Bank of Canada to take over key interest rate benchmark for financial markets

OTTAWA—The Bank of Canada plans to assume responsibility for a key interest rate benchmark for financial markets when enhancements are made to it next year.

The central bank says it will take over the administration of the Canadian Overnight Repo Rate Average (CORRA), from financial markets data firm Refinitiv, next year.

CORRA is defined by the bank as a risk-free overnight rate based on repurchase agreement transactions, calculated from on-screen trades conducted through interdealer brokers.

Changes to the benchmark will include basing the rate on a wider set of transaction data provided by the Investment Industry Regulatory Organization of Canada. The central bank says this will result in a more credible benchmark that is more representative of the Canadian market for repurchase agreements and consistent with global best practices.

The bank says it will provide CORRA as a public good, at no cost, in line with developments in other major economies. The target date for implementing the enhanced methodology is the second quarter of 2020.

The move is part of a global effort to co-ordinate benchmark reform in the wake of attempted market manipulation, notably the London Interbank Offered Rate (LIBOR), which came to light in 2012 and resulted in a series of fines for a group of banks and a jail sentence for a U.K. trader.

“The bank expects that, over time, CORRA will be further adopted across a wide range of financial products and could potentially become the dominant Canadian interest rate benchmark, particularly in derivatives markets,” Bank of Canada deputy governor Lynn Patterson said.

“It is very gratifying to see representatives of the public and private sectors come together to make real progress on our shared goal of making Canadian financial markets more resilient and efficient.”