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Ottawa expands deposit protection for savers
April 6, 2019
10:45 am
Doug
British Columbia, Canada
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Nehpets said

Doug said
It would be co-mingled with Canadian deposits within the respective deposit category. So, you have to factor in foreign exchange rates as I suspect the guarantee is based on $100,000 Canadian equivalent. 🙂 

Doug,

Not sure what you mean by "co-mingled". Are you saying that if I had $95,000 CDN on deposit in a CDIC FI, that I could only have $5,000 USD covered under the new CDIC rules? (exchange rate not used in my example, assuming the foreign currency would have to be converted to $CDN equivilant).

My understanding, and I stand to be corrected, was that I could have $100,000 CDN as well as $100,000 USD on deposit in the same CDIC FI, and each deposit would be covered.

Thanks for clarifying!

Stephen  

Hi Stephen,

Two things: although the deposit is in foreign currency, it's still owned by the same person and thus within that insured deposit category. Currency doesn't usually matter in this context. sf-cool

Just like reporting foreign currency GIC interest where you have to convert the interest "paid" to Canadian dollars at a Bank of Canada exchange rate to CAD from that FCY, I suspect something similar such that the FCY amount will be "calculated" in CAD dollars each day based on the CAD/FCY exchange rate for that day (likely BoC exchange rate). Therefore, if you have ~$75,000 USD in a CIBC USD GIC in your name and $100,000 with CIBC in a CAD GIC in your name, $75,000 USD would be CDIC insured and $100,000 uninsured (or vice versa).

Bottom line: No indication this is a new insured deposit category. Likewise, $75,000 USD in a CIBC TFSA GIC would be insured separately, just like $75,000 USD in a CIBC RRSP or RRIF GIC.

Cheers,
Doug

April 6, 2019
11:04 am
gicjunkie
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Vatox said
Thanks Norman1. That new 100k for the RDSP is important, because you can’t spread it around between institutions. You are only allowed one RDSP, so in order to maximize the insured amount you had to have no other deposits at that FI.  

Ah, but you can spread the RDSP money around to numerous institutions within the RDSP itself. One may have an RDSP with a major bank and, within the investment area of that bank, invest the funds in any number of other banks. I know this for a fact wrt TD Canada Trust's Web Broker. Money may be invested with TD, Scotiabank, Canadian Tire Bank, Equitable Bank, Manulife Bank, etc. (about a dozen choices - sorry, no credit unions) I am not one to assume anything, but it would seem reasonable that any cumulative investment at a specific CDIC insured bank would qualify for insurance on its own up to $100,000 within the RDSP. Something to verify for sure.

April 6, 2019
12:09 pm
Doug
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gicjunkie said

Ah, but you can spread the RDSP money around to numerous institutions within the RDSP itself. One may have an RDSP with a major bank and, within the investment area of that bank, invest the funds in any number of other banks. I know this for a fact wrt TD Canada Trust's Web Broker. Money may be invested with TD, Scotiabank, Canadian Tire Bank, Equitable Bank, Manulife Bank, etc. (about a dozen choices - sorry, no credit unions) I am not one to assume anything, but it would seem reasonable that any cumulative investment at a specific CDIC insured bank would qualify for insurance on its own up to $100,000 within the RDSP. Something to verify for sure.  

I'll admit I know very little about RDSPs, so wasn't aware that, as currently stands, one may hold only one RDSP with a given institution. (This seems punitive. I don't know why they would impose this limitation, but I think if someone were to pursue it, they'd win a Canadian Human Rights Tribunal decision. sf-wink)

I assume what you are referring to is holding savings with a discount broker, i.e., TD Direct Investing, in nominee form (held in so-called "street name" by your broker or broker's trustee with you as beneficial owner). Yes, of course this would be possible under that scenario, but again it's still only within one RDSP plan.

Is this legislation proposing to allow people to hold multiple RDSPs?

Cheers,
Doug

April 6, 2019
1:53 pm
Norman1
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It is more restrictive than that. A beneficiary can only have one RDSP. For a short period of time, a beneficiary can have two open, while transferring assets of an RDSP at one financial institution to the RDSP at another.

The upcoming changes to the CDIC Act don't change that. The upcoming changes give RDSP deposits a separate $100,000 of deposit insurance coverage in subsection 5(5) of the updated Schedule to the CDIC Act:

Registered education savings plans

5 (4) Despite subsection 6(2), for the purposes of deposit insurance with the Corporation, if moneys that constitute a deposit or part of a deposit are received by a member institution from a depositor under a registered education savings plan that is for the benefit of an individual, then the aggregate of those moneys and any other moneys that constitute a deposit received from that depositor under any other registered education savings plan that is for the benefit of that individual is considered to be a single deposit separate from any other deposit for the benefit of that individual.

