Order Fixing January 31, 2020 or the Day on Which the United Kingdom Ceases to be a Member State of the European Union, as the Day on Which Section 220 of that Act Comes into Force: SI/2020-13
Canada Gazette, Part II, Volume 154, Number 4
SI/2020-13 February 19, 2020
BUDGET IMPLEMENTATION ACT, 2018, NO. 1
Order Fixing January 31, 2020 or the Day on Which the United Kingdom Ceases to be a Member State of the European Union, as the Day on Which Section 220 of that Act Comes into Force
P.C. 2020-30 January 30, 2020
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 of the Budget Implementation Act, 2018, No. 1, chapter 12 of the Statutes of Canada, 2018, fixes January 31, 2020 or the day on which the United Kingdom ceases to be a member state of the European Union pursuant to Article 50 of the Treaty on European Union, whichever is later, as the day on which section 220 of that Act comes into force.
(This note is not part of the Order.)
This Order in Council, pursuant to section 221 of the Budget Implementation Act, 2018, No. 1 (BIA 1 2018), chapter 12 of the Statutes of Canada, 2018, fixes the later of January 31, 2020, and the date on which the United Kingdom (UK) ceases to be a member state of the European Union (EU) pursuant to Article 50 of the Treaty on European Union, as the day on which section 220 of that Act comes into force.
The purpose of this Order is to bring into force an amendment passed by Parliament as part of BIA 1 2018 to the Bank of Canada Act to allow the Bank of Canada to continue to transact in securities issued or guaranteed by the government of the UK after the UK withdraws from the EU.
The Bank of Canada has the standing authority under the Bank of Canada Act to buy and sell specific assets. In the normal course of events, the Bank is limited to transact in a set of securities, as follows:
- Metals: Gold, silver, nickel, or bronze coins or gold or silver bullion
- Currency: Any foreign currency
- Securities: Issued or guaranteed by Canada or a province of Canada, the government of the United States, Japan, or the government of a country in the EU
- Other: Special drawing rights
Ensuring that the Bank of Canada can continue to transact in securities guaranteed by the government of the UK is critical to the availability of liquidity to the Government of Canada from the Exchange Fund Account (EFA). The EFA, which is held in the name of the Minister of Finance, represents the largest component of Canada’s official international reserves. The portfolio is made up of liquid foreign currency securities, deposits and special drawing rights.
The legislative purposes of the EFA, as specified in the Currency Act, are to aid in the control and protection of the external value of the Canadian dollar and to provide a source of liquidity for the Government, if required. As of September 30, 2019, the pound sterling assets represented approximately US$ 7.3 billion (Can$ 9.6 billion) or 9.8 % of Canada’s liquid foreign reserve assets. The Government may enter into transactions with the Bank of Canada to convert these assets into Canadian dollars.
Following the results of the June 2016 referendum on the UK’s decision to leave the EU, the UK government triggered Article 50 of the Treaty on European Union — which sets out the steps to be taken by a country seeking to leave the European Union voluntarily — on March 29, 2017. Under Article 50, there are three avenues whereby the withdrawal date can be set. First, the date can be set by a withdrawal agreement between the UK and the European Council, representing all EU members. Second, should a withdrawal agreement not be in place, the fallback date is two years after Article 50 is triggered. Finally, the date can be extended beyond the two-year fallback date by unanimous agreement between the European Council and the UK. On October 28, 2019, the UK and the European Council agreed to extend the withdrawal date to January 31, 2020.
While many of the provisions in BIA 1 2018 came into force immediately upon royal assent on June 21, 2018, this provision was delayed due to the uncertainty surrounding the negotiations between the government of the UK and the EU, as well as within the UK itself. Specifically, section 221 of BIA 1 2018 stipulates that the amendment “comes into force on a day to be fixed by order of the Governor in Council, which may not be earlier than the day — if ever — on which the United Kingdom ceases to be a member of the European Union.”
The Order in Council brings into force legislation that enables the Bank of Canada to continue to transact in securities issued or guaranteed by the UK government in the normal course of events after it secedes from the EU. The entry into force of the provision will also ensure the availability of liquidity to the Government from pound sterling assets held in the EFA.
Without this Order in Council, the Bank of Canada would no longer be able to transact in securities issued or guaranteed by the UK in the normal course of events after it withdraws from the EU. It would also limit the availability of liquidity to the Government from the EFA.
There are no direct financial implications for the Government of Canada associated with this Order in Council.
Gender-based analysis plus
The entry into force of section 220 of the BIA 1 2018 is not expected to have any differential impacts on the basis of sex, gender, age, race, religion, ethnicity, sexuality and/or mental or physical disability.
The Bank of Canada has been consulted and is supportive of this amendment and the Order to bring the amendment into force.
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