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EQ Bank CEO on CDIC coverage
January 9, 2023
11:06 am
HighInterestWinner
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https://www.theglobeandmail.com/business/commentary/article-for-financial-stability-we-need-more-insurance-on-customers-bank/

I say this article and I find it interest that the CEO of EQ bank wants to see CDIC coverage increased to $200,000 in 2023.

He makes a good point in that since 2005, the protection offered hasn’t moved with inflation (even if just small as he said)

And to get the real rate coverage the same as in 2005, the coverage would need to be $140,000.

What is everyone’s thoughts on this?

January 9, 2023
11:15 am
Dean
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.
He'll get no argument there ❗❗

Given that $100K in today's $$$ is Chicken Feed, I'd like to see the CDIC limit increased to At Least $500K.

'Course that ain't gonna happen in my lifetime, but I can always dream. sf-wink

    Dean

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

January 9, 2023
11:22 am
savemoresaveoften
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Dean said
.
He'll get no argument there ❗❗

Given that $100K in today's $$$ is Chicken Feed, I'd like to see the CDIC limit increased to At Least $500K.

'Course that ain't gonna happen in my lifetime, but I can always dream. sf-wink

    Dean

  

But if every FI is at $500k, then there will be little competition to offer better rates to attract funds, not good for folks here 🙂

January 9, 2023
11:26 am
AltaRed
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EQ has a vested interest in seeing CDIC limits raised since second tier banks don't have the same confidence (safety of deposits) from the average consumer that the big 6 banks do. The big 6 would rather there be no CDIC insurance for them because it is simply not needed with AA rated mega-institutions and they would save on CDIC premiums. They clearly don't want to pay premiums for $200k of deposit insurance as an example.

OTOH, it is particularly important for the average investor/consumer to have higher CDIC insurance in privately held FIs that are opaque in their financial disclosures (and lack of credit ratings) like People's and Wealth Bank of Canada, and for ones like Home Trust/Oaken that are barely investment grade and about to go private later this year.

If the Feds were to announce higher CDIC insurance limits, CDIC would have to bulk up its assets to take on the risk of higher insurance exposure.

January 9, 2023
12:04 pm
Loonie
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I'm sure it's true that the Big Banks don't want to have to pay CDIC premiums. Their wishes are likely a very significant factor in the failure of CDIC to come anywhere near approximating inflation since inception, never mind 2005.
CDIC began in 1967 with $20,000 coverage.
Apparently 100K in 1967 would be worth well over 800K now.
https://www.in2013dollars.com/canada/inflation/1967

January 9, 2023
12:09 pm
Bill
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This is an issue for a tiny fraction of people, outside of them no-one cares.

On the other hand, it's ludicrous to me to have $100K limit for RRSP/RRIF accounts, forces people who don't have brokerage accounts to spread among various institutions. Of course it helps the big banks as people are comfy going over the limits with them so that maybe keeps a lot of RRSP/RRIF deposits with them. So maybe that's what's behind this issue never catching fire.

January 9, 2023
12:23 pm
Norman1
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The guiding principle is for deposit insurance to cover most of the depositors and not most of the deposits. Most of the deposits would then be subject to market discipline to avoid moral hazard.

As Bill wrote, the issue doesn't affect most people as most people don't have $100,000 in bank deposits to worry about.

It does help the big banks because they have smart people who understand how to multiply the CDIC coverage by offering deposits from multiple CDIC members in the same corporate family through their branch and online channels.

That's in contrast to EQ Bank which has their CEO write an newspaper article instead of figuring out a way to offer deposits through their EQ Bank channel issued by their recently acquired CDIC member Concentra Bank.

January 9, 2023
12:24 pm
Loonie
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Many, if not most, provincial credit union insurance programmes provide unlimited insurance for registered funds.

In 1967, I doubt very much that most people had 20K in the bank, but CDIC covered that much anyway. My parents certainly didn't; that was about the value of their Toronto house at that time. I remember that because it was when theey split up and assets were documented

January 10, 2023
3:29 pm
dougjp
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Yes I also think EQ has an obvious vested interest in doing such an interview....

However the point that nothing (of substance) ever changes at CDIC over many many years despite what's going on in the world around it, is a very valid point. Why not index CDIC coverage limits to inflation, like CPP? And while they are at it, do some "backdating" of raising coverage limits.

It's not so bad being senile; you get to meet many more people.

January 10, 2023
4:04 pm
mechone
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250k I think is what the CDIC rate should be . Years ago to be a millionaire was few and far between, yet today it's quite common . The rate needs to go up and the banks can afford the rates ,they have been making grossly huge profits for years, so much the Federal liberals have dumped a new tax on them.

January 10, 2023
4:08 pm
savemoresaveoften
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mechone said
250k I think is what the CDIC rate should be . Years ago to be a millionaire was few and far between, yet today it's quite common . The rate needs to go up and the banks can afford the rates ,they have been making grossly huge profits for years, so much the Federal liberals have dumped a new tax on them.  

