Joining the ranks of our central bankers, the Bank of Canada has opened the spigot to provide greater liquidity to the financial system. On Monday, the federal government and the Bank of Canada announced the purchase of billions of dollars of mortgages and mortgage-backed securities to permit the flow of credit to companies and households. Specifically, the Bank of Canada and the national housing authority will augment liquidity available through:

* Mortgage bond purchases of C$ 500 million; the Bank will also accept a wider range of qualifying securities for repo operations.

• * A Reduction of capital buffers designed to ease lending restrictions for Canada’s key banks; buffers will be lowered to 1% of risk-weighted assets from the    2.25 % level set for the end of April.
• *Purchases of Insured Mortgages, a return of program the government used during the 2008 financial crisis, with plans to acquire up to $50 billion in government-insured mortgages through the nation’s housing agency.
• *Expanded  Term Repo Operations in which the central bank will accept in its term repo operations a much wider range of collateral; also, the Bank of Canada will extend term repo operations to weekly, instead of every second week, and broaden the maturity of its operations.
• *Standing Liquidity Facility which is an overnight credit facility will be expanded to allow a greater percentage of collateral to be in the form of non-mortgage loans, and
• *Bankers Acceptance Purchase Facility which links the purchase of securities to credit lines of small and medium-sized business.

This concerted effort can be only interpreted that the Canadian government is anticipating major stress affecting financial institutions and their clients. The Bank is essentially operating as a lender of last resort in which it provides liquidity through asset purchases to make sure the commercial banks can help their customers survive during this public health crisis. It remains to be seen if this amount of firepower will achieve that goal. Unlike the 2008 crisis in which the extent of damage to the financial institutions could be quantified, this crisis is still very much open-ended and indeterminate as to its depth and breath.