Registered disability savings plans

5 (5) Despite subsection 6(2), for the purposes of deposit insurance with the Corporation, if moneys that constitute a deposit are received by a member institution from a depositor under a registered disability savings plan that is for the benefit of an individual, then the aggregate of those moneys and any other moneys that constitute a deposit or part of a deposit received from the same depositor under any other registered disability savings plan that is for the benefit of that individual is considered to be a single deposit separate from any other deposit for the benefit of that individual.

April 6, 2019
2:18 pm
Vatox
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The 100k RDSP category means I could move my RDSP to a FI where I like the products the most. Up until now I have had to keep it where I have no other deposits.

April 6, 2019
2:27 pm
Doug
British Columbia, Canada
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Norman1 said
It is more restrictive than that. A beneficiary can only have one RDSP. For a short period of time, a beneficiary can have two open, while transferring assets of an RDSP at one financial institution to the RDSP at another.

The upcoming changes to the CDIC Act don't change that. The upcoming changes give RDSP deposits a separate $100,000 of deposit insurance coverage in subsection 5(5) of the updated Schedule to the CDIC Act:

Registered education savings plans

5 (4) Despite subsection 6(2), for the purposes of deposit insurance with the Corporation, if moneys that constitute a deposit or part of a deposit are received by a member institution from a depositor under a registered education savings plan that is for the benefit of an individual, then the aggregate of those moneys and any other moneys that constitute a deposit received from that depositor under any other registered education savings plan that is for the benefit of that individual is considered to be a single deposit separate from any other deposit for the benefit of that individual.

Registered disability savings plans

5 (5) Despite subsection 6(2), for the purposes of deposit insurance with the Corporation, if moneys that constitute a deposit are received by a member institution from a depositor under a registered disability savings plan that is for the benefit of an individual, then the aggregate of those moneys and any other moneys that constitute a deposit or part of a deposit received from the same depositor under any other registered disability savings plan that is for the benefit of that individual is considered to be a single deposit separate from any other deposit for the benefit of that individual.

  

Thanks, Norman. That's helpful, and unfortunate one cannot have more than RDSP. Very strange! A "gift" to the banks to encourage vendor lock-in, perhaps? sf-wink

As for creating a separate deposit category for RDSP with CDIC, yeah that makes sense. Originally, when TFSAs first came out, it was confusing because TFSA wasn't a separate insured deposit category.

Cheers,
Doug

April 6, 2019
8:17 pm
Loonie
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It could be difficult to ensure that your deposits are fully insured if you have USD accountand are at or near the maximum because of fluctuations in rates of exchange.

This would be worst for CIBC/Simplii customers as there would be at least 3 separate accounts that you would have to be taking into account (plus any GICs), complicated by a fluctuating exchange rate.sf-cry It would be too much bother for me. I don't deal with Simplii as it is, and this is one of the reasons, because I also have an account at CIBC and don't want the bother of keeping track.

April 7, 2019
4:19 am
Doug
British Columbia, Canada
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Loonie said
It could be difficult to ensure that your deposits are fully insured if you have USD accountand are at or near the maximum because of fluctuations in rates of exchange.

This would be worst for CIBC/Simplii customers as there would be at least 3 separate accounts that you would have to be taking into account (plus any GICs), complicated by a fluctuating exchange rate.sf-cry It would be too much bother for me. I don't deal with Simplii as it is, and this is one of the reasons, because I also have an account at CIBC and don't want the bother of keeping track.  

Yeah, for small values of USD funds, it doesn't matter much. But, agreed that it would be hard to track. One could always still max out their CAD bank account CDIC insured limit and just know that their USD deposits are, technically speaking, uninsured. Alternatively, if in GICs or broker-held savings accounts, they could use CIBC's other issuers for their CAD or USD deposits such that all their USD deposits are held with CIBC Mortgage Corp. or CIBC Mortgages Inc. and their CAD deposits are held with CIBC, the parent, and be fully CDIC insured to $100,000 CAD equivalent (perhaps in advising forum members of CDIC insurance limits, effective next year or in advance of that, as preparation, we should be referring to it is as "$100,000 CAD equivalent" now!?).

Cheers,
Doug

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