Rate Increase for 1-Year Term (average 4.25%) - July 27, 2022 | Page 3 | Hubert Financial | Discussion forum

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Rate Increase for 1-Year Term (average 4.25%) - July 27, 2022
July 30, 2022
7:57 pm
Loonie
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Greedy Guy said

CDIC was established by federal legislation, CDIC Act. CDIC coverage is guaranteed by a large investment portfolio and, if required, federal government regulated/supported loans.  

MB govt similarly legislates their CU insurance. Given that about half of Manitobans belong to a CU, govt would essentially have to step in if needed.

With MB CUs, it would be possible to add up all the deposits and see what the ratio is between insurance and deposits.

I don't know any way of ascertaining the total value of deposits insured by CDIC. If anyone knows, please post.
Unless that can be ascertained, we can't determine the adequacy of CDIC, even including its borrowing capacity.
And borrowing, in either case, would be a risky business.

There used to be someone on this forum, can't remember the name exactly, "Northern...", who had all this figured out. Perhaps he/she will comment.

July 30, 2022
8:07 pm
smayer97
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Greedy Guy said
You are right. Your preference is based on flexibility to cash the GIC early.

As I have no need to cash the GIC early, my preference is based on the lower risk CDIC backed GIC.  

Risk is also determined by and need to factor in the amount of deposits that these insurance have to cover, and the likelihood of needing to cover more than the amount of coverage available to each.

For DGCM, it only needs to cover failures within one province. CDIC needs to cover failures anywhere across Canada. So, part of this assessment needs to weigh in how much of their respective deposits would be at risk at the same time.

Not sure what the numbers are within each system.

July 30, 2022
10:05 pm
Greedy Guy
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Loonie said

MB govt similarly legislates their CU insurance. Given that about half of Manitobans belong to a CU, govt would essentially have to step in if needed.

With MB CUs, it would be possible to add up all the deposits and see what the ratio is between insurance and deposits.

I don't know any way of ascertaining the total value of deposits insured by CDIC. If anyone knows, please post.
Unless that can be ascertained, we can't determine the adequacy of CDIC, even including its borrowing capacity.
And borrowing, in either case, would be a risky business.

There used to be someone on this forum, can't remember the name exactly, "Northern...", who had all this figured out. Perhaps he/she will comment.  

Borrowing capacity of CDIC is probably very similar to the borrowing capacity of the federal government. From FAQ per https://www.cdic.ca/your-coverage/faqs/#information-q1 :

"Can CDIC go bankrupt?
CDIC’s role is vital to the stability of the Canadian financial system and to the flow of financial services. The CDIC Act provides that CDIC cannot be placed into bankruptcy. CDIC is a Crown corporation and is backed by the Government of Canada."

July 31, 2022
8:44 am
Norman1
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Section 46 of the CDIC Act gives CDIC immunity against attempts to push it into bankruptcy and liquidation:

Insolvency and winding-up

46 No statute relating to the insolvency or winding-up of any corporation applies to the [Canada Deposit Insurance] Corporation and in no case shall the affairs of the Corporation be wound up unless Parliament so provides.

It doesn't give CDIC immunity against running out of money.

There are limits to the Government of Canada's support for CDIC. That was found in CDIC Act section 10.1. Instead of giving CDIC a fixed line of credit that some provinces give their provincial deposit insurer, the Government of Canada has empowered CDIC to issue Government of Canada bonds. A formula determines the limit which was around $20 billion back then.

July 31, 2022
9:00 am
Norman1
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CDIC discloses amounts of deposits insured in its annual reports.

$968 billion insured (25% of the deposits with CDIC members) is reported in the Management’s Discussion and Analysis section, page 16 of its 2021 annual report:

Insured deposits

As at April 30, 2020 (the annual date on which insured deposits are calculated for insurance premiums), deposits insured by CDIC increased by 14% year over year to $968 billion and accounted for 25% of total deposits held at member institutions. The growth in insured deposits reflects amendments to the deposit insurance eligibility criteria which extended coverage to include eligible deposits held in foreign currency and eligible deposits with terms greater than five years, as well as the impact of the COVID-19 pandemic that saw an increased level of savings by Canadians. …

July 31, 2022
12:00 pm
Bill
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So 75% of deposits are uninsured, i.e. are over $100k or in non-CDIC member places?

