Bank of Canada paper explains decision to dilute ELA solvency requirement
Economists say emergency liquidity can play an important role in resolution
The Bank of Canada views emergency liquidity as a useful element of a resolution process, which led it to revise its requirement for an institution to be solvent when it receives central bank support, economists explain in a review article published on November 17.
The central bank adjusted its emergency lending assistance (ELA) framework in December 2015 such that an institution may be temporarily insolvent but still access liquidity as long as it has a credible resolution plan, write
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