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Changes/Upgrades Coming To The CDIC
December 1, 2019
3:51 pm
Dean
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.
Starting at the end of April, it looks like some good changes are going to be made ... but unfortunately they're not going to increase the $100K limits.

Link ➡ https://www.cdic.ca/your-coverage/changes-to-cdic-deposit-protection/

sf-cool " Live Long And Prosper " sf-cool

December 2, 2019
5:04 am
dougjp
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IMHO, close to nothing is happening, in terms of changes that affect most people.

What I want to see is an increase in the maximum coverage limit, that amount equal to the compound inflation rate since the $ 100,000- limit was established. But that would be common sense so it won't happen. sf-yell

December 2, 2019
11:35 am
Dean
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dougjp said

IMHO, close to nothing is happening, in terms of changes that affect most people.

. . .  

True ⬆ ... but they are still 'positive' changes.
.

dougjp said
. . .

What I want to see is an increase in the maximum coverage limit, that amount equal to the compound inflation rate since the $ 100,000- limit was established. But that would be common sense so it won't happen. sf-yell  

You're not alone on that ^ one❗

The CDIC has been around for 52 years now ... since 1967, when the insured limits were just $20K. Fast forward to 2017 and the insured limits had increased to $100K.

Link ➡ https://www.cdic.ca/about-us/our-history/

Should the CDIC insured limits be increased again ... 'Yes', of course❗ But it doesn't look like that's going to happen, this time around.

sf-cool " Live Long And Prosper " sf-cool

December 2, 2019
11:43 am
dougjp
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Selkirk said

You're not alone on that ^ one❗

The CDIC has been around for 52 years now ... since 1967, when the insured limits were just $20K. Fast forward to 2017 and the insured limits had increased to $100K.

Link ➡ https://www.cdic.ca/about-us/our-history/

Should the CDIC insured limits be increased again ... 'Yes', of course❗ But it doesn't look like that's going to happen, this time around.  

Actually their history website page is very misleading, I sure hope they don't deal with people like this when they try to get their money back if a bank fails! "By 2017", well yes its true that by 2017 the coverage was $ 100,000-. However everything I found says that $ 100,000- limit was established in 2005!

December 2, 2019
12:56 pm
AltaRed
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So with CPI at 105.3 in Jan 05 and 136.6 in Oct 19, we should have CDIC coverage at about $130k today. It would be nice if they'd tie it to CPI and increase in $5k or $10k increments over time.

December 2, 2019
1:18 pm
Peter
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December 2, 2019
1:48 pm
Dean
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dougjp said

Actually their history website page is very misleading, I sure hope they don't deal with people like this when they try to get their money back if a bank fails! "By 2017", well yes its true that by 2017 the coverage was $ 100,000-. However everything I found says that $ 100,000- limit was established in 2005!  

Actually, the CDIC History web page (https://www.cdic.ca/about-us/our-history/) is just meant to be a Very brief summary.

If you're looking for the 'full-meal-deal' on the history of the CDIC, you can read their 300 page book they published in 2017, available online as a PDF.

CDIC History PDF Link ➡ https://www.cdic.ca/wp-content/uploads/from-next-best-to-world-class-book.pdf

Happy Reading❗sf-cool

sf-cool " Live Long And Prosper " sf-cool

December 2, 2019
4:40 pm
NorthernRaven
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AltaRed said
So with CPI at 105.3 in Jan 05 and 136.6 in Oct 19, we should have CDIC coverage at about $130k today. It would be nice if they'd tie it to CPI and increase in $5k or $10k increments over time.  

First, the Big Banks would probably resist increases in the limit, since there are likely far fewer people worried about exceeding CDIC coverage with them, as opposed to some of the smaller banks offering high rates. They'd be paying increased premiums for much less benefit than the minnows.
Also, CDIC is targeting a fund of 100 basis points (1%) of insured deposits for 2025-26 (they are under 70 bps right now). A coverage limit of $125K or whatever would bring bigger pieces of large accounts under the "insured deposits" coverage, and extend the date to reach 100bps (and the big accounts are probably again skewed to the large banks).

Second, changing the limit too often (if it were automatically indexed, say) would affect CDIC's messaging and awareness for those who aren't CDIC geeks.

Neither prevents an increase, but there's multiple considerations that go into that number.

December 2, 2019
5:43 pm
AltaRed
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I recognize it is wishful thinking and can have some unintended consequences, but still it makes sense from the consumer perspective. I don't have more than $100k in any HISA or GIC products anyway.

December 2, 2019
6:34 pm
Dean
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AltaRed said

I recognize it is wishful thinking and can have some unintended consequences, but still it makes sense from the consumer perspective. I don't have more than $100k in any HISA or GIC products anyway.  

Actually, it's Not 'wishful thinking' ... the CDIC insurance rate limits have increased from the original $20K (1967), to $100K over the years.

Another Major increase is 'Long' overdue, as many of us here (and elsewhere) sorely need it. I'd like to see it go to $500K, but for now I'd settle for $200K.

sf-cool " Live Long And Prosper " sf-cool

December 5, 2019
3:49 pm
Loonie
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CDIC has never kept up with inflation, and was low to begin with.

The fact that recent changes have been introduced which do not address this issue suggests to me that nothing is likely to be done about it for some time to come - unless there is a LOT of complaining.
Even the banks are feeling a slight pinch in this low interest environment as the spreads are so small, so they won't want to pay for more insurance to protect consumers.

