Canada Gazette, Part I, Volume 152, Number 15: GOVERNMENT NOTICES

April 14, 2018

BANK OF CANADA

BANK OF CANADA

FINANCIAL STATEMENTS
DECEMBER 31, 2017

Glossary of Abbreviations

Abbreviation

Defintion

Abbreviation

Defintion

AFS

available-for-sale

ITA

Income Tax Act

BIS

Bank for International Settlements

LVTS

Large Value Transfer System

CPA Canada

Chartered Professional Accountants of Canada

OCI

other comprehensive income

FVOCI

fair value through other comprehensive income

PSAS

Public Sector Accounting Standards

FVTPL

fair value through profit or loss

Pension Plan

Bank of Canada Pension Plan

HTM

held-to-maturity

SDR

Special Drawing Rights

IAS

International Accounting Standard

SIPP

Statement of Investment Policy and Procedures

IASB

International Accounting Standards Board

SPA

Bank of Canada Supplementary Pension Arrangement

IFRS

International Financial Reporting Standards

SPRAs

securities purchased under resale agreements

IMF

International Monetary Fund

SSRAs

securities sold under repurchase agreements

Financial Reporting Responsibility

Management of the Bank of Canada (the Bank) is responsible for the financial statements, which are prepared in accordance with International Financial Reporting Standards. The amounts and financial information included in the statements reflect management’s best estimates and judgment. Financial information presented elsewhere in the Annual Report is consistent with the financial statements.

Management is responsible for the integrity and reliability of the financial statements and the accounting system from which they are derived. The Bank maintains a system of internal controls to provide reasonable assurance that transactions are properly authorized and recognized, that financial information is reliable, that assets are safeguarded and liabilities recognized, and that operations are carried out effectively. The Bank’s internal audit department reviews internal controls, including the application of accounting and financial controls.

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 (the Committee) of the Board. The Committee is composed of members who are neither officers nor employees of the Bank and who are financially literate. The Committee is therefore qualified to review the Bank’s annual financial statements and to recommend their approval by the Board of Directors. The Committee meets with management, the Chief Internal Auditor and the Bank’s independent auditors who are appointed by Governor-in-Council. The Committee has established processes to evaluate the independence of the Bank’s independent auditors and oversees all services provided by them. The 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, PricewaterhouseCoopers LLP and Ernst & Young LLP, and their report is presented herein. The independent auditors have full and unrestricted access to the Committee to discuss their audit and related findings.

Ottawa, Canada, February 15, 2018

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 December 31, 2017, and the statements of net income and comprehensive income, changes in equity, and cash flows for the year then ended, and related notes, which comprise 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 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 December 31, 2017, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Ottawa, Canada, February 15, 2018

Chartered Professional Accountants
Licensed Public Accountants

Chartered Professional Accountants
Licensed Public Accountants

BANK OF CANADA

Statement of Financial Position
As at December 31 (in millions of Canadian dollars)

 

Note

 

2017

 

2016

ASSETS

         

Cash and foreign deposits

3, 4, 7

 

14.6

 

19.3

Loans and receivables

3, 5, 7

       

Securities purchased under resale agreements

   

9,478.5

 

8,277.0

Other receivables

   

4.5

 

5.2

     

9,483.0

 

8,282.2

Investments

3, 6, 7

     

Government of Canada treasury bills

   

18,370.4

 

16,791.8

Government of Canada bonds

   

82,087.0

 

79,845.9

Other investments

   

403.6

 

395.0

     

100,861.0

 

97,032.7

Property and equipment

8

 

569.0

 

570.7

Intangible assets

9

 

40.1

 

36.2

Other assets

10

 

132.6

 

164.9

Total Assets

   

111,100.3

 

106,106.0

LIABILITIES AND EQUITY

         

Bank notes in circulation

7, 11

 

85,855.9

 

80,478.6

Deposits

3, 7, 12

     

Government of Canada

   

21,454.2

 

20,228.4

Members of Payments Canada

   

500.3

 

499.7

Other deposits

   

2,274.3

 

2,103.4

     

24,228.8

 

22,831.5

Securities sold under repurchase agreements

3, 7, 13

 

-

 

1,500.0

Other liabilities

3, 7, 14

 

520.0

 

808.9

Total Liabilities

   

110,604.7

 

105,619.0

Commitments, contingencies and guarantees

16, 17

       

Equity

18

 

495.6

 

487.0

Total Liabilities and Equity

   

111,100.3

 

106,106.0

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

BANK OF CANADA

Statement of Net Income and Comprehensive Income
For the year ended December 31 (in millions of Canadian dollars)

 

2017

 

2016

INCOME

     

Interest revenue

     

Investments

1,603.4

 

1,605.6

Securities purchased under resale agreements

52.4

 

37.4

Other sources

0.3

 

0.2

 

1,646.1

 

1,643.2

Interest expense

   

Deposits

(187.4)

 

(122.7)

Net interest revenue

1,468.7

 

1,520.5

Dividend revenue

5.1

 

3.6

Other revenue

5.7

 

7.2

Total income

1,479.5

 

1,531.3

EXPENSES

   

Staff costs

253.6

 

228.1

Bank note research, production and processing

53.1

 

52.2

Premises costs

21.5

 

42.1

Technology and telecommunications

47.6

 

38.0

Depreciation and amortization

51.9

 

35.6

Other operating expenses

76.1

 

70.4

Total expenses

503.8

 

466.4

Net Income

975.7

 

1,064.9

OTHER COMPREHENSIVE INCOME (LOSS)

     

Items that will not be reclassified to net income

     

Remeasurements of the net defined-benefit liability/asset

(37.1)

 

4.1

Items that may subsequently be reclassified to net income

     

Change in fair value of available-for-sale financial assets

(0.9)

 

(11.4)

Other comprehensive income (loss)

(38.0)

 

(7.3)

Comprehensive Income

937.7

 

1,057.6

Bank of Canada

Statement of Changes in Equity
(in millions of Canadian dollars)

For the year ended December 31

 

Note

 

Share capital

 

Statutory reserve

 

Special reserve

 

Available-for-sale reserve

 

Retained earnings

 

Total

Balance as at January 1, 2017

   

5.0

 

25.0

 

100.0

 

357.0

 

-

 

487.0

COMPREHENSIVE INCOME FOR THE YEAR

Net income

   

-

 

-

 

-

 

-

 

975.7

 

975.7

Remeasurements of the net defined-benefit liability/asset

15

 

-

 

-

 

-

 

-

 

(37.1)

 

(37.1)

Change in fair value of BIS shares

3

 

-

 

-

 

-

 

8.6

 

-

 

8.6

Change in fair value of Government of Canada treasury bills

   

-

 

-

 

-

 

-

 

(9.5)

 

(9.5)

     

-

 

-

 

-

 

8.6

 

929.1

 

937.7

Surplus for the Receiver General for Canada

14, 18

 

-

 

-

 

-

 

-

 

(929.1)

 

(929.1)

Balance as at December 31, 2017

   

5.0

 

25.0

 

100.0

 

365.6

 

-

 

495.6

 

Note

 

Share capital

 

Statutory reserve

 

Special reserve

 

Available-for-sale reserve

 

Retained earnings

 

Total

Balance as at January 1, 2016

   

5.0

 

25.0

 

100.0

 

368.2

 

-

 

498.2

COMPREHENSIVE INCOME FOR THE YEAR

Net income

   

-

 

-

 

-

 

-

 

1,064.9

 

1,064.9

Remeasurements of the net defined-benefit liability/asset

15

 

-

 

-

 

-

 

-

 

4.1

 

4.1

Change in fair value of BIS shares

3

 

-

 

-

 

-

 

(10.2)

 

-

 

(10.2)

Change in fair value of Government of Canada treasury bills

   

-

 

-

 

-

 

(1.0)

 

(0.2)

 

(1.2)

     

-

 

-

 

-

 

(11.2)

 

1,068.8

 

1,057.6

Surplus for the Receiver General for Canada

14, 18

 

-

 

-

 

-

 

-

 

(1,068.8)

 

(1,068.8)

Balance as at December 31, 2016

   

5.0

 

25.0

 

100.0

 

357.0

 

-

 

487.0

BANK OF CANADA

Statement of Cash Flows
(in millions of Canadian dollars)

For the year ended December 31

 

2017

 

2016

CASH FLOWS FROM OPERATING ACTIVITIES

     

Interest received

1,695.7

 

1,746.4

Dividends received

5.1

 

3.6

Other revenue received

8.7

 

