Bank of Canada extends oversight to Interac’s e-Transfer service
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Yet any rumours of cash’s demise could be overstated, at least according to the Bank of Canada. A survey by the central bank, Ipsos and Statistics Canada in April found 74 per cent of those who responded had “no plans to go cashless.”
Unlike the U.S. Federal Reserve and other central banks, the Bank of Canada has no direct regulatory power over financial institutions. But in the aftermath of the Great Recession, the Bank of Canada’s oversight duties over payments were expanded to include prominent payment systems. While the central bank says such systems are not “systemically important” — a designation that suggests that failure could trigger a financial crisis — they are still “critical” to the Canadian economy.
Including Interac, the Bank of Canada oversees five systemically important financial market infrastructures and two prominent payment systems. The other payment system is the Automated Clearing Settlement System, owned and operated by Payments Canada, and through which the vast majority of Canadian payments are cleared.
To decide if a payment system is prominent enough to earn the “prominent” tag, the Bank of Canada looks at the value and volume of transactions, among other things. Once a payment service is placed under the Bank of Canada’s watch, it has to abide by the central bank’s rules for managing risks.
“Since payment systems are interconnected, if one institution can’t settle what it owes on time, that could affect the financial strength of other institutions,” Bank of Canada staff wrote in July. “To prevent this, we have controls in place to make sure that all participants meet their payment obligations.”
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