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Updates to CDIC coverage
March 24, 2020
9:36 pm
moneyhelp
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As of April 30th, 2020 all US $ Accounts will be eligible for CDIC insurance. The Government of Canada has expanded coverage of CDIC insurance to include foreign currencies, among other changes. You can learn more about the CDIC changes on their website at cdic.ca*

*source: Message via Tangerine internal messaging system.

CDIC: https://www.cdic.ca/newsroom/cdic-articles-and-updates/changes-to-canada-deposit-insurance-framework/

March 25, 2020
7:54 am
Nehpets
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Thanks for sharing that information, moneyhelp!

Stephen

March 25, 2020
8:00 am
Doug
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moneyhelp said
As of April 30th, 2020 all US $ Accounts will be eligible for CDIC insurance. The Government of Canada has expanded coverage of CDIC insurance to include foreign currencies, among other changes. You can learn more about the CDIC changes on their website at cdic.ca*

*source: Message via Tangerine internal messaging system.

CDIC: https://www.cdic.ca/newsroom/cdic-articles-and-updates/changes-to-canada-deposit-insurance-framework/  

Yes, this is old news, so most people are aware of this.

Importantly, though, realize, though, that this is not a new deposit category. It is just an expansion of insured deposit types. The foreign currency deposits are insured as part of the applicable deposit category's Canadian dollar deposits and your CDIC deposit limit for that category will be calculated on a nightly basis at the Bank of Canada's noon foreign exchange rate.

For example, if I had $50,000 in Canadian funds in non-registered accounts in my name alone and $50,000 in U.S. funds in the same at the same CDIC member financial institution, as at today*, how much is CDIC insured? (For added detail, it is HISAs and the current interest rate is 1.5% on the Canadian funds and 1.0% on the U.S. funds.)

Either moneyhelp, Nehpets (Stephen), or others can answer this. (I know the answer, but just quizzing people here.)

Cheers,
Doug

* Assume "today" is May 1st, 2020.

March 25, 2020
9:04 am
Nehpets
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It is my understanding that if both CDN and foreign funds are in the same category, at the same FI, they would be combined and insured up to $100,000.

Stephen

March 25, 2020
9:06 am
Loonie
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Thanks for the reminder, moneyhelp.
Good point about combined US-Cdn coverage, Doug.

I would assume that the coverage is in Cdn dollars even though the deposit may be in USD. Is that correct?
If so, at the current rate of exchange, you would be covered for fewer US dollars than Cdn ones.Also, since the exchange rate floats, you would want to stay below limits. With current volatility, I would want to keep 10% below, and review monthly if HISA. It's trickier if GIC.

March 25, 2020
9:36 am
Doug
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Nehpets said
It is my understanding that if both CDN and foreign funds are in the same category, at the same FI, they would be combined and insured up to $100,000.

Stephen  

Yes, that's what I'm saying, but it fluctuates daily. sf-cool

Loonie said
Thanks for the reminder, moneyhelp.
Good point about combined US-Cdn coverage, Doug.

I would assume that the coverage is in Cdn dollars even though the deposit may be in USD. Is that correct?

That's correct. sf-cool

If so, at the current rate of exchange, you would be covered for fewer US dollars than Cdn ones.Also, since the exchange rate floats, you would want to stay below limits. With current volatility, I would want to keep 10% below, and review monthly if HISA. It's trickier if GIC.  

The BoC noon rate isn't out yet, so using the March 24th USD/CAD FX rate...

I would be covered for $50,000 USD, which, converted at 1.4491 from yesterday (assuming "today" is May 1st, 2020), is $72,455.00. Thus, of my $50,000 CAD, only $27,545.00 is CDIC insured. Any accrued and as yet unpaid deposit interest would also be uninsured by CDIC when paid, assuming the FX rate remained the same when paid.

Cheers,
Doug

March 25, 2020
10:05 am
moneyhelp
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Well this can be mitigated by holding your money (USD or CAD) among multiple FI, the only downside is that because of daily fluctuations and because different FI will offer differing rates, its best to always underestimate rather than overestimate.

Thoughts?

Also, since it does mention foreign currency, I imagine it applies to any other currency. This spring my parents were planning to go to Italy and sell property and that would bring back Euro's, but thats' not happening anymore because of what's happening there (well everywhere) so this would be a welcoming update. 🙂

March 25, 2020
10:56 am
Doug
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moneyhelp said
Well this can be mitigated by holding your money (USD or CAD) among multiple FI, the only downside is that because of daily fluctuations and because different FI will offer differing rates, its best to always underestimate rather than overestimate.

Thoughts?