9.8

Interest paid

(187.8)

 

(122.7)

Payments to or on behalf of employees and to suppliers and to members of Payments Canada

(481.1)

 

(380.3)

Net increase (decrease) in deposits

1,397.3

 

(1,761.4)

Acquisition of securities purchased under resale agreements—overnight repo

(14,590.2)

 

(56,389.0)

Proceeds from securities purchased under resale agreements—overnight repo

14,590.2

 

57,389.0

Proceeds from securities sold under repurchase agreements

7,800.1

 

1,500.0

Repayments of securities sold under repurchase agreements

(9,300.1)

 

-

Net cash provided by operating activities

937.9

 

1,995.4

CASH FLOWS FROM INVESTING ACTIVITIES

     

Net increase (decrease) in Government of Canada treasury bills

(1,562.6)

 

1,418.5

Purchases of Government of Canada bonds

(19,084.9)

 

(18,504.0)

Proceeds from maturity of Government of Canada bonds

16,775.0

 

14,330.0

Acquisition of securities purchased under resale agreements—term repo

(72,579.8)

 

(68,602.8)

Proceeds from securities purchased under resale agreements—term repo

71,381.7

 

65,412.5

Additions of property and equipment

(43.0)

 

(165.3)

Additions of intangible assets

(11.1)

 

(7.9)

Net cash used in investing activities

(5,124.7)

 

(6,119.0)

CASH FLOWS FROM FINANCING ACTIVITIES

     

Net increase in bank notes in circulation

5,377.3

 

4,981.7

Remittance of surplus to the Receiver General for Canada

(1,193.7)

 

(849.5)

Net cash provided by financing activities

4,183.6

 

4,132.2

Effect of exchange rate changes on foreign currency

(1.5)

 

(0.5)

Increase (decrease) in cash and foreign deposits

(4.7)

 

8.1

Cash and foreign deposits, beginning of year

19.3

 

11.2

Cash and Foreign Deposits, end of year

14.6

 

19.3

Notes to the Financial Statements of the Bank of Canada

For the year ended December 31, 2017

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 address of the Bank’s registered head office is 234 Wellington Street, Ottawa, Ontario.

The Bank conforms to the financial reporting requirements of the Bank of Canada Act as prescribed in the Bank’s bylaws, which require that the Bank’s financial statements be prepared in accordance with Generally Accepted Accounting Principles as set out in the Chartered Professional Accountants of Canada (CPA Canada) Handbook. Consistent with CPA Canada guidance, the Bank is a government business enterprise as defined by the Canadian Public Sector Accounting Standards (PSAS) and, as such, adheres to the standards applicable to publicly accountable enterprises. In compliance with this requirement, the Bank has developed accounting policies in accordance with International Financial Reporting Standards (IFRS).

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, which are 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. The income generated from the Government of Canada treasury bills and Government of Canada bonds that back the bank notes in circulation (net of bank note production and distribution costs) is referred to as “seigniorage.” It provides a stable and constant source of funding for the Bank’s operations, which enables the Bank to function independently of government appropriations. A portion of this revenue is used to fund the Bank’s operations and reserves, and the remaining net income is remitted to the Receiver General for Canada in accordance with the requirements of the Bank of Canada Act.

2. Basis of preparation

Compliance with International Financial Reporting Standards

These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB).

The Board of Directors approved the financial statements on February 15, 2018.

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 Canada. In this fiscal-agent role, the Bank provides transactional and administrative support to the Government of Canada in certain areas, consistent with the requirements of section 24 of the Bank of Canada Act. The Bank does not bear the risks and rewards of those activities conducted in its role as fiscal agent. The assets, liabilities, expenditures and revenues relating to this support are the Government of Canada’s and are not included in the financial statements of the Bank.

Securities safekeeping and other custodial services are provided to foreign central banks, international organizations and other government-related entities. Under the terms governing these services, the Bank is indemnified against losses. Any assets and income that are managed under these services are excluded from the Bank’s financial statements, as they are not assets or income of the Bank.

Measurement base

The financial statements have been prepared on a historical cost basis, except for the following items:

Functional and presentation currency

The Bank’s functional and presentation currency is the Canadian dollar. The amounts in the notes to the financial statements of the Bank are in millions of Canadian dollars, unless otherwise stated.

Significant accounting policies

This section contains the Bank’s accounting policies that relate to the financial statements as a whole.

When an accounting policy is applicable to a specific note to the financial statements, the policy and related disclosures are provided within that note as identified in the table below, except where it is not presented as part of Note 3 Financial instruments.

Note

Topic

8

Property and equipment

9

Intangible assets

10

Other assets

11

Bank notes in circulation

14

Other liabilities

15

Employee benefits

16

Leases

17

Commitments, contingencies and guarantees

19

Related parties

There were no new or amended standards adopted by the Bank during 2017 that had a significant impact on its financial statements.

Revenue recognition

Foreign currencies

Investment income and expenses denominated in foreign currencies are translated into Canadian dollars at the exchange rate in effect at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the exchange rate prevailing at the end of the reporting period. The resulting foreign exchange gains and losses are included in Other revenue. Gains or losses on equity investments classified as AFS, including those related to the exchange rate, are recognized in other comprehensive income.

Impairment

Impairment of financial assets

The Bank assesses whether there is objective evidence that a financial asset or group of assets is impaired at the end of each reporting period. 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 indicators of impairment, and whenever events or changes in circumstances indicate that the carrying amount exceeds their recoverable amount.

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

Key accounting judgments, estimates and assumptions

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses, and other related information.

The Bank based its assumptions and estimates on the information 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 reporting period.

Judgments, estimates and underlying assumptions are reviewed for appropriateness and consistent application on an ongoing basis. Revisions to accounting estimates are recognized in the reporting period in which the estimates are revised and in any future reporting periods affected.

Significant judgment and estimates are used in the measurement of financial instruments (Note 3) and employee benefits (Note 15).

Future changes to IFRS

The following new standards issued by the IASB were assessed as having a possible effect on the Bank in the future.

IFRS 9 Financial Instruments (IFRS 9)

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

IFRS 9 eliminates the existing financial asset categories and adopts a principles-based approach to the classification of financial assets, which is driven by a financial instrument’s cash-flow characteristics and the business model in which it is held.

IFRS 9 also introduces an expected loss impairment model for all financial assets not measured at fair value through profit or loss (FVTPL). The model has three stages:

Finally, IFRS 9 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 changes apply to those entities that hedge non-financial risk. These changes are not applicable to the Bank, since the Bank does not engage in hedging activities.

The mandatory effective date for the adoption of IFRS 9 is January 1, 2018, as determined by the IASB, although early adoption was permitted. The Bank has determined that IFRS 9 will result in a change to the classification and measurement of Government of Canada treasury bills from FVOCI to amortized cost, and the transition is not expected to have a significant impact on the Bank’s financial statements. The Bank has also determined that the changes to accounting for financial instrument impairment are not expected to have a significant impact on the Bank’s financial statements. As such, the Bank has opted not to restate its comparative information on adoption of IFRS 9. Additional disclosures related to the Bank’s financial instrument accounting policies, impairment methodologies and financial risk assessments will be required.

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 mandatory effective date for the adoption of IFRS 15 is January 1, 2018, as determined by the IASB, although early adoption is permitted. The Bank has determined that IFRS 15 will not have a significant impact on the Bank’s financial statements.

IFRS 16 Leases (IFRS 16)

In January 2016, the IASB issued IFRS 16, which 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 (IAS 17) and its associated interpretive guidance. Significant changes have been made to lessee accounting since the distinction between operating and finance leases was eliminated, and thus, assets and liabilities must be recognized for all leases (subject to limited exceptions for short-term leases and leases of low-value assets). IFRS 16 does not include significant changes to the requirements for lessors.

IFRS 16 is effective January 1, 2019, with earlier application permitted for companies that have also early-adopted IFRS 15. The Bank has made a preliminary assessment that IFRS 16 will not have a significant impact on the Bank’s financial statements.

3. Financial instruments

The Bank’s financial instruments consist of the following:

Bank notes in circulation, the net defined-benefit liability/asset for pension benefit plans and other employee benefit plans, and lease contracts are excluded from this note and are discussed in Note 11, Note 15 and Note 16, respectively.

Accounting policy

The Bank accounts for all financial instruments using settlement-date accounting. Financial assets and liabilities are recorded when the Bank becomes party to the contractual provisions of the instruments.

