments were $6.6 million ($9.3 million as at 31 December 2014) for equipment obtained through a finance lease arrangement (note 9). The net carrying amount of the equipment at 31 December 2015 was $6.3 million ($8.8 million at 31 December 2014). The finance lease obligation amounted to $6.5 million at 31 December 2015 ($9.0 million as at 31 December 2014) and is recorded in Other liabilities (note 14).

18. Commitments, contingencies and guarantees

Long-term contracts other than leases

The Bank has a long-term contract with an outside service provider for retail debt services that expires in 2021. At 31 December 2015, fixed payments totalling $111.9 million remained, plus a variable component based on the volume of transactions.

The Bank has a long-term contract with an outside service provider for data centre services that expires in 2025. At 31 December 2015, fixed payments totalling $12.3 million remained.

Commitments related to the program to overhaul and modernize the head office building are included in commitments for Property and equipment in note 9.

At 31 December 2015, the total minimum payments for long-term contracts, other than leases, Property and equipment, and Intangible assets, are as follows:

Due within one year 22.1
Due within one to three years 44.2
Due within three to five years 44.2
Thereafter 13.7
Total minimum payments 124.2
Foreign currency contracts

The Bank is a counterparty to several foreign currency swap facilities as follows:

Maximum available
Bilateral liquidity swap facilities with central banks  
Bank of Japan (denominated in Japanese yen) Unlimited
Swiss National Bank (denominated in Swiss francs) Unlimited
Bank of England (denominated in British pounds) Unlimited
European Central Bank (denominated in euros) Unlimited
Federal Reserve Bank of New York (denominated in U.S. dollars) Unlimited
People’s Bank of China (denominated in renminbi) 200,000.0
Other swap facilities  
Exchange Fund Account of Canada (denominated in Canadian dollars) Unlimited
Federal Reserve Bank of New York (denominated in U.S. dollars) 2,000.0
Banco de México (denominated in Canadian dollars) 1,000.0
Bank for International Settlements (denominated in Canadian dollars) 100.0

The BIS swap was accessed in 2015 and 2014 for operational purposes. None of the other liquidity or other swaps were accessed, by either party, in 2015 or 2014. No related commitments existed as at 31 December 2015 ($Nil as at 31 December 2014).

Bilateral liquidity swap facilities with central banks

The bilateral liquidity swap facilities were established to provide liquidity in each jurisdiction in any of their currencies, should market conditions warrant.

The swap facilities with the Bank of Japan, the Swiss National Bank, the Bank of England, the European Central Bank and the Federal Reserve Bank of New York are standing arrangements with no expiry date. The Bank of Canada and the People’s Bank of China signed a reciprocal three-year Canadian-dollar/renminbi bilateral swap arrangement in November 2014.

These facilities can be structured as either a Canadian-dollar liquidity swap or a foreign currency liquidity swap arrangement and can be initiated by either party. The exchange rate applicable to the swap facilities is based on the prevailing market spot exchange rate as mutually agreed upon by the parties.

Other swap facilities

The other swap facilities established with the Federal Reserve Bank of New York and with the Banco de México, which expire on 12 December 2016, have indefinite terms and are subject to annual renewal.

The Bank is party to a standing foreign currency swap facility with the Exchange Fund Account of Canada. There is no stated maximum amount under this agreement.

The Bank is also party to a swap facility with the BIS for operational purposes. Transactions executed under this agreement are generally one business day in duration.

Contingency

The 9 441 shares in the BIS have a nominal value of 5 000 Special Drawing Rights per share, of which 25 per cent (i.e. SDR1,250) is paid up. The balance of SDR3,750 is callable at three months’ notice by a decision of the BIS Board of Directors. The Canadian equivalent of this contingent liability was $67.9 million at 31 December 2015 ($59.5 million at 31 December 2014), based on prevailing exchange rates.

Guarantees

In the normal course of operations, the Bank enters into certain guarantees, which are described below.

