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What is the service provided by the LVTS? why is it important?
Answer: The LVTS is an electronic, real-time net settlement network, designed to provide
immediate finality and settlement to time-critical transactions. There are fourteen LVTS
participants and all other members of the Canadian Payments Association are able to arrange
LVTS payments for their clients through the LVTS participants. The importance of the LVTS is
that it eliminates systemic risk—the risk to the entire payments system due to the inability of one
financial institution to fulfill its payment obligations in a timely fashion.
Diff: 3 Type: SA Page Ref: 404 - 405
Skill: Recall
Objective List: 17.1 Characterize the framework for the implementation of monetary policy in
Canada
What is the function of the ACSS?
Answer: The ACSS is an electronic payments system operated by the Canadian Payments
Association. The ACSS aggregates interbank payments from non-LVTS paper-based payment
items such as cheques, travellers' cheques, gift certificates and money orders, and transfers the
net amounts from and to each participant's settlement account with the Bank of Canada. The
Bank completes the settlement the next day through the LVTS.
Diff: 2 Type: SA Page Ref: 405
Skill: Recall
Objective List: 17.1 Characterize the framework for the implementation of monetary policy in
Canada
What is the operating band for the overnight interest rate?
Answer: The Bank of Canada implements monetary policy by changing the overnight interest
rate in order to influence other short-term interest rates and the exchange rate. The Bank's
operational objective is to keep the overnight rate within a band of 50 basis points. Early in the
morning (9:00 am) on each of the eight specified dates within the year the Bank announces an
operating band of 50 basis points for the overnight rate.
Diff: 2 Type: SA Page Ref: 406
Skill: Recall
Objective List: 17.1 Characterize the framework for the implementation of monetary policy in
Canada