Financial instruments are classified based on their nature and business purpose into one of the following categories:

Financial instruments carried at FVTPL are initially recognized at fair value, with any transaction costs expensed as incurred. All other financial instruments are initially recognized at fair value plus transaction costs, if any. See the “Supporting information” section for details on how the Bank determines the fair value of its financial instruments.

The Bank derecognizes a financial asset when it considers that substantially all the risks and rewards of the asset have been transferred or when the contractual rights to the cash flows of the financial asset expire. The Bank derecognizes financial liabilities when the Bank’s obligations are discharged, are cancelled or expire.

Subsequent to initial recognition and on derecognition, financial instruments are measured based on their classification as described in the table below.

Financial Instrument Categories

Subsequent Measurement

Derecognition

Financial Assets

Cash and cash equivalents

  • Cash and foreign deposits

FVTPL. Unrealized changes in the fair value, if any, are recognized in net income.

Fair value gains or losses on disposal are recognized in net income.

Loans and receivables

  • Securities purchased under resale agreements (SPRAs)
  • Advances to members of Payments Canada
  • Other receivables

HTM

  • Government of Canada bonds

Amortized cost using the effective interest method,note1 less any impairment losses.

Impairment is recognized in net income. Any subsequent reversals of a previous impairment would be recognized in net income. Any subsequent decline in the fair value below the carrying amount at the impairment date would represent a further impairment to be recognized in net income.

The difference between the financial asset’s carrying amount and the sum of the consideration received and receivable is recognized in net income.

AFS

  • Government of Canada T-bills
  • Other investments (BIS shares)

FVOCI. Unrealized changes in the fair value are recognized in other comprehensive income and accumulated in the available-for-sale reserve in Equity.

Impairment is recognized in net income. Any subsequent reversals of a previous impairment would be recognized in other comprehensive income for equity instruments and in net income for debt instruments. Any subsequent decline in the fair value below the carrying amount at the impairment date would represent a further impairment to be recognized in net income.

The cumulative unrealized gain or loss previously recognized in other comprehensive income is reclassified from Equity to net income.

Financial Liabilities

Financial liabilities at amortized cost

  • Deposits
  • SSRAs
  • Other liabilities

Amortized cost using effective interest method.note1

The difference between the financial liability’s carrying amount and the sum of the consideration paid and payable (including any non-cash assets transferred or liabilities assumed) is recognized in net income.

Accounting estimates and judgments

Judgment is required when determining if objective evidence of impairment exists, and if so, the amount of impairment. In making this judgment, the Bank evaluates the duration and extent to which the fair value of an investment is less than its cost at each reporting period, among other factors.

Judgment is also required in estimating the fair values of financial instruments. Estimated fair values for financial instruments are designed to approximate amounts for which the instruments could be exchanged in a current arm’s-length transaction between knowledgeable, willing parties.

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.

The tables below explain the valuation methods used to determine the fair value of each financial instrument and its associated level in the fair value hierarchy. There were no changes to valuation methodologies during the year.

Financial Instruments Carried at Fair Value

Valuation Method

Cash and foreign deposits

Fair value is estimated to be equal to their face value due to their nature as cash.

Government of Canada treasury bills

Quoted market prices (Level 1)

BIS shares

Significant unobservable inputs (Level 3)

Estimated as 70% of the Bank’s interest in the net asset value of the BIS at the reporting date. This is consistent with the methodology applied by the BIS for all share repurchases since the 1970s, and was further endorsed in a decision by the International Court at The Hague relating to a share repurchase by the BIS in 2001 (the last share repurchase conducted by the BIS). The Bank expects the value of the BIS shares to fluctuate over time in conjunction with the strength of the BIS balance sheet and exchange rates.

Financial Instruments Carried at Amortized Cost

Valuation Method

SPRAs, other receivables, deposits and financial liabilities

Carrying amount (approximation to fair value assumed due to their nature as short-term or due on demand)

Government of Canada bonds

Quoted market prices (Level 1)

Supporting information
Financial instruments carried at fair value

The following table shows the fair value of the Bank’s financial assets, classified in accordance with the fair value hierarchy described above.

As at December 31, 2017

 

Level 1

 

Level 2

 

Level 3

 

Total

Government of Canada treasury bills

 

18,370.4

 

-

 

-

 

18,370.4

BIS shares

 

-

 

-

 

403.6

 

403.6

 

 

18,370.4

 

-

 

403.6

 

18,774.0

As at December 31, 2016

 

Level 1

 

Level 2

 

Level 3

 

Total

Government of Canada treasury bills

 

16,791.8

 

-

 

-

 

16,791.8

BIS shares

 

-

 

-

 

395.0

 

395.0

   

16,791.8

 

-

 

395.0

 

17,186.8

There were no transfers of amounts between levels in 2017.

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

As at December 31

 

2017

 

2016

Opening balance at beginning of year

 

395.0

 

405.2

Change in fair value recorded through other comprehensive income

 

8.6

 

(10.2)

Closing balance at end of year

 

403.6

 

395.0

Financial instruments not carried at fair value

The fair value of Government of Canada bonds was $84,405.6 million at December 31, 2017 ($83,528.5 million at December 31, 2016).

4. Cash and foreign deposits

Cash and foreign deposits is composed of cash on hand and highly liquid demand deposits in foreign currencies with other central banks or international financial institutions. Included in the total balance of $14.6 million ($19.3 million at December 31, 2016) was Can$13.8 million of foreign deposits (Can$18.2 million at December 31, 2016).

The Bank’s policies on classifying and measuring financial instruments are discussed in Note 3, and related financial risks are discussed in Note 7.

5. Loans and receivables

Loans and receivables is composed primarily of SPRAs and, if any, advances to members of Payments Canada. These transactions are obligations of Payments Canada members and are fully collateralized in accordance with publicly disclosed collateral eligibility and margin requirements. The remaining amount is composed primarily of trade receivables.

Securities purchased under resale agreements is composed of overnight repurchase (repo) operations and term repo operations, 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. The overnight repo matures the next business day and is used to support the effective implementation of monetary policy by withdrawing intraday liquidity, thereby reinforcing the Bank’s target for the overnight rate. The term repo generally matures 1 to 90 business days after issuance and is used for balance sheet management, to promote the orderly functioning of Canadian financial markets and to provide the Bank with information on conditions in short-term funding markets. Balances outstanding as at December 31, 2017, consist of agreements with original terms to maturity ranging from 17 to 84 days (from 18 to 85 days at December 31, 2016).

Advances to members of Payments Canada are collateralized liquidity loans made under the Bank’s Standing Liquidity Facility to facilitate overnight settlement in the Large Value Transfer System (LVTS). These advances mature the next business day. Interest on overnight advances is calculated at the Bank Rate, which is the rate of interest that the Bank charges on one-day loans to major financial institutions. Collateral pledged for these advances comes from a pool of eligible collateral in which the Bank has the discretion to choose the highest-quality collateral to cover any advances granted. As at December 31, 2017, there were no advances to members of Payments Canada ($nil at December 31, 2016).

The Bank’s policies on classifying and measuring financial instruments are discussed in Note 3, and related financial risks are discussed in Note 7.

6. Investments

The Bank’s investments are composed of Government of Canada treasury bills, Government of Canada bonds and other investments. The Bank’s investments are predominantly based on its balance sheet needs under its framework for financial market operations.

Other investments is composed solely of the Bank’s holdings of 9 441 BIS shares (9 441 BIS shares at December 31, 2016), which are held as part of its functions as a central bank and are long-standing in nature. Ownership of BIS shares is limited to central banks, and new shares can be acquired only following an invitation to subscribe extended by the BIS Board of Directors. The shares are non-transferable unless prior written consent is obtained from the BIS.

The Bank also 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 loans are fully collateralized and are generally one business day in duration. Securities loaned under the Securities-Lending Program continue to be accounted for as Investments for the duration of the loan period. Lending fees charged by the Bank on these transactions are included in Other revenue at the loan maturity date. As at December 31, 2017, there were no loaned securities in the Bank’s investments ($nil at December 31, 2016).

The Bank’s policies on classifying and measuring financial instruments are discussed in Note 3, and related financial risks are discussed in Note 7.

7. Financial risk management

The Bank maintains a comprehensive risk management and control framework to manage its risks. The Executive Council oversees enterprise 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 risks associated with its financial instruments, including credit risk, market risk and liquidity risk. The Financial Risk Office monitors and reports on the financial risks related 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 possibility of loss due to the failure of a counterparty or guarantor to meet payment obligations in accordance with agreed-upon terms.

