Personal Finance

Changes to CDIC coverage

  • Last Updated:
  • Dec 18th, 2019 5:36 pm
[OP]
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Jan 4, 2009
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Changes to CDIC coverage

CDIC announced the dates when their proposed changes will take effect...

Hi-lights:

Phase 1 (Apr 30, 2020)
- foreign currency deposits are now eligible
- deposits with terms > 5 years now covered

Phase 2 (Apr 30, 2021)
- RESP/RDSP deposits are now covered

Full details are here
50 replies
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May 8, 2009
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This is a huge step forward. This will give banks a huge one up over credit unions for forex coverage.

Resp coverage helps as well. Surprised it wasn't covered all this time.
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I wonder if a few big banks went bankrupt, would CDIC have enough to pay everyone?

There would be hundreds of thousands of people all claiming at once.
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Feb 15, 2006
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rfdrfd wrote: I wonder if a few big banks went bankrupt, would CDIC have enough to pay everyone?

There would be hundreds of thousands of people all claiming at once.
Canadian banks are among the most highly regulated in the world. A few banks going bankrupt? Have you heard any in recent years?
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Jul 4, 2004
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CDIC should be thinking about increasing the $100K threshold.
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rfdrfd wrote: I wonder if a few big banks went bankrupt, would CDIC have enough to pay everyone?

There would be hundreds of thousands of people all claiming at once.
I don't know they'd be able to pay even if one would flop and a massive run on the others ensues...
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May 16, 2017
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rfdrfd wrote: I wonder if a few big banks went bankrupt, would CDIC have enough to pay everyone?

There would be hundreds of thousands of people all claiming at once.
The only scenario where that could occur would be something much worse than the Great Depression (i.e. it ain't going to happen and it would be unreasonable to insure for such an eventuality; if it did happen, the social, economic and political chaos would likely mean deposits are the least of peoples' worries).
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May 16, 2017
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titaniumtux wrote: This is a huge step forward. This will give banks a huge one up over credit unions for forex coverage.

Resp coverage helps as well. Surprised it wasn't covered all this time.
BC Credit Union deposit insurance already covers:

Savings accounts
• Chequing accounts
• Joint accounts
• Trust accounts
• Term deposits (with no limit on the length of the term to maturity)
• GICs (that are in the form of money on deposit with a BC credit union)
Foreign currency deposits
• Registered and tax-free savings accounts

Believe it is similar everywhere else except Quebec.
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robsaw wrote: BC Credit Union deposit insurance already covers:

Savings accounts
• Chequing accounts
• Joint accounts
• Trust accounts
• Term deposits (with no limit on the length of the term to maturity)
• GICs (that are in the form of money on deposit with a BC credit union)
Foreign currency deposits
• Registered and tax-free savings accounts

Believe it is similar everywhere else except Quebec.
Afaik DICO in Ontario won't cover forex deposits. MB & SK do. Not sure about other provinces.
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Thanks OP, good to know.

While deposit insurance is a good thing, and not likely to be needed in Canada, one should never say never. The future is always unknown, and life is full of surprises.

As for credit unions, it depends on the province, but for example for Hubert (Sunova), based in Manitoba:

"The Deposit Guarantee Corporation of Manitoba provides an unlimited guarantee of all deposits in a Manitoba credit union or caisse populaire including accrued interest to date of payout.
This guarantee covers all deposits including those in a foreign currency or with terms exceeding five years."

But of course the resources of provincial funds are smaller. Probably fine for covering one institution that gets into trouble, but might not be up to covering a larger-scale problem.
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Sep 6, 2018
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The govt can always print more money incase CDIC cant pay everyone.

However if someone has more than the coverage limits they are out of luck.

They should really increase the coverage limit.. With CAD dropping a lot VS USD... CAD$100K is not worth much nowadays.

rfdrfd wrote: I wonder if a few big banks went bankrupt, would CDIC have enough to pay everyone?