LVTS guarantee

The LVTS is a large-value payment system, owned and operated by the CPA. Any deposit-taking financial institution that is a member of the CPA can participate in the LVTS, provided that it maintains a settlement account at the Bank of Canada, has the facilities to pledge collateral for LVTS purposes and meets certain technical requirements. The system’s risk-control features, which include caps on net debit positions and collateral to secure the use of overdraft credit, are sufficient to permit the system to obtain the necessary liquidity to settle in the event of the failure of the single LVTS participant with the largest possible net amount owing. The Bank guarantees to provide this liquidity, and, in the event of a single-participant failure, the liquidity loan will be fully collateralized. In the extremely unlikely event that there were defaults by more than one participant during the LVTS operating day, in an aggregate amount in excess of the largest possible net amount owing by a single participant, there would not likely be enough collateral to secure the amount of liquidity that the Bank would need to provide to settle the system. This might result in the Bank having unsecured claims on the defaulting participants in excess of the amount of collateral pledged to the Bank to cover the liquidity loans. The Bank would have the right, as an unsecured creditor, to recover any amount of its liquidity loan that was unpaid. The amount potentially at risk under this guarantee is not determinable, since the guarantee would be called upon only if a series of extremely low-probability events were to occur. No amount has ever been provided for in the liabilities of the Bank, and no amount has ever been paid under this guarantee.

Other indemnification agreements

In the normal course of operations, the Bank provides indemnification agreements with various counterparties in transactions such as service agreements, software licences, leases and purchases of goods. Under these agreements, the Bank agrees to indemnify the counterparty against loss or liability arising from acts or omissions of the Bank in relation to the agreement. The nature of the indemnification agreements prevents the Bank from making a reasonable estimate of the maximum potential amount that the Bank would be required to pay such counterparties. No amount has ever been paid under such indemnifications.

Insurance

The Bank does not normally insure against direct risks of loss to the Bank, except for potential liabilities to third parties and when there are legal or contractual obligations to carry insurance. However, in connection with the Head Office Renewal Program, the Bank has obtained insurance coverage for the period of construction to cover direct risks to the Bank’s property.

Any costs arising from risks not insured are recognized in the accounts if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably as at the statement of financial position date, and it is probable that an outflow of economic benefits will be required to settle the obligation.

19. Related parties

The Bank is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. To achieve its monetary policy objectives, the Bank maintains a position of structural and functional independence from the Government of Canada through its ability to fund its own operations without external assistance and through its management and governance.

In the normal course of its operations, the Bank enters into transactions with related parties, and material transactions and balances are presented in these financial statements. Not all transactions between the Bank and government-related entities have been disclosed, as permitted by the partial exemption available to wholly owned government entities in International Accounting Standard 24 Related Party Disclosures (IAS 24).

The Bank provides funds-management, fiscal-agent and banking services to the Government of Canada, as mandated by the Bank of Canada Act, and does not recover the costs of these services.

Bank of Canada pension plans

The Bank provides management, investment and administrative support to the Bank of Canada Pension Plan. Services in the amount of $0.9 million ($0.8 million in 2014) were fully recovered from the Plan in 2015.

Key management personnel and compensation

The key management personnel responsible for planning, directing and controlling the activities of the Bank are the members of the Executive Council, the Senior Management Council and the Board of Directors. The number of key management personnel as at 31 December 2015 was 29 (29 in 2014).

The compensation of key management personnel is presented in the following table:

  31 December 2015 31 December 2014
Short-term employee benefits 5.0 3.7
Post-employment benefits 1.6 1.0
Directors’ fees 0.2 0.2
Total compensation 6.8 4.9

Short-term employee benefits and post-employment benefits apply to Bank of Canada employees only.

There were no other long-term employee benefit costs or termination benefits related to key management personnel in 2015.

[15-1-o]

DEPARTMENT OF THE ENVIRONMENT

DEPARTMENT OF HEALTH

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Publication after screening assessment of a living organism — Saccharomyces cerevisiae (S. cerevisiae) strain F53specified on the Domestic Substances List (subsection 77(1) of the Canadian Environmental Protection Act, 1999)

Whereas S. cerevisiae strain F53 is a living organism on the Domestic Substances List identified under subsection 105(1) of the Canadian Environmental Protection Act, 1999;

Whereas a summary of the draft Screening Assessment conducted on this living organism pursuant to paragraph 74(b) of the Act is annexed hereby;

And whereas it is proposed to conclude that this living organism does not meet any of the criteria set out in section 64 of the Act,

Notice therefore is hereby given that the Minister of the Environment and the Minister of Health propose to take no further action on this living organism at this time under section 77 of the Act.

Public comment period

As specified under subsection 77(5) of the Canadian Environmental Protection Act, 1999, any person may, within 60 days after publication of this notice, file with the Minister of the Environment written comments on the measure the ministers propose to take and on the scientific considerations on the basis of which the measure is proposed. More information regarding the scientific considerations may be obtained from the Government of Canada’s Chemical Substances Web site (www.chemicalsubstances.gc.ca). All comments must cite the Canada Gazette, Part I, and the date of publication of this notice and be sent to the Executive Director, Program Development and Engagement Division, Gatineau, Quebec K1A 0H3, 819-938-5212 (fax), eccc.substances.eccc@canada.ca (email).