The Bank is exposed to credit risk through its cash and foreign deposits, investments and advances to members of Payments Canada, and through market transactions conducted in the form of SPRAs and loans of securities. The maximum exposure to credit risk is estimated to be the carrying value of those items. The Bank is also exposed to credit risk through its guarantee of the LVTS and through the execution of foreign currency contracts. The maximum exposure under guarantees and foreign currency contracts is discussed in Note 17.

There are no past due or impaired amounts.

Concentration of credit risk

The Bank’s investment portfolio represents 91% of the carrying value of its total assets (91% in 2016). The credit risk associated with the Bank’s investment portfolio is low because the securities held are primarily direct obligations of the Government of Canada, which holds a credit rating of AAA and has no history of default.

SPRAs represent 9% of the carrying value of the Bank’s total assets (8% at December 31, 2016). The fair value of collateral pledged to the Bank against these financial instruments at the end of the reporting period is presented below.

   

2017

 

2016

As at December 31

 

$

 

%

 

$

 

%

Securities issued or guaranteed by the Government of Canada

 

2,414.9

 

24.5

 

878.4

 

10.1

Securities issued or guaranteed by a provincial government

 

7,444.0

 

75.5

 

7,796.4

 

89.9

Total fair value of collateral pledged to the Bank

 

9,858.9

 

100.0

 

8,674.8

 

100.0

Carrying value of advances to members of Payments Canada

 

-

 

-

 

-

 

-

Carrying value of SPRAs

 

9,478.5

 

100.0

 

8,277.0

 

100.0

Carrying value of collateralized securities at year-end

 

9,478.5

 

100.0

 

8,277.0

 

100.0

Collateral as a percentage of carrying value at year-end

     

104.0

     

104.8

In the unlikely event of a counterparty default, collateral can be liquidated to offset credit exposure. Collateral is taken in accordance with the Bank’s publicly disclosed eligibility criteria and margin requirements, which are accessible on its website. Strict eligibility criteria are set for all collateral, and the credit quality of collateral is managed through a set of restrictions based on asset type, term to maturity and credit attributes, including ratings of the securities pledged.

Market risk

Market risk is the potential for adverse changes in the fair value or future cash flows of a financial instrument due to changes in market variables, such as interest rates, foreign exchange rates and market prices. It is composed of 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 interest rates.

The Bank’s exposure to interest rate risk arises through fluctuations in the fair value of its investment in Government of Canada treasury bills, which are short term, and from fluctuations in the future cash flows of cash and foreign deposits held by the Bank and deposits held at the Bank by other institutions, 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 numbers below show the effect at December 31 of an (increase)/decrease in interest rates of 25 basis points on the fair value of the Government of Canada treasury bill portfolio and on other comprehensive income.

As at December 31

 

2017

 

2016

Government of Canada treasury bills

 

(16.7) / 15.5

 

(15.2) / 15.0

The numbers below show the effect as at December 31 of an increase/(decrease) in interest rates of 25 basis points on the interest paid on Government of Canada deposits, which represent substantially all of the Bank’s interest rate risk exposure on financial liabilities.

As at December 31

 

2017

 

2016

Interest expense on Government of Canada deposits

 

58.1 / (58.1)

 

58.0 / (58.0)

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 five major currencies: the euro, the US dollar, the British pound, the Japanese yen and the Chinese renminbi. 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 due to changes in market prices (other than those arising from changes in interest and exchange rates).

The Bank is exposed to other price risk through its investment in the BIS. As discussed in Note 3, the fair value of these shares is estimated on the basis of the net asset value of the BIS, less a discount of 30%. Accordingly, the fair value fluctuations of these shares reflect movements in the net asset value of the BIS and exchange rates as discussed above. The other price risk associated with BIS shares is incidental to the reason for holding them, as discussed in Note 6.

Liquidity risk

Liquidity risk is the potential for loss if the Bank is unable to meet its financial obligations as they fall due. Liabilities with no fixed maturity include bank notes in circulation and Government of Canada deposits, with the remaining liabilities (deposits of members of Payments Canada, SSRAs (if any) and other financial liabilities) due within 12 months. The Bank is also exposed to liquidity risk through its guarantee of the LVTS, as discussed in Note 17.

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 these liabilities with no fixed maturity, the Bank holds a portfolio of highly liquid securities, composed primarily of Government of Canada treasury bills, Government of Canada bonds and SPRAs. 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 can settle the obligation by means of several tools, including the sale of investments backing those liabilities.

Also, 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 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.

As at December 31, 2017

 

No fixed maturity

 

Within 12 months

 

1 to 5 years

 

Over 5 years

 

Total

FINANCIAL ASSETS

                   

Cash and foreign deposits

 

14.6

 

-

 

-

 

-

 

14.6

Loans and receivables

 

-

 

9,495.6

 

-

 

-

 

9,495.6

Investments

                   

Government of Canada treasury bills

 

-

 

18,450.0

 

-

 

-

 

18,450.0

Government of Canada bonds

 

-

 

17,139.3

 

43,069.8

 

34,930.4

 

95,139.5

BIS shares

 

403.6

 

-

 

-

 

-

 

403.6

   

418.2

 

45,084.9

 

43,069.8

 

34,930.4

 

123,503.3

FINANCIAL LIABILITIES

                   

Bank notes in circulation

 

85,855.9

 

-

 

-

 

-

 

85,855.9

Deposits

                   

Government of Canada

 

21,454.2

 

-

 

-

 

-

 

21,454.2

Members of Payments Canada

 

-

 

500.3

 

-

 

-

 

500.3

Other deposits

 

2,274.3

 

-

 

-

 

-

 

2,274.3

Securities sold under repurchase agreements

 

-

 

-

 

-

 

-

 

-

Other financial liabilities

 

-

 

277.3

 

-

 

-

 

277.3

   

109,584.4

 

777.6

 

-

 

-

 

110,362.0

Net maturity difference

 

(109,166.2)

 

44,307.3

 

43,069.8

 

34,930.4

 

13,141.3

As at December 31, 2016

 

No fixed maturity

 

Within 12 months

 

1 to 5 years

 

Over 5 years

 

Total

FINANCIAL ASSETS

                   

Cash and foreign deposits

 

19.3

 

-

 

-

 

-

 

19.3

Loans and receivables

 

-

 

8,288.0

 

-

 

-

 

8,288.0

Investments

                   

Government of Canada treasury bills

 

-

 

16,825.0

 

-

 

-

 

16,825.0

Government of Canada bonds

 

-

 

18,240.6

 

39,693.0

 

35,023.1

 

92,956.7

BIS shares

 

395.0

 

-

 

-

 

-

 

395.0

   

414.3

 

43,353.6

 

39,693.0

 

35,023.1

 

118,484.0

FINANCIAL LIABILITIES

                   

Bank notes in circulation

 

80,478.6

 

-

 

-

 

-

 

80,487.6

Deposits

                   

Government of Canada

 

20,228.4

 

-

 

-

 

-

 

20,228.4

Members of Payments Canada

 

-

 

499.7

 

-

 

-

 

499.7

Other deposits

 

2,103.4

 

-

 

-

 

-

 

2,103.4

Securities sold under repurchase agreements

 

-

 

1,500.0

 

-

 

-

 

1,500.0

Other financial liabilities

 

-

 

598.7

 

-

 

-

 

598.7

   

102,810.4

 

2,598.4

 

-

 

-

 

105,408.8

Net maturity difference

 

(102,396.1)

 

40,755.2

 

36,693.0

 

35,023.1

 

13,075.2

8. Property and equipment

Property and equipment consists of land, buildings, computer equipment, other equipment and related projects in progress.

Accounting policy

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 major components of an item of property and equipment have different useful lives, they are accounted for as separate items 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 is recognized in depreciation.