There would be hundreds of thousands of people all claiming at once.
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Sep 11, 2006
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Wow "- foreign currency deposits are now eligible " that's pretty gutsy of CDIC. They should raise the $100K coverage limit to at least $250K
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robsaw wrote: The only scenario where that could occur would be something much worse than the Great Depression (i.e. it ain't going to happen and it would be unreasonable to insure for such an eventuality; if it did happen, the social, economic and political chaos would likely mean deposits are the least of peoples' worries).
The housing bear makes a good point.

If banks are so secure then why any excitement over this?

He's absolutely right. In case of a major collapse there CIDC insurance would be useless.



I
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Mar 1, 2019
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BiegeToyota wrote: The housing bear makes a good point.

If banks are so secure then why any excitement over this?

He's absolutely right. In case of a major collapse there CIDC insurance would be useless.
Because people have accounts with smaller banks as they chase higher interest rates on savings accounts, especially here of all places.
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rfdrfd wrote: I wonder if a few big banks went bankrupt, would CDIC have enough to pay everyone?

There would be hundreds of thousands of people all claiming at once.
Whenever i hear this what if scenario... I start to illustrate in what 'realistic' scenarios would this happen.

TOTAL FINANCIAL AND ECONOMIC COLLAPSE. This would involve some sort of catastrophic apocalyptic type disaster.
Or some sort of catastrophic political instability or war. Which I can only imagine if our political machine fully collapse... With an African style military coupe.
Again... all unlikely scenarios in a country as stable as Canada. But these things would need to happen in order for that many banks to collapse at once. And if those things happen... Then we have BIGGER problems to worry about then our life savings or money.
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Sep 17, 2018
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This is from cdic page of what's excluded from bail ins

Can someone translate the last paragraph to some thing simplier.

What is Excluded?
The following are not eligible for a bail-in conversion:

Deposits (including chequing accounts, savings accounts and term deposits such as GICs);
Secured liabilities (e.g., covered bonds);
Eligible financial contracts (e.g., derivatives); and
Most structured notes.4
While they are not subject to conversion under the bail-in regime, NVCC instruments are subject to conversion pursuant to their contractual terms and would fully convert into common shares prior to the bail-in conversion of senior debt into common shares
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titaniumtux wrote: This is a huge step forward. This will give banks a huge one up over credit unions for forex coverage.

Resp coverage helps as well. Surprised it wasn't covered all this time.
I'm sure you probably already knew this, @titaniumtux, but it's worth noting that the foreign currency deposit coverage will be included within one's Canadian dollar denominated deposits within a specific deposit category (and per depositor, of course). While not all the details have been ironed out, for the purposes of deposit limit calculation, the foreign currency deposit balances will be calculated daily at, presumably, the Bank of Canada's published noon foreign exchange rate in Canadian dollar equivalent terms. So, be mindful that $100,000 USD does not equal $100,000 USD in CDIC deposit insurance, if that matters to you. At current exchange rates, you'd be limited to about $75,000 USD.

The loss of the travellers' cheques deposit insurance, since credit unions and Scotiabank still sell and cash them, was surprising, as was the loss of the separate mortgage property tax account deposit category (now included in non-registered deposits).

Cheers,
Doug
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rfdrfd wrote: I wonder if a few big banks went bankrupt, would CDIC have enough to pay everyone?

There would be hundreds of thousands of people all claiming at once.
Your point is well taken, but in almost all cases of bank failures, CDIC just arranges an asset and liability assumption and/or sale to another CDIC member institution. However, CDIC does only have about $5 billion in short-term money market and AAA rated government and corporate bonds and a $22 billion borrowing limit (which can be increased) with the Government of Canada through the Consolidated Revenue Fund. There were about $730 billion in CDIC insured deposits (the actual amount of deposits is over a trillion, perhaps trillions.

Cheers,
Doug
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wally_walrus wrote: I don't know they'd be able to pay even if one would flop and a massive run on the others ensues...
They'd have enough, inclusive of authorizing borrowing limit from the Government of Canada, to fully fund the deposits of Canada's 9th largest bank, Manulife Bank. :)

Cheers,
Doug

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