Anyway, they've got about $7 billion on hand to insure about $3 trillion of our money in various deposit accounts, if I understand the info here right, with the ability to borrow some more, so quite a shortfall seems to me in case of systemic failure such as a depression. CDIC, etc insurance is designed for individual failures, wouldn't come close in a general calamity (which we all know can never again happen anyway, central banks have got it all figured out now, right?).

July 31, 2022
12:11 pm
Norman1
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That's correct: 75% of the total, about $3.8 trillion, deposits with CDIC members is not insured.

Most of the CDIC member deposits don't rely on CDIC deposit insurance.

July 31, 2022
12:19 pm
cgouimet
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Bill said
So 75% of deposits are uninsured, i.e. are over $100k or in non-CDIC member places?

Anyway, they've got about $7 billion on hand to insure about $3 trillion of our money in various deposit accounts, if I understand the info here right, with the ability to borrow some more, so quite a shortfall seems to me in case of systemic failure such as a depression. CDIC, etc insurance is designed for individual failures, wouldn't come close in a general calamity (which we all know can never again happen anyway, central banks have got it all figured out now, right?).  

If all our houses burned to the ground, insurance companies would just close their claims department ...

CGO
July 31, 2022
12:28 pm
ExtraSauce
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Interesting and germane topic as I am on verge of starting to lock in at several locations. Tangerine (CDIC), Hubert(DGCM), VanCity(CUDIC/BCFSA), EQ (CDIC), TD (CDIC).

For some reason I thought that BC Credit Unions were backed by Provincial Gov, but like Manitoba CU's, evidently not: "The deposit guarantee is not an obligation of, and neither CUDIC nor BCFSA are backstopped by, the provincial Government."

https://www.bcfsa.ca/media/1959/download

While unlikely things will get bad enough to destroy savers nest eggs, the fine print suggests that even GIC's have some risk.

Are there any provinces that actually do fully back Term Deposits? Short of in depth analysis to discover current liabilities versus capacity to insure, it seems the best/only solution to safeguarding deposits, is to spread it around and that's about as good as it gets if you want to get paid on your deposits.

July 31, 2022
1:34 pm
savemoresaveoften
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cgouimet said

If all our houses burned to the ground, insurance companies would just close their claims department ...  

or if all banks fail, your money in the banks should not be your biggest worry....

July 31, 2022
3:00 pm
laineyrose
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I am new to using redeemable GICs.
Do I wait until the interest is deposited before I redeem my gic so I can move to another redeemable GIC for a higher rate?

Or on the first day after the 3rd month do I call to redeem my gic, even if the interest may not have shown up by then?

Also, after I call does it happen immediately or shows up on my account the next day?

Thanks!

July 31, 2022
3:30 pm
HermanH
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laineyrose said Do I wait until the interest is deposited before I redeem my gic so I can move to another redeemable GIC for a higher rate?

Yes, if you move money before the quarterly maturity date, you won't receive any interest for that quarterly term. The quarterly maturity date is shown on the GIC account. If the maturity date is today's date, then you can call right away to redeem and re-purchase a new GIC at the current rate.

laineyrose said Or on the first day after the 3rd month do I call to redeem my gic, even if the interest may not have shown up by then?

The interest should appear on the date of maturity.

laineyrose said
Also, after I call does it happen immediately or shows up on my account the next day?

If you call and order them to redeem, it should show up in your account and be ready for re-purchase immediately.

July 31, 2022
4:56 pm
BillieBob
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laineyrose said
I am new to using redeemable GICs.
Do I wait until the interest is deposited before I redeem my gic so I can move to another redeemable GIC for a higher rate?

Or on the first day after the 3rd month do I call to redeem my gic, even if the interest may not have shown up by then?

Also, after I call does it happen immediately or shows up on my account the next day?

Thanks!  

You can also call in advance and give instructions to redeem it on the upcoming quarterly interest date.

July 31, 2022
5:56 pm
MG
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BillieBob said

You can also call in advance and give instructions to redeem it on the upcoming quarterly interest date.  

I usually call a week in advance to give instructions.

August 1, 2022
7:34 am
cgouimet
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MG said

I usually call a week in advance to give instructions.  

I usually log in early AM the day the interest is due to confirm the interest was paid. I then call and within 2 minutes the GIC is closed with funds in my Savings Account. I then open a new GIC on line. Total time, under 5 minutes.

CGO
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