In accordance with section 313 of the Canadian Environmental Protection Act, 1999, any person who provides information in response to this notice may submit with the information a request that it be treated as confidential.

DAVID MORIN
Director General
Science and Risk Assessment Directorate

On behalf of the Minister of the Environment

JOHN COOPER
Acting Director General
Safe Environments Directorate

On behalf of the Minister of Health

ANNEX

Summary of the Draft Screening Assessment Report of Saccharomyces cerevisiae Strain F53

Pursuant to paragraph 74(b) of the Canadian Environmental Protection Act, 1999 (CEPA), the Minister of the Environment and the Minister of Health have conducted a screening assessment of yeast Saccharomyces cerevisiae (S. cerevisiae) strain F53.

S. cerevisiae strain F53 is a yeast that has characteristics in common with other strains of the species S. cerevisiae. S. cerevisiae is known for its fermentative ability and ethanol production. It has been used widely in bakery and brewery industries; it has thus been in close association with humans for centuries. Multiple potential uses of S. cerevisiae in consumer, industrial, commercial and agricultural sectors exist. These include production of, or the presence in, food, natural health products such as probiotics, feeds, biofuels and biochemicals for the manufacture of cosmetics, perfumes and therapeutic drugs, as well as bioremediation and wastewater treatment.

S. cerevisiae is known to occur in a wide variety of ecological niches, and has a history of safe use through releases into the environment through human activities used in feed and probiotics for animals, and as an agricultural input for plant growth promotion. There are no reports in the literature implicating the Domestic Substances List (DSL) S. cerevisiae strain F53 in causing adverse effects on terrestrial or aquatic plants, invertebrates or vertebrates. However, there are few reports of pathogenicity attributed to other strains of S. cerevisiae. These include one report of infection in a dog with a history of prolonged antibiotic use, and one report of infection in prawns. S. cerevisiae has also been reported to cause some adverse effects on nematodes.

There have been no reported human infections attributed to the DSL S. cerevisiae strain F53; however, certain strains of S. cerevisiae and S. cerevisiae var. boulardii can act as opportunistic pathogens in individuals with compromised immunity or pre-existing medical conditions. In most cases, infections are treated effectively with antifungal compounds. Compared with other opportunistic yeast pathogens like Candida albicans, S. cerevisiae is an organism of low virulence, and rarely causes infections among healthy individuals. Based on Health Canada’s in vitro assays, S. cerevisiae strain F53 does not possess putative virulence traits that are generally found in other pathogenic strains, and in vivo pathogenicity testing on 6- to 8-week-old BALB/c mice indicated that S. cerevisiae strain F53 does not cause any adverse effects to healthy animals.

This Screening Assessment considers the aforementioned characteristics of S. cerevisiae strain F53 with respect to the environmental and human health effects associated with product use and industrial processes subject to CEPA, including releases to the environment through waste streams and incidental human exposure through environmental media. A conclusion under CEPA on S. cerevisiae strain F53 is not related to, nor does it preclude, assessment of products generated by or containing S. cerevisiae strain F53 as prescribed under the purview of the Food and Drugs Act.

S. cerevisiae strain F53 was nominated to the DSL for commercial use in Canada in 2004. To update information on current uses, the Government launched a mandatory information-gathering survey under section 71 of CEPA as published in the Canada Gazette, Part I, on October 3, 2009 (section 71 notice). Information submitted in response to the section 71 notice indicates that S. cerevisiae strain F53 was imported into or manufactured in Canada in 2008 for use in consumer and commercial applications, such as the production of foods, feeds and beverages, as well as in research and development.

Based on the information available, it is proposed to conclude that S. cerevisiae strain F53 does not meet the criteria under paragraph 64(a) or (b) of CEPA, as it is not entering the environment in a quantity or concentration or under conditions that have or may have an immediate or long-term harmful effect on the environment or its biological diversity or that constitute or may constitute a danger to the environment on which life depends. It is also proposed to conclude that S. cerevisiae strain F53 does not meet the criteria under paragraph 64(c) of CEPA, as it is not entering the environment in a quantity or concentration or under conditions that constitute or may constitute a danger in Canada to human life or health.

Proposed conclusion

Based on the information available, it is proposed to conclude that S. cerevisiae F53 does not meet any of the criteria set out under section 64 of CEPA.

The draft Screening Assessment for this living organism is available on the Government of Canada’s Chemical Substances Web site (www.chemicalsubstances.gc.ca).