Depreciation is calculated using the straight-line method and is applied over the estimated useful lives of the assets. The estimated useful lives 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. The estimated useful lives for major asset classes are as follows:

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

Accounting estimates and judgments

Judgment is required when determining

Supporting information

Carrying value of property and equipment

2017

 

Land and buildings

 

Computer equipment

 

Other equipment

 

Total

Cost

               

Balances as at December 31, 2016

 

560.8

 

68.8

 

113.8

 

743.4

Additions

 

21.2

 

11.4

 

10.4

 

43.0

Disposals

 

(2.9)

 

(1.0)

 

(37.0)

 

(40.9)

Transfers to other asset categories

 

(0.6)

 

3.2

 

(5.3)

 

(2.7)

Balances as at December 31, 2017

 

578.5

 

82.4

 

81.9

 

742.8

Depreciation

               

Balances as at December 31, 2016

 

(90.3)

 

(23.1)

 

(59.3)

 

(172.7)

Depreciation expense

 

(18.7)

 

(11.6)

 

(11.3)

 

(41.6)

Disposals

 

2.9

 

0.7

 

36.9

 

40.5

Transfers to other asset categories

 

-

 

-

 

-

 

-

Balances as at December 31, 2017

 

(106.1)

 

(34.0)

 

(33.7)

 

(173.8)

Carrying amounts

               

Balances as at December 31, 2016

 

470.5

 

45.7

 

54.5

 

570.7

Balances as at December 31, 2017

 

472.4

 

48.4

 

48.2

 

569.0

2017

 

Land and buildings

 

Computer equipment

 

Other equipment

 

Total

Projects in progress

               

Included in Carrying amounts at December 31, 2017

 

-

 

3.8

 

3.1

 

6.9

Commitments at December 31, 2017

 

0.9

 

13.6

 

1.1

 

15.6

The commitments at December 31, 2017, primarily consist of computer and mechanical equipment related to resiliency initiatives.

2016

 

Land and buildings

 

Computer equipment

 

Other equipment

 

Total

Cost

               

Balances as at December 31, 2015

 

457.4

 

41.0

 

82.9

 

581.3

Additions

 

139.8

 

18.9

 

6.6

 

165.3

Disposals

 

-

 

(3.2)

 

-

 

(3.2)

Transfers to other asset categories

 

(36.4)

 

12.1

 

24.3

 

-

Balances as at December 31, 2016

 

560.8

 

68.8

 

113.8

 

743.4

Depreciation

               

Balances as at December 31, 2015

 

(84.4)

 

(20.9)

 

(44.6)

 

(149.9)

Depreciation expense

 

(5.9)

 

(5.4)

 

(14.7)

 

(26.0)

Disposals

 

-

 

3.2

 

-

 

3.2

Transfers to other asset categories

 

-

 

-

 

-

 

-

Balances as at December 31, 2016

 

(90.3)

 

(23.1)

 

(59.3)

 

(172.7)

Carrying amounts

               

Balances as at December 31, 2015

 

373.0

 

20.1

 

38.3

 

431.4

Balances as at December 31, 2016

 

470.5

 

45.7

 

54.5

 

570.7

2016

 

Land and buildings

 

Computer equipment

 

Other equipment

 

Total

Projects in progress

               

Included in Carrying amounts at December 31, 2016

 

0.5

 

11.0

 

6.5

 

18.0

Commitments at December 31, 2016

 

17.1

 

0.1

 

16.4

 

33.6

9. Intangible assets

Intangible assets are identifiable non-monetary assets without physical substance that represent future economic benefits and are controlled by the Bank. The Bank’s intangible assets consist of computer software that has been internally developed or externally acquired.

Accounting policy

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 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.

Accounting estimates and judgments

Judgment is required when determining

Supporting information

Carrying value of intangible assets

2017

 

Internally generated software

 

Other software

 

Total

Cost

           

Balances as at December 31, 2016

 

53.4

 

63.1

 

116.5

Additions

 

5.3

 

5.8

 

11.1

Disposals

 

-

 

-

 

-

Transfers to other asset categories

 

-

 

2.7

 

2.7

Balances as at December 31, 2017

 

58.7

 

71.6

 

130.3

Amortization

           

Balances as at December 31, 2016

 

(42.5)

 

(37.8)

 

(80.3)

Amortization expense

 

(2.2)

 

(7.7)

 

(9.9)

Disposals

 

-

 

-

 

-

Transfers to other asset categories

 

-

 

-

 

-

Balances as at December 31, 2017

 

(44.7)

 

(45.5)

 

(90.2)

Carrying amounts

           

Balances as at December 31, 2016

 

10.9

 

25.3

 

36.2

Balances as at December 31, 2017

 

14.0

 

26.1

 

40.1

2017

 

Internally generated software

 

Other software

 

Total

Projects in progress

           

Included in Carrying amounts at December 31, 2017

 

7.7

 

3.7

 

11.4

Commitments at December 31, 2017

 

1.2

 

3.1

 

4.3

2016

 

Internally generated software

 

Other software

 

Total

Cost

           

Balances as at December 31, 2015

 

49.1

 

64.1

 

113.2

Additions

 

4.3

 

3.6

 

7.9

Disposals

 

-

 

(4.6)

 

(4.6)

Transfers to other asset categories

 

-

 

-

 

-

Balances as at December 31, 2016

 

53.4

 

63.1

 

116.5

Amortization

           

Balances as at December 31, 2015

 

(41.0)

 

(34.3)

 

(75.3)

Amortization expense

 

(1.5)

 

(8.1)

 

(9.6)

Disposals

 

-

 

4.6

 

4.6

Transfers to other asset categories

 

-

 

-

 

-

Balances as at December 31, 2016

 

(42.5)

 

(37.8)

 

(80.3)

Carrying amounts

           

Balances as at December 31, 2015

 

8.1

 

29.8

 

37.9

Balances as at December 31, 2016

 

10.9

 

25.3

 

36.2

2016

 

Internally generated software

 

Other software

 

Total

Projects in progress

           

Included in Carrying amounts at December 31, 2016

 

4.6

 

2.5

 

7.1

Commitments at December 31, 2016

 

-

 

-

 

-

10. Other assets

Other assets is composed of bank note inventory (production materials, including the polymer substrate and ink), the net defined-benefit asset related to the Bank of Canada Pension Plan, and all other assets, which are primarily prepaid expenses.

Accounting policy

Bank note inventory is measured at the lower of the cost or the net realizable value. The cost to produce finished bank notes is expensed as incurred. All other assets are recorded at amortized cost using the effective interest method.

The accounting policy for the net defined-benefit asset related to the Bank of Canada Pension Plan is discussed in Note 15.

Supporting information

Composition of other assets

As at December 31

 

Note

 

2017

 

2016

Bank note inventory

     

7.2

 

3.0

Net defined-benefit asset

 

15

 

109.0

 

131.2

All other assets

     

16.4

 

30.7

Total other assets

     

132.6

 

164.9

11. Bank notes in circulation

Bank notes in circulation represents those bank notes that have been produced and issued for use in the economy. They are non-interest-bearing liabilities and are due on demand.

Accounting policy

Bank notes in circulation are recorded at face value. The fair value of bank notes in circulation approximates their carrying value. The Bank’s assessment of related financial risks is discussed in Note 7.

Supporting information

In accordance with the Bank of Canada Act, the Bank has the sole authority to issue bank notes for circulation in Canada. Currently, bank notes are issued in denominations of $5, $10, $20, $50 and $100. Other bank notes, as described in the table below, are denominations that are still in circulation but are no longer issued.

The face value of notes in circulation, presented by denomination, is as follows:

As at December 31

 

2017

 

2016

$5

 

1,346.9

 

1,265.0

$10

 

1,503.4

 

1,358.7

$20

 

19,946.4

 

19,459.0

$50

 

14,845.5

 

13,076.1

$100

 

47,099.1

 

44,178.2

Other bank notes

 

1,114.6

 

1,141.6

Total bank notes in circulation

 

85,855.9

 

80,478.6

12. Deposits

Deposits is composed of deposits by the Government of Canada, members of Payments Canada and other financial institutions, and also includes unclaimed balances remitted to the Bank in accordance with governing legislation. The Bank pays interest on the deposits for the Government of Canada, members of Payments Canada and some other financial institutions at short-term market rates. The Bank pays interest on unclaimed balances in accordance with governing legislation. Interest expense on deposits is included in net income.

Deposits from the Government of Canada were $21,454.2 million as at December 31, 2017 ($20,228.4 million as at December 31, 2016). They consist of $1,454.2 million for operational balances and $20,000.0 million held for the prudential liquidity-management plan ($228.4 million and $20,000.0 million, respectively, at December 31, 2016).

The Bank’s policies on classifying and measuring financial instruments are discussed in Note 3, and related financial risks are discussed in Note 7.

13. Securities sold under repurchase agreements

Securities sold under repurchase agreements, also known as overnight reverse repos, are reverse 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. They are fully collateralized by Government of Canada treasury bills and, as such, are treated as collateralized borrowing transactions.

There were no SSRAs outstanding as at December 31, 2017 ($1,500.0 million in SSRAs were outstanding at December 31, 2016, with $1,500.5 million in Government of Canada treasury bills pledged as collateral by the Bank).