Most millionaires these days are real estate rich, cash poor. Majority still don’t have $100k in savings / GIC type accounts.

Regular posters here are the exception, not the norm.

I do think $200-250k is more meaningful.

January 10, 2023
8:06 pm
Norman1
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Increase is not really needed.

The Big Five banks have figured a way to multiply CDIC coverage and avoid having to educate depositors about their strong debt ratings.

EQ Bank (that's really Equitable Bank) now has four CDIC members in its corporate family:

  1. Equitable Bank
  2. Equitable Trust
  3. Concentra Bank
  4. Concentra Trust

Must be someone there who can put the four pieces together to offer $400,000 of CDIC coverage.

Maybe the EQ Bank person should talk with their colleague running their deposit broker channel. For some reason, through deposit brokers, "All of our GICs are available through Equitable Bank, and its wholly owned subsidiary, Equitable Trust." sf-embarassed

January 11, 2023
7:45 am
cgouimet
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Norman1 said
Increase is not really needed.

The Big Five banks have figured a way to multiply CDIC coverage and avoid having to educate depositors about their strong debt ratings.

EQ Bank (that's really Equitable Bank) now has four CDIC members in its corporate family:

  1. Equitable Bank
  2. Equitable Trust
  3. Concentra Bank
  4. Concentra Trust

Must be someone there who can put the four pieces together to offer $400,000 of CDIC coverage.

Maybe the EQ Bank person should talk with their colleague running their deposit broker channel. For some reason, through deposit brokers, "All of our GICs are available through Equitable Bank, and its wholly owned subsidiary, Equitable Trust." sf-embarassed  

With a spouse, you can make non-Registered coverage $1.2MM by each having individual accounts and then joint accounts ...

Then, $100k each in each Registered category (TFSA, RRSP, RRIF, RESP, RDSP)

CDIC.png

CGO
January 11, 2023
8:08 am
savemoresaveoften
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cgouimet said

With a spouse, you can make non-Registered coverage $1.2MM by each having individual accounts and then joint accounts ...

Then, $100k each in each Registered category (TFSA, RRSP, RRIF, RESP, RDSP)

CDIC.png  

While it is true $1.2mm is now CDIC insured, I still dont want the off chance the name goes belly up and dont know how long the funds will be tied there.

I rather have $250k limit at 5 FIs and distribute it that way.

January 11, 2023
8:16 am
RetirEd
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CDIC was created to protect ordinary trusting Canadians whose savings would be threatened by bank failures; it was assumed that anyone rich enough to exceed those limits would take the time to learn how to protect their assets - or be able to take the loss.

Provincial and sectoral (such as broker) deposit insurance was created to help non-CDIC holdings match offered confidence levels of CDIC ones. Note that not all these have the stability levels or deep pockets of the CDIC-backed ones.

With the separate CDIC categories - particularly for registered assets that are often individuals' life savings - I think that covers most "ordinary Canadians." It effectively doubles the $100K to $200K. Institutions creating separate financial entities also redoubles the increase, not to mention savers putting assets in more than one outfit.

I don't think that's out of line.
RetirEd

January 11, 2023
10:18 pm
Loonie
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mechone said
250k I think is what the CDIC rate should be . Years ago to be a millionaire was few and far between, yet today it's quite common . The rate needs to go up and the banks can afford the rates ,they have been making grossly huge profits for years, so much the Federal liberals have dumped a new tax on them.  

Anyone else remember the TV quiz show "The $64,000 Question"? It was a game show, very popular, where the ultimate jackpot, rarely achieved, was $64K. It ran in the late 1950s or early '60's. Back then, this was an enormous amount of money, which is what made the show so popular. The title became a colloquial expression to express very difficult conundrums.

January 12, 2023
8:37 am
Bill
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I assume not affecting CDIC but I read that the Bank of Canada expects to lose about $9 billion in the next few years. Never happened in its 87 year history (thus supporting my gut feeling post-Boomer era will unfold as unlike we've ever seen).

Maybe someone knows if there are any implications to this previously never seen event - ? Or is it a nothing?

January 12, 2023
8:56 am
Norman1
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It's really nothing. Federal government will cover it by returning some of the billions of dollars of profit that Bank of Canada used turn over each year to the federal government.

This has been Bank of Canada's the comprehensive income the past few years in millions of dollars:

2016 1,057.6
2017 937.7
2018 1,245.9
2019 1,173.3
2020 1,821
2021 2,810

There is talk now that maybe central banks in the world should be allowed to retain some of their yearly profits.

January 12, 2023
9:51 am
Bob
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Increase is long overdue. Surely should be the same as FRSA @ $250,000!

January 12, 2023
10:06 am
Bill
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Norman1, I'm aware the money stuff is all smoothed over, my question is really about why, why after 87 years, including Great Depression and WWII, of this never once happening, has it happened now?

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