Nonetheless, if the CUs can do it, so can they. Even if they don't put their limits as high as the CUs, they can certainly do better.

December 5, 2019
3:58 pm
dougjp
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In an actuarial sense, CDIC is just reducing costs by not having the limit increased.

OK fine, reducing costs/spending is a long dead government concept, but as long as the incumbents of the office don't have to admit that they are NOT spending money but rather trying to save it, they can waste it elsewhere, as they most surely will sf-yell

December 5, 2019
4:39 pm
Dean
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.
Interesting little article (especially the first paragraph). I wasn't aware that the present CDIC $100K limits will soon be 15 Years Old

Article link ➡ https://retirehappy.ca/maximizing-cdic-coverage/

sf-cool " Live Long And Prosper " sf-cool

December 5, 2019
4:42 pm
dougjp
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Selkirk said
.
Interesting little article (especially the first paragraph). I wasn't aware that the present CDIC $100K limits will soon be 15 Years Old

Article link ➡ https://retirehappy.ca/maximizing-cdic-coverage/  

Yup, see post # 4 above.

December 5, 2019
6:25 pm
NorthernRaven
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dougjp said
In an actuarial sense, CDIC is just reducing costs by not having the limit increased.

OK fine, reducing costs/spending is a long dead government concept, but as long as the incumbents of the office don't have to admit that they are NOT spending money but rather trying to save it, they can waste it elsewhere, as they most surely will sf-yell  

Despite any kneejerk complaints about the "guvmint", CDIC is funded by the premiums paid by banks on insured deposits, and receives no government funding.

December 6, 2019
9:48 am
Dean
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Selkirk said
.
Interesting little article (especially the first paragraph). I wasn't aware that the present CDIC $100K limits will soon be 15 Years Old

Article link ➡ https://retirehappy.ca/maximizing-cdic-coverage/  

What's most interesting about that ^ first paragraph, is 'how' the CDIC limit got increased from $60K to $100K, back in 2005 . . .

Quote:

"In 2005, conservative investors who appreciated the good old GIC had something to really celebrate. After 22 years, Canada Deposit Insurance Corporation (CDIC) raised the insured limit from $60,000 to $100,000. A large part of the reason for the change was due to the work of David Newman, president of Fiscal Agents in Oakville Ontario. In 2004, they started a petition asking GIC investors to lobby for a change to increase CDIC coverage. All the hard work finally paid off when the increase to $100,000 was announced in the 2005 Federal Budget."

If it could be done back on 2005, why can't it be done again (15 years later),
in 2020❓

sf-cool " Live Long And Prosper " sf-cool

December 6, 2019
1:41 pm
Loonie
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I believe Fiscal Agents is a deposit broker, so a low limit would affect the volume of their business. Perhaps they or another deposit broker would like to spearhead another campaign?
I suggest someone who has hit the limits at their deposit brokerage ask about this. Or just ask at Fiscal Agents. It would have more weight coming from a customer though.

December 6, 2019
5:27 pm
Doug
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Selkirk said

What's most interesting about that ^ first paragraph, is 'how' the CDIC limit got increased from $60K to $100K, back in 2005 . . .

Quote:

"In 2005, conservative investors who appreciated the good old GIC had something to really celebrate. After 22 years, Canada Deposit Insurance Corporation (CDIC) raised the insured limit from $60,000 to $100,000. A large part of the reason for the change was due to the work of David Newman, president of Fiscal Agents in Oakville Ontario. In 2004, they started a petition asking GIC investors to lobby for a change to increase CDIC coverage. All the hard work finally paid off when the increase to $100,000 was announced in the 2005 Federal Budget."

If it could be done back on 2005, why can't it be done again (15 years later),
in 2020❓  

Dean, I don't think it's necessary. People put way too much stock in deposit insurance. In reality, deposit insurance, if tapped at all, compensates an acquiring bank for the bad or probably bad loans it's agreed to take on. In nearly every case in the past 30 years (perhaps longer), no one lost $1 because they exceeded their CDIC limit because the acquiring bank simply assumed the deposits. Banks are a lot more regulated than they were in the 70s and 80s, so the chances of a bank failing nowadays are far more remote; CDIC has a lot more power to take over a bank before it ever came to the point of a bank being insolvent. Even Home Capital, they were never insolvent; they were well capitalized and their bad loans were within tolerances. The issue was one of liquidity, but the deposits were all there, so it wasn't like they'd absconded with depositors' funds. Everything was accounted for.

In reality, if a bank were to actually fail and depositors were to lose funds because the bank didn't have the funds on deposit that they claimed to, the government would still step in and backstop it. If they raise the deposit insurance limit, they now have to put those liabilities on their books as contingent liabilities. If they continue with the current practice of implicitly, but not explicitly, saying they'd use whatever means at their disposal in the event of such a crisis, they can effectively guarantee all deposits without saying so. sf-cool

It just depends whether you're comfortable with that implicit extreme high likelihood of a backstop or an iron-clad guarantee. I'm personally fine with the former, and I'd argue, you should be to.

Functionally, CDIC isn't so much deposit insurance as a bank surtax on capital. Nothing wrong with that, but an insurer that never has to pay out any claims is hardly an insurer, I'd argue.

Cheers,
Doug

December 7, 2019
10:14 am
Dean
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Thanks for that ⬆ explanation, Doug

Very Well Stated ... and Duly Noted❗

Thanks again,
Selkirk (a.k.a. Dean)

sf-cool " Live Long And Prosper " sf-cool

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