The Bank’s policies on classifying and measuring financial instruments are discussed in Note 3, and related financial risks are discussed in Note 7.

14. Other liabilities

Other liabilities consists of accounts payable and accrued liabilities, provisions and the net defined-benefit liability of the Bank of Canada Supplementary Pension Plan and other employee benefit plans.

Accounting policy

The Bank’s policies on classifying and measuring financial instruments (accounts payable and accrued liabilities, within the context of Other liabilities) are discussed in Note 3, and related financial risks are discussed in Note 7. The Bank’s accounting policy for the net defined-benefit liability of the Bank of Canada Supplementary Pension Plan and other employee benefit plans is discussed in Note 15.

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.

Accounting estimates and judgments

Estimates for provisions consider the present value of the cash flows expected to be required to settle the obligation.

Supporting information

Composition of other liabilities

As at December 31

 

Note

 

2017

 

2016

Surplus payable to the Receiver General for Canada

     

204.2

 

468.8

Net defined-benefit liability

 

15

       

Pension benefit plans

     

64.4

 

38.2

Other benefit plans

     

178.3

 

172.0

All other liabilities and provisions

     

73.1

 

129.9

Total other liabilities

     

520.0

 

808.9

Surplus payable to the Receiver General for Canada

The following table reconciles the opening and closing balances of the surplus payable to the Receiver General for Canada, which is based on the requirements of section 27 of the Bank of Canada Act and the Bank’s remittance agreement with the Minister of Finance, as discussed in Note 18.

As at December 31

 

2017

 

2016

Opening balance at beginning of year

 

468.8

 

249.5

Remittance of surplus to the Receiver General for Canada

 

(1,193.7)

 

(849.5)

Surplus for the Receiver General for Canada

 

929.1

 

1,068.8

Closing balance at end of year

 

204.2

 

468.8

15. Employee benefits

The Bank provides employees with several employee benefit plans, consisting of short-term employee benefits, post-employment benefits, long-term employee benefits and termination benefits.

The Bank of Canada Pension Plan (the 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 Pension Plan is a registered pension plan as defined in the Income Tax Act (ITA) and, consequently, is not subject to income taxes.

The Bank of Canada Supplementary Pension Arrangement (SPA) was created to pay pension benefits to Bank employees with annual earnings above the amount covered by the Pension Plan, as provided under the ITA. The SPA is a retirement compensation arrangement as defined in the ITA.

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 assets cannot be used for any purpose other than payment of pension benefits and related administration fees.

The Bank also sponsors other benefit plans provided to employees, specifically the unfunded post-employment defined-benefit plans for life insurance and eligible health and dental benefits, the unfunded long-service benefit program for employees hired before January 1, 2003, and the long-term disability program.

Accounting policy

Employee benefits refer to all forms of consideration given by an entity in exchange for services rendered by employees or for the termination of employment as described in the following table:

Category

Description

Measurement and Recognition

Short-term employee benefits

Benefits expected to settle wholly within 12 months of when the service was rendered.

Refers to salary, bonus, annual leave, health benefits, dental care and statutory benefits.

The liability and related expense are recognized in the reporting period in which they occur and are measured on an undiscounted basis.

Post-employment benefits

Benefits payable after the completion of employment (pension plan and other benefits).

Refers to

  • the Pension Plan,
  • the SPA,
  • life insurance and eligible health and dental benefits, and
  • the long-service benefit program.

The net asset or liability recognized is composed of the present value of the defined-benefit obligation less the fair value of plan assets, when applicable.

The defined-benefit obligation is calculated by discounting estimated future cash flows using an appropriate interest rate.note1 The plan assets of funded benefit plans are measured at their fair value at the end of the reporting period.

The expense recognized in net income 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.

Remeasurementsnote2 are recognized immediately in other comprehensive income in the reporting period in which they occur and are accumulated in Equity. 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. Past service costs are recognized at the earlier of when the plan amendment or curtailment occurs, or when the Bank recognizes related restructuring costs or termination benefits.

Long-term employee
benefits

Refers to the long-term disability program.

The liability recognized is the present value of the defined-benefit obligation, calculated by discounting estimated future cash flows using an appropriate interest rate.note1

The expense recognized in net income for the reporting period 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.

Termination benefits

Benefits provided in exchange for termination

The liability and related expense is recognized in net income at the earlier of when the Bank can no longer withdraw the offer of the termination benefit or when the Bank recognizes any related restructuring costs.

Accounting estimates and judgments

The cost of the defined-benefit pension plans and other benefit plans and the present value of the benefit obligations are determined using actuarial valuations. An actuarial valuation involves using various assumptions determined by management and reviewed annually by the actuary that may differ from future developments. These assumptions include

The most recent actuarial valuation for the purposes of funding the pension plans was done as at January 1, 2017, and the next required valuation will be as at January 1, 2018. Benefits are based on years of service and the average full-time salary for the best five consecutive years. They are indexed to reflect changes in the consumer price index on the date payments begin and each January 1 thereafter.

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

   

Pension benefit plans

 

Other benefit plans

As at December 31

 

2017

 

2016

 

2017

 

2016

Defined-benefit obligation

               

Discount ratenote1

 

3.50%

 

3.90%

 

3.44%

 

3.84%

Inflation ratenote2

 

2.00%

 

2.00%

 

n.a.

 

n.a.

Rate of compensation increase

 

3.00%

 

3.20%

 

3.00%

 

3.20%

   

+ merit

 

+ merit

 

+ merit

 

+ merit

Mortality tablenote3

 

CPM2014Publ

(scale CPM-B)

 

CPM2014Publ

(scale CPM-B)

 

CPM2014Publ

(scale CPM-B)

 

CPM2014Publ

(scale CPM-B)

Benefit plan expense

               

Discount ratenote1

 

3.90%

 

4.10%

 

3.84%

 

4.02%

Inflation ratenote2

 

2.00%

 

2.00%

 

n.a.

 

n.a.

Rate of compensation increase

 

3.00%

 

3.20%

 

3.20%

 

3.20%

   

+ merit

 

+ merit

 

+ merit

 

+ merit

Assumed medical cost trend

               

Medical cost trend rate

 

n.a.

 

n.a.

 

5.57–4.50%

 

5.80–4.50%

Year that the rate reaches the ultimate trend rate

 

n.a.

 

n.a.

 

2029

 

2029


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.

Sensitivity analysis

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

Increase (decrease) in obligationnote1

 

Pension benefit plans

 

Other benefit plans

Discount rate

     

Impact of 0.10% increase

(31.1)

 

(3.1)

Impact of 0.10% decrease

31.9

 

3.2

Rate of compensation increase

     

Impact of 0.10% increase

5.6

 

0.3

Impact of 0.10% decrease

(5.6)

 

(0.3)

Mortality rate

     

Impact of 10.00% increase

(38.9)

 

(2.9)

Impact of 10.00% decrease

43.3

 

3.4

Inflation rate

     

Impact of 0.10% increase

28.1

 

n.a.

Impact of 0.10% decrease

(27.5)

 

n.a.

Medical cost trend rates

     

Impact of 1.00% increase

n.a.

 

31.0

Impact of 1.00% decrease

n.a.

 

(24.0)

Supporting information

The changes to the net defined-benefit asset (liability) for the year are as follows:

 

Pension benefit plans

 

Other benefit plans

 

2017

 

2016

 

2017

 

2016

Fair value of plan assets

             

Fair value of plan assets as at January 1

1,701.6

 

1,596.8

 

-

 

-

Interest income

66.2

 

65.2

 

-

 

-

Remeasurement gains (losses)

             

Return on plan assetsnote1

117.1

 

56.5

 

-

 

-

Bank contributions

29.6

 

27.5

 

-

 

-

Employee contributions

12.2

 

11.0

 

-

 

-

Benefit payments and transfers

(56.3)

 

(53.4)

 

-

 

-

Administration costs

(2.1)

 

(2.0)

 

-

 

-

Fair value of plan assets as at December 31

1,868.3

 

1,701.6

 

-

 

-

Defined-benefit obligation

             

Benefit obligation as at January 1

1,608.6

 

1,499.1

 

172.0

 

168.2

Current service cost

42.2

 

37.5

 

5.3

 

5.3

Interest cost

63.3

 

62.1

 

6.7

 

6.8

Past service cost

-

 

-

 

0.8

 

-

Employee contributions

12.2

 

11.0

 

-

 

-

Remeasurement (gains) losses

             

Arising from changes in demographic assumptions

(2.7)

 

-

 

-

 