Also, since it does mention foreign currency, I imagine it applies to any other currency. This spring my parents were planning to go to Italy and sell property and that would bring back Euro's, but thats' not happening anymore because of what's happening there (well everywhere) so this would be a welcoming update. 🙂  

Yes, but that's always been the case. But just be mindful that at FIs where you hold foreign currencies in significant quantities, hold between 35-50% less than the current $100,000 insured deposit limit in that category. That is, if you had $50,000 CAD and $20,000 USD, I would consider yourself to be "maxed out" in that deposit category and call it a day. Note, too, that you can still hold $100,000 in CAD and USD deposits in your RRSP, the same in your TFSA, the same in any joint accounts with the same joint owners, and so forth. Any savings in a mortgage property tax account are no longer insured separately and are now as part of the same beneficial ownership non-registered savings (i.e., you and your spouse had $5,000 in a mortgage property tax account, that $5,000 is now included with you and your spouse's joint savings account limit at that FI).

If you hold savings with a Big 5 bank, check to see if they can code your deposits based on one of their subsidiary banks. That is, if you hold GICs with Scotia iTRADE, you can have GICs in each of the following CDIC member subsidiaries and the parent company:
- The Bank of Nova Scotia (parent company)
- Scotia Mortgage Corp.
- Montreal Trust Co. of Canada
- National Trust Company of Canada
- ADS Canadian Bank
- Canadian Tire Bank*

and still be fully insured. Most of these can also be held directly through Scotiabank, in addition to broker channels like Scotia iTRADE.

* 20% owned by The Bank of Nova Scotia, with rights beginning in 2021 to own up to 49.9% of Canadian Tire Bank if they so choose; 80% owned by Canadian Tire Corporation, Limited

With HSBC Bank Canada GICs, either directly or through a broker, your subsidiaries include:
- HSBC Mortgage Corp.
- HSBC Trust Company

Cheers,
Doug

March 25, 2020
11:11 am
Bill
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Doug, no need to do any calculations, it's obvious that $US 50k plus $Cdn 50k is over $100k CDIC limit.

My understanding is this applies to Canadian and US dollar accounts, nothing to do with other currencies, no?

March 25, 2020
1:38 pm
Doug
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Bill said
Doug, no need to do any calculations, it's obvious that $US 50k plus $Cdn 50k is over $100k CDIC limit.

My understanding is this applies to Canadian and US dollar accounts, nothing to do with other currencies, no?  

It applies to Canadian and U.S. dollar accounts, but the accounts themselves are included within the same limit regardless of where the funds are.

For example, one can have several Canadian, and one or more U.S., dollar denominated accounts in the same beneficial ownership and deposit category at a particular financial institution, but the CDIC limits are not calculated by each account.

Yes, in that example, it was obvious it'd be over the limit, but I used it as a simplified example to illustrate how to calculate it. See my second example of $50,000 CAD and $20,000 USD. $20,000 USD @ 1.44 is $28,918.00, so one could probably have a bit more than that and still be covered. I'm just saying one needs to take into account how volatile the CAD/USD rate is and widen or narrow their CDIC limit "cushion" accordingly. It's very possible we retest the lows and even go further into the low $0.60 range. Thus, one should try and aim to be at least 10-30% below their CDIC limit when they hold foreign currencies.

USD accounts are most common, yes, but keep in mind the CDIC website specifically mentions "foreign currencies" (https://www.cdic.ca/newsroom/cdic-articles-and-updates/changes-to-canada-deposit-insurance-framework/). Scotiabank, HSBC, CIBC, and others have accounts denominated in at least one or more of the following currencies:
- Euro (HSBC and Scotiabank)
- Swiss Franc (grandfathered; no longer sold—HSBC only, to my knowledge)
- Hong Kong Dollar (HSBC)
- Japanese Yen (grandfathered; no longer sold—HSBC only, to my knowledge)
- Great British Pound (HSBC, possibly CIBC)
- Chinese Yuan (HSBC, possibly Scotiabank and CIBC; limited to electronic transactions only but, nonetheless, would be CDIC insured)

Cheers,
Doug

March 25, 2020
2:07 pm
hwyc
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FAQs about changes CDIC deposit insurance sf-smile

... enriching context regarding foreign currency deposits

What conversion rate would CDIC apply on foreign currency deposits in the event of failure?
In the majority of cases, CDIC would use the conversion rates published by the Bank of Canada on the date of failure. If the Bank of Canada does not publish a rate for a particular foreign currency, then the rate would be based on whatever the rate was at the failed member institution on the date of failure.

March 25, 2020
2:14 pm
Doug
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hwyc said
FAQs about changes CDIC deposit insurance sf-smile  

Thanks, but merely pointing to an FAQ isn't helpful. It's useful to link it contextually to one or more discussion posts in this discussion. sf-cool

To clarify, the above-captioned link shared by @hwyc reiterates and encapsulates what I have said above, particularly with regard to "foreign currency deposits" and how the deposits of foreign currencies are calculated. That is, they are not separate limits. When you hold foreign currencies, the value of your CDIC insured deposits fluctuates daily, and can change wildly over time. sf-cool

Cheers,
Doug

March 25, 2020
2:24 pm
Bill
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hwyc, thanks for the link, I found it very helpful.

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