[15-1-o]

DEPARTMENT OF INDUSTRY

OFFICE OF THE REGISTRAR GENERAL

Appointments

Name and position

Order in Council

Bracken, The Hon. J. Keith  
  • Government of British Columbia
 
  • Administrator
 
  • March 21 to March 24, 2016
2016-131
  • April 5 to April 8, 2016
2016-196
Dhawan, Neil 2016-116
  • Chef of the Prime Minister’s residence
 
Federal Court of Appeal or the Federal Court 2016-173
  • Commissioners to administer oaths
 
  • Bérubé, Chantal Rachel Marie
 
  • Buchanan, Hazel
 
  • Di Mavindi, Orelie Victoria
 
  • Fedorak, Frank
 
  • Gabel, Cheryl
 
  • Gawn, Victoria
 
  • McDonald, Beverly
 
  • Pilon, Mélissa Nicole
 
  • Pinel, Johanne
 
  • Price, Emily
 
  • Sarai, Naveen
 
  • Vincent, Julie
 
  • Werezak, Bonita
 
  • Wilson, Catharine
 
  • Winter, Beatriz
 
Government of Ontario 2016-198
  • Administrators
 
  • Lauwers, The Hon. Peter D.
 
  • April 5 to April 8 and April 10, 2016
 
  • Smith, The Hon. Heather J.
 
  • April 11 to April 15, 2016
 
Government of Saskatchewan 2016-130
  • Administrators
 
  • Caldwell, The Hon. Neal W.
 
  • March 13 to March 22, 2016
 
  • Whitmore, The Hon. Peter A.
 
  • April 5 to April 24, 2016
 
Immigration and Refugee Board of Canada  
  • Full-time members
 
  • Israel, Milton
2016-152
  • Lee, David P. F.
2016-153
  • Rivest, Marie-José
2016-154
  • Sokolyk, Diane Elizabeth
2016-155
Lustig, Edward Peter 2016-156
  • Canadian Human Rights Tribunal
 
  • Part-time member
 
Sapers, Howard Ian 2016-151
  • Correctional Investigator of Canada
 
Social Security Tribunal  
  • Appeal Division
 
  • Full-time member
 
  • Borer, Mark Steven
2016-136
  • Employment Insurance Section
 
  • Full-time members
 
  • Boudreault, Alcide
2016-144
  • Bourque, Charline
2016-149
  • Bugden, Martin Henry
2016-150
  • Dyck, Connie Lee
2016-145
  • Legere, Leroy Joseph
2016-140
  • McCarthy, John Gerard
2016-148
  • Morin, Normand
2016-141
  • Noonan, John
2016-146
  • Payment, Jean-Philippe
2016-142
  • Sterne, Richard Wilton Edward
2016-143
  • Wallocha, Katherine
2016-147
  • Income Security Section
 
  • Full-time members
 
  • Byrne, Lianne Marcella
2016-139
  • Saunders, Virginia Lee
2016-138
  • Sherwood, Kelley Joanne
2016-137
Steel, The Hon. Freda M. 2016-199
  • Government of Manitoba
 
  • Administrator
 
  • April 5 to April 16, 2016
 
Tax Court of Canada 2016-174
  • Commissioners to administer oaths
 
  • Buchanan, Hazel
 
  • Didkovski, Maxim
 
  • Dunn, Amanda
 
  • Gabel, Cheryl
 
  • Gawn, Victoria
 
  • Hennessy, Modelissa
 
  • Laberge, Linda
 
  • Laroche, Marie-Ève
 
  • Larose-Chevalier, Félix
 
  • Lozier, Darquise
 
  • McDonald, Beverly
 
  • Olivier, Véronique
 
  • Pinel, Johanne
 
  • Prouse, Sean
 
  • Sarai, Naveen
 
  • Vincent, Julie
 
  • Waterman, Dale
 
  • Werezak, Bonita
 
  • Wilson, Catharine
 
Welsh, The Hon. B. Gale 2016-197
  • Government of Newfoundland and Labrador
 
  • Administrator
 
  • April 5 to April 10, 2016
 

March 31, 2016

DIANE BÉLANGER
Official Documents Registrar

[15-1-o]

DEPARTMENT OF INDUSTRY

OFFICE OF THE REGISTRAR GENERAL

Senator called

His Excellency the Governor General has been pleased to summon to the Senate of Canada, by letters patent under the Great Seal of Canada bearing date of March 23, 2016:

Harder, V. Peter, of Manotick, in the Province of Ontario, member of the Senate and a Senator for the Province of Ontario.

April 1, 2016

DIANE BÉLANGER
Official Documents Registrar

[15-1-o]