-

Arising from changes in experience

41.3

 

-

 

-

 

-

Arising from changes in financial assumptions

115.1

 

52.2

 

1.0

 

(0.4)

Benefit payments and transfers

(56.3)

 

(53.3)

 

(7.5)

 

(7.9)

Defined-benefit obligation as at December 31

1,823.7

 

1,608.6

 

178.3

 

172.0

Net defined-benefit asset (liability)

44.6

 

93.0

 

(178.3)

 

(172.0)

Net defined-benefit asset

109.0

 

131.2

 

-

 

-

Net defined-benefit liability

(64.4)

 

(38.2)

 

(178.3)

 

(172.0)

Net defined-benefit asset (liability)

44.6

 

93.0

 

(178.3)

 

(172.0)

Benefit plan expenses recognized in net income

41.4

 

36.4

 

13.3

 

11.4

Remeasurement losses (gains) recognized in other comprehensive income

36.6

 

(4.3)

 

0.5

 

0.2


The defined-benefit obligation, presented by membership category, is as follows:

   

Pension benefit plans

 

Other benefit plans

As at December 31

 

2017

 

2016

 

2017

 

2016

Active members

 

757.6

 

627.7

 

87.8

 

87.9

Pensioners

 

956.1

 

884.7

 

90.5

 

84.1

Deferred members

 

110.0

 

96.2

 

-

 

-

Defined-benefit obligation

 

1,823.7

 

1,608.6

 

178.3

 

172.0

The cumulative remeasurement losses recognized in other comprehensive income are as follows:

   

Pension benefit plans

 

Other benefit plans

As at December 31

 

2017

 

2016

 

2017

 

2016

Cumulative remeasurement losses recognized, beginning of year

 

(212.2)

 

(216.5)

 

(16.8)

 

(16.6)

Remeasurement gains (losses) recognized in current year

 

(36.6)

 

4.3

 

(0.5)

 

(0.2)

Cumulative remeasurement losses recognized, end of year

 

(248.8)

 

(212.2)

 

(17.3)

 

(16.8)

Pension benefit plans asset mix

The pension plans’ SIPPs require that investments be held in a diversified mix of asset types and also set out requirements for investment eligibility. The diversification of assets serves to decrease the variations in the expected return performance of the portfolio. For the Pension Plan, 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 report was endorsed by the Pension Committee in September 2015.

The pension plans’ investments are subject to credit, liquidity and market risks, the latter being the most significant risk due to the volatility of the assets. The plans’ liabilities are calculated using a discount rate determined by reference to Canadian AA-rated corporate bonds; a rate of return on plan assets inferior to the discount rate would result in a deficit. Requirements for asset diversification and investment eligibility serve as basic risk management tools for the investment portfolio.

The pension benefit plan assets consist of the following:

   

2017

 

2016

As at December 31

 

Quoted

 

Unquoted

 

Total

 

%

 

Quoted

 

Unquoted

 

Total

 

%

Money market instruments

 

11.9

 

-

 

11.9

 

0.6

 

8.1

 

-

 

8.1

 

0.5

Equity instruments

                               

Canadian equity funds

 

333.8

 

-

 

333.8

 

17.9

 

317.7

 

-

 

317.7

 

18.8

Foreign equity funds

 

573.2

 

-

 

573.2

 

30.7

 

543.2

 

-

 

543.2

 

31.8

Debt instrumentsnote1

                               

Securities issued or guaranteed by the Government of Canada

 

254.5

 

-

 

254.5

 

13.6

 

232.0

 

-

 

232.0

 

13.6

Other securities

 

400.8

 

-

 

400.8

 

21.5

 

353.6

 

-

 

353.6

 

20.8

Real estate funds

 

-

 

257.2

 

257.2

 

13.8

 

-

 

211.8

 

211.8

 

12.4

SPA statutory deposit

 

-

 

36.9

 

36.9

 

2.0

 

-

 

35.2

 

35.2

 

2.1

   

1,574.2

 

294.1

 

1,868.3

 

100.0

 

1,454.6

 

247.0

 

1,701.6

 

100.0

Total cash payments

Regulations governing federally regulated pension plans establish certain solvency requirements calculated under the assumption that the plans are terminated 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 as at January 1, 2017, reported a solvency surplus of $66.5 million and a three-year average solvency surplus of $41.8 million ($20.0 million and $37.0 million, respectively, for the valuation completed at January 1, 2016). Contributions in 2018 will be based on the actuarial valuation as at January 1, 2018, and are estimated to be $11.0 million ($24.3 million in 2017).

16. Leases

The Bank occupies leased premises throughout Canada including Ottawa, Halifax, Montréal, Toronto, Calgary and Vancouver.

Accounting policy

Payments made for leases classified as operating leases are charged to net income on a straight-line basis over the term of the lease. The Bank is not party to any significant finance leases.

Supporting information

The minimum payments are determined at the beginning of the lease and may vary during its term. Contingent rent on premises leases is based on building operating costs. The expiry dates vary for each lease, ranging from fiscal 2018 to 2026.

The future minimum payments for rent, real estate taxes and building operations as at December 31, 2017, are presented below.

As at December 31

 

2017

 

2016

Due within one year

 

1.9

 

15.9

Due within one to five years

 

8.9

 

9.3

Due later than five years

 

6.7

 

1.4


Total premises lease commitments

 

17.5

 

26.6


Lease payments expensed

 

19.4

 

20.8

17. Commitments, contingencies and guarantees

Commitments

A commitment is an enforceable, legally binding agreement to make a payment in the future for the purchase of goods or services. These amounts are not recorded in the Statement of Financial Position since the Bank has not yet received the goods or services from the supplier. The amounts below are what the Bank has committed to pay based on current expected contract prices.

Commitments related to Property and equipment, Intangible assets and Leases are discussed in Note 8, Note 9 and Note 16, respectively.

The Bank has a long-term contract with an outside service provider for retail debt services that expires in 2021. As at December 31, 2017, fixed payments totalling $71.2 million remained, plus a variable component based on the volume of transactions.

The Bank has long-term contracts with outside service providers for business recovery and data centre services, which expire between 2023 and 2026. As at December 31, 2017, fixed payments totalling $69.1 million remained.

As at December 31, 2017, the total minimum payments for long-term contracts, other than leases, property and equipment, and intangible assets, were as follows:

As at December 31

 

2017

Due within one year

 

35.4

Due within one to five years

 

70.8

Due within three to five years

 

32.6

Thereafter

 

3.0

Total minimum payments

 

141.8

Foreign currency swap facilities

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

As at December 31, 2017

Denominated in

Expiry date

Maximum available

Bilateral liquidity swap facilities with other central banks

Bank of England

British pounds

No expiry

Unlimited

Bank of Japan

Japanese yen

No expiry

Unlimited

Bank of Korea

South Korean won

No expiry

Unlimited

European Central Bank

euros

No expiry

Unlimited

Federal Reserve Bank of New York

US dollars

No expiry

Unlimited

Swiss National Bank

Swiss francs

No expiry

Unlimited

People’s Bank of China

renminbi

November 8, 2020

200,000.0

Other swap facilities

Exchange Fund Account of Canada

Canadian dollars

No expiry

Unlimited

Federal Reserve Bank of New York

US dollars

December 12, 2018

2,000.0

Banco de México

Canadian dollars

December 12, 2018

1,000.0

Bank for International Settlements

Canadian dollars

No expiry

100.0

Bilateral liquidity swap facilities with other central banks

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

In November 2017, the Bank signed a swap facility (standing arrangement with no expiry date) with the Bank of Korea. In December 2017, the Bank and the People’s Bank of China renewed the reciprocal Canadian-dollar/ renminbi bilateral swap arrangement, which expires on November 8, 2020.

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 December 12, 2018, 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. The BIS swap was not accessed in 2017, but was accessed in 2016. None of the other liquidity or other swaps were accessed, by either party, in 2017 or 2016. No related commitments existed as at December 31, 2017 ($nil as at December 31, 2016).

Contingencies

Contingent liabilities are possible obligations that could result from uncertain future events outside of the Bank’s control, or present obligations not recognized because the amount cannot be adequately measured or payment is not probable. Contingent liabilities are not recognized in the financial statements but are disclosed if significant.

BIS shares

The 9,441 shares in the BIS have a nominal value of 5,000 Special Drawing Rights per share, of which 25% (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 $63.3 million as at December 31, 2017 ($63.9 million at December 31, 2016) based on prevailing exchange rates.

