Recently, the Bank of Canada (the Bank) announced the final list of 26 foreign currency exchange rates that it will continue to publish after March 1, 2017. The list of currencies is based on the majority of foreign exchange transactions conducted against the Canadian dollar and combines the top 20 currencies by trading volume and Canada's top 20 trading partners. This list will be reviewed and revised, as needed, every three years.
The release of this list follows a trail of changes being made in respect of the Bank's published foreign exchange rate data. In February 2016, the Bank announced changes to the calculation methodology of its foreign exchange rates which, starting on May 1, 2017, will be published as a single indicative rate as against the Canadian dollar for a reduced number of currencies.
To facilitate the transition, the Bank will concurrently publish the existing and new foreign exchange rate data between March 1, 2017 and April 28, 2017.
Starting on May 1, 2017, exchange rate data will be posted only in respect of the final 26 currencies. All other exchange rates, including noon and closing, high and low, will cease to be published. However, monthly and annual averages as well as the Canadian-dollar effective exchange rate index will continue to be published. In terms of historical data, the Bank will maintain such information for a 10-year look back period.
In anticipation of these changes, the Bank conducted a survey in 2014, canvassing a range of stakeholders using the Bank's exchange rates including for general business purposes, commercial contracts, benchmarks for commercial transactions, accounting purposes for corporations and entities subject to legal requirements that reference these rates (e.g., the Income Tax Act). The survey's findings informed the Bank's approach to crafting the new calculation methodology.
The Bank's rationale is buttressed in part by the fact that the publication of the Bank's exchange rates is based on providing a public good for statistical, analytical and information purposes only – not as benchmarks for transactional purposes. In the age of the internet, the Bank also notes that exchange rates are readily available from numerous alternate sources. The Bank highlights the fact that similar changes are being undertaken by other central banks and that many currencies currently published are infrequently accessed.
The Bank has acknowledged that these changes may impact business processes, IT systems, drafting of legal contracts and federal and provincial legislation. Businesses should review their commercial contracts, including credit agreements, to ensure exchange rate definitions and provisions continue to work from both a drafting and practical perspective. For example, reference to noon spot rates should be removed as noon rates will no longer be published.
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