$150K CDIC Insurance ? | Page 4 | General financial discussion | Discussion forum

If the regulator OSFI, and CDIC which insures these institutions, are each doing their job with respect to capitalization and proper risk management, our banks will not get into the same predicaments. Our banking regulations are considerably more stringent than those in the USA even today.

That said, it seems Ottawa let Wealth One Bank go a long time with annual losses before finally forcing some moves. It still is a lame duck the best that I am aware of. It also seems to me the Home Trust risk management protocols were a bit too risky resulting in a run on the bank (on liquid deposits) before being injected with capital by Berkshire.

The key to solvency and good financial health is the regulator/insurer laying on the lumber early enough to steer a rogue FI away from the ditches.

If regulations could guarantee bank solvency then unlimited CDIC could be offered at zero cost.

In reality banking business model is based on making money by taking risk which is by definition non-zero.

The credit union in NB gives an insured amount of $250,000. It’s a provincial insurance. I put my overflow from my People’s Trust TFSA into the credit union. Eventually I will be bringing my money home to the east coast anyway and the Credit Union will be home to it with the money fully insured.
It would be great if the CDIC would have a limit of $250,000. Thats not likely, so $150,000 is a bit better than $100,000. The article I read said there was never a claim made so CDIC can surely increase its limit.

I agree. Incentives to spread the risk are a valid goal for deposit insurance. Why encourage concentration in one risk pool?

RetirEd said
I agree. Incentives to spread the risk are a valid goal for deposit insurance. Why encourage concentration in one risk pool?

That's why CDIC doesn't set the limit generously. This is from the consultation paper:

The International Association of Deposit Insurers has established Core Principles of Effective Deposit Insurance Systems (see link at the end of this document). These guidelines state that the level and scope of deposit insurance coverage should be credible but limited.

Specifically, most depositors across insured institutions should be fully protected, in order to minimize the risk of bank runs. With the protection offered by deposit insurance, depositors are less likely to withdraw their funds in times of perceived or real stress, thus reducing the risk of bank runs and potential contagion across the financial system.

At the same time, a substantial proportion of the value of deposits should be left unprotected and therefore exposed to market discipline. Market discipline refers to the fact that uninsured depositors are exposed to the risk of loss in the event of a bank failure. Therefore, depositors who have funds not covered by deposit insurance have an incentive to monitor the performance and risk management practices of the member institution and to keep their funds in a member institution they consider to be safe.

Depositors holding large value deposits are generally viewed as best positioned to monitor risk-taking by financial institutions and exert this market discipline, given they are considered to have the financial sophistication needed to judge the soundness of a financial institution.

There was no increase in CDIC insurance limit for the former Central Guaranty Trust deposits.

What CDIC had to provide TD was "deficiency coverage" on the outstanding loans that Central Guaranty Trust had made and the borrowers may not repay.

TD didn't accept all the Central Guaranty Trust loans as compensation for assuming the deposit liabilities of Central Guaranty Trust. CDIC likely paid TD cash to top things up.

The undesired loans and other assets ended up in a special CDIC subsidiary, Adelaide Capital Corporation, to try to recover what CDIC had to pay TD in 1992:

The Corporation’s [CDIC] consolidated financial statements include the results of Adelaide Capital Corporation (ACC), a structured entity created by CDIC in 1992 to affect the failure of Central Guaranty Trust Company and Central Guaranty Mortgage Corporation. (See Note 2 of the Corporation’s fiscal 2022/23 consolidated financial statements for more information.) …

The story finally ended, over 30 years later. In July 2023, Adelaide Capital Corporation filed for bankruptcy. $399,000 in assets and $1.45 billion still owed to CDIC.

There is a lot to be decided, including how much increase in coverage and under what circumstances. Unless you can find something in the budget just released on this subject, my take is we might see something in the Fall 2026 budget for implementation in 2027 but that is pure speculation on my part.

The question asked was 'when did we think we would see increased coverage'. I provided what I thought would be the logical (and more historical) way it would wind its way through Dept of Finance et al....rather than a political/ideological response.

The big 6 banks have most of the deposits so they would indeed pay most of the premiums, but the big 6 are probably also in the lowest (Category 1) premium rate as well. I have not found any document that breaks out premium share by category, never mind by institution so we will be left guessing.

The premium rates for each of the 5 categories is on page 2 of https://www.cdic.ca/wp-content/uploads/Differential-Premiums-Manual.pdf

And total premium income of $986M for 2025 is on page 4 of the 2025 Annual Report https://www.cdic.ca/wp-content/uploads/cdic-2025-annual-report.pdf However, no indication of premium income by premium category and no indication of number of banks in each premium category.

Page 4 has some other interesting data too. I invite those who are conspiracy theorists to dig around for more details.