Guarantees
LVTS guarantee

The LVTS is a large-value payment system, owned and operated by Payments Canada. Any deposit-taking financial institution that is a member of Payments Canada 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 greater than 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 may 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 Bank’s maximum exposure 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 paid as a result of this guarantee. For that reason, no amount has ever been provided for in the liabilities of the Bank.

Other indemnification agreements

In the normal course of operations, the Bank includes indemnification clauses within 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. No indemnification amount has ever been paid under such agreements.

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 is a legal or contractual obligation to carry insurance.

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

18. 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.

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, consistent with the requirement of section 27 of the Bank of Canada Act.

Special reserve

Following an amendment to section 27.1 of the Bank of Canada Act, the special reserve was created in 2007 to offset potential unrealized valuation losses due to changes in the fair value of the Bank’s available-for-sale portfolio. An initial amount of $100 million was established at that time, and the reserve is subject to a ceiling of $400 million.

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.

Available-for-sale reserve

The available-for-sale reserve represents the net unrealized fair value gains of each of the Bank’s AFS assets, as shown below.

As at December 31

 

2017

 

2016

Government of Canada treasury bills

 

-

 

-

BIS shares

 

365.6

 

357.0

Total available-for-sale reserve

 

365.6

 

357.0

Retained earnings

The Bank’s remittance agreement with the Minister of Finance was designed to enable the Bank to manage its equity requirements with consideration given to the volatility arising from fair value changes and remeasurements, which are recorded in other comprehensive income. This agreement allows the Bank to withhold any increase in cumulative net 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 from changes in accounting standards or legislation, from its remittance to the Receiver General for Canada. Any decrease in withheld cumulative net unrealized non-cash losses is added to the remittance.

The net income of the Bank, less any allocation to reserves, is considered ascertained surplus (surplus) and is transferred to the Receiver General for Canada, consistent with the requirement of section 27 of the Bank of Canada Act. Changes to the surplus payable to the Receiver General for Canada are presented in Note 14.

During 2017, the Bank withheld $46.6 million from its remittances to the Receiver General for Canada (in 2016, reimbursed $3.9 million from previously withheld remittances). As at December 31, 2017, $156.0 million in withheld remittances was outstanding ($109.4 million as at December 31, 2016).

19. Related parties

Persons or entities are considered related parties to the Bank if they are

Government of Canada

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 significant 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 Plan

The Bank provides management, investment and administrative support to the Pension Plan. Services in the amount of $0.9 million ($0.9 million in 2016) were fully recovered from the plan in 2017. Disclosures related to the Bank’s post-employment benefit plans are included in Note 15.

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 December 31, 2017, was 30 (27 in 2016).

The compensation of key management personnel is presented in the following table. Short-term employee benefits and post-employment benefits apply to Bank of Canada employees only.

As at December 31

 

2017

 

2016

Short-term employee benefits

 

6.6

 

4.8

Post-employment benefits

 

1.8

 

2.0

Directors’ fees

 

0.3

 

0.3

Total compensation

 

8.7

 

7.1

There were no other long-term employee benefit costs or termination benefits related to key management personnel in 2017 ($nil in 2016).

DEPARTMENT OF JUSTICE

DEPARTMENT OF JUSTICE

STATUTES REPEAL ACT

List of repeals

Notice is given, pursuant to section 4 of the Statutes Repeal Act, chapter 20 of the Statutes of Canada, 2008, that the following provisions were repealed on December 31, 2017, by the operation of section 3 of that Act.

March 13, 2018

Jody Wilson-Raybould
Minister of Justice and Attorney General of Canada

SCHEDULE

  1. Public Safety Act, 2002, S.C. 2004, c. 15, section 78
  2. An Act to amend the Federal-Provincial Fiscal Arrangements Act and to make consequential amendments to other Acts (fiscal equalization payments to the provinces and funding to the territories), S.C. 2005, c. 7, subsection 7(1)
DEPARTMENT OF PUBLIC SAFETY AND EMERGENCY PREPAREDNESS

DEPARTMENT OF PUBLIC SAFETY AND EMERGENCY PREPAREDNESS

CRIMINAL CODE

Designation as fingerprint examiner

Pursuant to subsection 667(5) of the Criminal Code, I hereby designate the following person of the Regina Police Service as a fingerprint examiner:

Ottawa, March 22, 2018

Kathy Thompson
Assistant Deputy Minister
Community Safety and Countering Crime Branch

DEPARTMENT OF PUBLIC SAFETY AND EMERGENCY PREPAREDNESS

DEPARTMENT OF PUBLIC SAFETY AND EMERGENCY PREPAREDNESS

CRIMINAL CODE

Designation as fingerprint examiner

Pursuant to subsection 667(5) of the Criminal Code, I hereby designate the following persons of the Royal Canadian Mounted Police as fingerprint examiners:

Ottawa, March 22, 2018

Kathy Thompson
Assistant Deputy Minister
Community Safety and Countering Crime Branch

OFFICE OF THE SUPERINTENDENT OF FINANCIAL INSTITUTIONS

OFFICE OF THE SUPERINTENDENT OF FINANCIAL INSTITUTIONS

BANK ACT

Silicon Valley Bank — Order permitting a foreign bank to establish a branch in Canada

Notice is hereby given that, pursuant to subsections 524(1) and (2) of the Bank Act, the Minister of Finance made an order on March 8, 2018, permitting Silicon Valley Bank to establish a branch in Canada to carry on business in Canada under the name, in English, Silicon Valley Bank, and, in French, Banque Silicon Valley.

March 29, 2018

Jeremy Rudin
Superintendent of Financial Institutions

OFFICE OF THE SUPERINTENDENT OF FINANCIAL INSTITUTIONS

OFFICE OF THE SUPERINTENDENT OF FINANCIAL INSTITUTIONS

INSURANCE COMPANIES ACT

United States Liability Insurance Company — Order to insure in Canada risks

Notice is hereby given of the issuance, pursuant to subsection 574(1) of the Insurance Companies Act, of an order approving United States Liability Insurance Company to insure in Canada risks, under the name United States Liability Insurance Company, effective March 15, 2018.

April 5, 2018

Jeremy Rudin
Superintendent of Financial Institutions

PRIVY COUNCIL OFFICE

PRIVY COUNCIL OFFICE

Appointment opportunities

We know that our country is stronger — and our government more effective — when decision-makers reflect Canada’s diversity. The Government of Canada has implemented an appointment process that is transparent and merit-based, strives for gender parity, and ensures that Indigenous peoples and minority groups are properly represented in positions of leadership. We continue to search for Canadians who reflect the values that we all embrace: inclusion, honesty, fiscal prudence, and generosity of spirit. Together, we will build a government as diverse as Canada.

The Government of Canada is currently seeking applications from diverse and talented Canadians from across the country who are interested in the following positions.

Current opportunities

The following opportunities for appointments to Governor in Council positions are currently open for applications. Every opportunity is open for a minimum of two weeks from the date of posting on the Governor in Council Appointments website.

Position

Organization

Closing date

President and Chief Executive Officer

Canada Deposit Insurance Corporation

 

President and Chief Executive Officer

Canada Infrastructure Bank

 

Chairperson

Canada Lands Company Limited

 

President and Chief Executive Officer

Canada Post Corporation

 

Chief Executive Officer

Canadian Air Transport Security Authority

 

Chief Executive Officer

Canadian Dairy Commission

 

Chairperson

Civilian Review and Complaints Commission for the Royal Canadian Mounted Police

 

Commissioner of Corrections

Correctional Service Canada

 

Members
(appointment to roster)

International Trade and International Investment Dispute Settlement Bodies

 

Parliamentary Librarian

Library of Parliament

 

Chief Electoral Officer

Office of the Chief Electoral Officer

 

Parliamentary Budget Officer

Office of the Parliamentary Budget Officer

 

Director (Federal Representative)

Quebec Port Authority

April 17, 2018

Chairperson

Social Security Tribunal of Canada

 

Executive Director

Telefilm Canada

 

Chairperson and Vice-Chairperson

Transportation Appeal Tribunal of Canada

May 7, 2018

Chief Executive Officer

Windsor-Detroit Bridge Authority

 

Ongoing opportunities

Opportunities posted on an ongoing basis.

Position

Organization

Closing date

Full-time and Part-time Members

Immigration and Refugee Board

June 29, 2018

Members — All regional divisions

Parole Board of Canada

 

Upcoming opportunities

New opportunities that will be posted in the coming weeks.

Position

Organization

Sergeant-at-Arms

House of Commons

Commissioners

International Joint Commission