Canada's central bank should be allowed to create a "deferred asset" covering losses on quantitative easing, according to former advisers at the C.D. Howe Institute.

That would require a change in federal legislation, according to former advisers Steve Ambler and Thorsten Koeppl and Jeremy Kronick, a director at the institute and a former central bank researcher. The upcoming report from the C.D. Howe Institute in Toronto is due out Tuesday morning.

While the Bank has an indemnity with the government on the value of the bonds purchased under QE, that doesn't cover the spread between the rate paid on settlement balances held by commercial banks and what the central bank earns on the federal government bonds it purchased. The current policy of holding bonds to maturity means the Bank may hold an extra CAD70 billion on its books for decades, the authors wrote. The Bank may hike another 25bps next month, Ambler recently told MNI, increasing the gap. (See: Steady CPI Dents 50BP BOC Hike Case- Ex Adviser)