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A working group will present recommendations on enhancements to the Canadian overnight risk-free rate by the end of the year, and the Bank of Canada will seek broader input on interest rate benchmark reform, a top official said on Monday.

In a speech that did not mention monetary policy or the economy, Deputy Governor Lynn Patterson said the Bank of Canada is making progress toward creation of a new term risk-free Canadian dollar interest rate benchmark, the main objective of a working group set up in March.

The benchmark, which would exist alongside the Canadian Dollar Offered Rate (CDOR), Canada’s version of Libor, echoes efforts in other countries to address concerns about benchmark suitability and manipulation by developing new risk-free or nearly risk-free reference rates.

“Reference rate reform is a necessary and huge global undertaking. Getting this right is critical for maintaining trust in the financial system,” Patterson said in prepared notes for a speech to the investment industry in Toronto.

She said the bank’s working group is looking at options to enhance the existing Canadian overnight risk-free rate, the Canadian Overnight Repo Rate Average (CORRA), including whether the rate could be calculated using a broader range of transactions, instead of just those occurring on interdealer broker screens.

“These enhancements might include dealer-to-client trades. We expect that (the working group) will have a recommendation to bring forward on enhancements to CORRA by the end of the year,” Patterson said.

She also said the bank and its working group need feedback from a wide range of stakeholders and will likely set up targeted round-table discussions and other subgroups to solicit broader input on a range of topics, from the type of products that use interest-rate benchmarks to the wording of the fallback provisions in Canadian cash products referencing CDOR.

“If a new risk-free term benchmark is developed, market adoption will be critical,” Patterson said. “As we begin to trade in these products, we will need to be patient – liquidity may take some time to build.”