Do you go over CIDC limit with this bank? | Motive Financial (formerly Canadian Direct Financial) | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
Do you go over CIDC limit with this bank?
August 26, 2019
10:34 am
commonboy
Member
Members
Forum Posts: 5
Member Since:
February 14, 2019
sp_UserOfflineSmall Offline

Just curious if anyone deposits over $100K with Motive.

August 26, 2019
11:39 am
Doug
British Columbia, Canada
Member
Members
Forum Posts: 2909
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

Keep in mind Motive Financial is a divisional brand of Canadian Western Bank that operates as a virtual bank branch (with a separate brand name) in a manner the same as Simplii Financial. Thus, your deposits in the same beneficial ownership of Canadian Western Bank are included within your same deposit insurance limit of Motive Financial. They are not separate institutions for the purposes of CDIC insurance.

But yes, while this is a personal decision and is not investment or savings advice, my personal preference is to exceed my CDIC deposit insurance limits when the HISA or GIC CDIC-insured deposit issuer is rated 'A' or higher. I will do it on 'BBB+' or higher on select issuers only.

Cheers,
Doug

August 26, 2019
2:10 pm
AltaRed
Member
Members
Forum Posts: 914
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

Along with Doug's thoughts, I would at the A(low) or A- level, and most likely at BBB (high) or BBB+ where I believe CWB is, but likely not at the Equitable Group level, and most certainly not at the Home Capital Group level (non-investment grade yet I believe).

August 26, 2019
3:28 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 2909
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

AltaRed said
Along with Doug's thoughts, I would at the A(low) or A- level, and most likely at BBB (high) or BBB+ where I believe CWB is, but likely not at the Equitable Group level, and most certainly not at the Home Capital Group level (non-investment grade yet I believe).Β Β 

Thanks, @AltaRed. Great minds think alike. πŸ˜‰

Your post about CWB's credit rating had me intrigued enough to check to see whether I got it wrong. Indeed, they're actually, according to DBRS (in the process of being acquired by Morningstar, at which time it seems likely they might be renamed Morningstar Bond Ratings or something), A(low), which, presumably, is one notch above BBB+ or BBB(high).

Source: https://www.dbrs.com/research/337991/canadian-western-bank-rating-report

and:

https://www.cwbankgroup.com/investor-relations/stock-and-debt-information/credit-ratings

FWIW, DBRS did upgrade HCG's credit ratings, which also includes Home Trust Company and Home Bank, to BB from BB(low), as at end of March 2019 (source: https://www.dbrs.com/research/341724/dbrs-upgrades-home-capital-group-inc-to-bb-low-and-home-trust-company-to-bb-positive-trend). Investment grade is BBB or BBB+/BBB(high), right, @AltaRed? DBRS has most recently rated Equitable Group, including Equitable Bank (Equitable Trust had yet to launch, or issue any deposits), as BBB, but upgraded its trend to "positive" (source: https://www.dbrs.com/research/348056/dbrs-changes-trend-on-equitable-bank-to-positive-confirms-ratings-at-bbb).

Cheers,
Doug

August 26, 2019
6:53 pm
AltaRed
Member
Members
Forum Posts: 914
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

I believe investment grade is any of the BBB designations, including BBB(low). Given how fine a line that is to slip to BB(high), I tend to dismiss BBB(low) as too risky for my taste.

October 7, 2019
11:46 am
pwr1019
Member
Members
Forum Posts: 3
Member Since:
October 7, 2019
sp_UserOfflineSmall Offline

Sorry I would not exceed the 100K CDIC insurance with Motive. Safe money is safe money and A- does not cut it, there are safer alternatives out there and the little extra % is not worth it. So my opinion 100K with Motive great idea, getting beyond the 100K keep looking or split up your funds

October 7, 2019
9:37 pm
Bud
Member
Members
Forum Posts: 621
Member Since:
February 20, 2018
sp_UserOfflineSmall Offline

Think it safe enough to do 200-250k with this name

October 8, 2019
6:53 am
canadian.100
Member
Members
Forum Posts: 122
Member Since:
September 7, 2018
sp_UserOfflineSmall Offline

Interesting
CWB rating of A- is higher than EQ Group at BBB and Home Group at BB.
The big Cdn banks are rated AA.
CWB rating seems reasonable compared to the big banks.

October 8, 2019
7:24 am
Loonie
Member
Members
Forum Posts: 5464
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Surely it depends on more than ratings, significant though they may be.

The more money you have, the more risk you can afford to take and the more difficult it becomes to keep it all insured.

If your "cash" portfolio is, for example, is 2,000,000, then you will have to scramble to divvy it all up so that it's all insured and at good rates, especially if you insist in keeping it in banks.
But if you only have 200,000, then why would you want to risk any of it being uninsured?

One's judgment on this should reflect one's circumstances, not just ratings or the opinions of others on what is acceptable.

October 8, 2019
8:04 am
Bud
Member
Members
Forum Posts: 621
Member Since:
February 20, 2018
sp_UserOfflineSmall Offline

What is Laurentian rating?
Any smaller CUs rated?

October 8, 2019
10:57 am
pwr1019
Member
Members
Forum Posts: 3
Member Since:
October 7, 2019
sp_UserOfflineSmall Offline

Bud said
Think it safe enough to do 200-250k with this nameΒ Β 

Really? Why would you not split your money and use two institutions with 100k and be 100% insured by the gov? If that is too much work I would suggest Tangerine instead as some have been able to get a rate of 2.75% almost the same as Motive for a AA rated institution. If (when?) there is a financial crisis the smaller weaker players are much more at risk. For interest from CDIC website failed members

1996 – Security Home Mortgage Corporation
1995 – NAL Mortgage Company
1995 – North American Trust Company
1995 – Income Trust Company
1994 – Monarch Trust Company
1994 – Confederation Trust Company
1993 – Prenor Trust Company of Canada
1993 – Dominion Trust Company
1992 – First City Mortgage Company
1992 – First City Trust Company
1992 – Central Guaranty Trust Company
1992 – Central Guaranty Mortgage Corporation
1992 – Shoppers Trust Company
1991 – Standard Trust Company
1991 – Standard Loan Company
1991 – Saskatchewan Trust Company
1991 – Bank of Credit and Commerce Canada
1990 – Settlers Savings and Mortgage Corporation
1988 – Financial Trust Company
1987 – Principal Savings & Trust Company
1987 – North West Trust Company
1986 – Columbia Trust Company
1986 – Bank of British Columbia Mortgage Corporation
1986 – Bank of British Columbia
1985 – Western Capital Trust Company
1985 – Pioneer Trust Company
1985 – Northland Bank
1985 – London Loan Limited
1985 – Continental Trust Company
1985 – Canadian Commercial Bank
1985 – CCB Mortgage Investment Corporation
1984 – Northguard Mortgage Corporation
1983 – Seaway Trust Company
1983 – Seaway Mortgage Corporation
1983 – Greymac Trust Company
1983 – Greymac Mortgage Corporation
1983 – Fidelity Trust Company
1983 – Crown Trust Company
1983 – AMIC Mortgage Investment Corporation
1982 – District Trust Company
1980 – Astra Trust Company
1972 – Security Trust Company Limited
1970 – Commonwealth Trust Company

October 8, 2019
5:42 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 2909
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

That list is misleading. Most of this "failed" banks, trust, or loan companies ultimately had their assets and liabilities assumed by another bank. CDIC may have had to compensate the acquiring bank for potentially bad loans as part of the arrangement, but as far as I know, no depositor lost funds if they exceeded the limit because the deposit insurance regime wasn't tapped. πŸ™‚

In at least 5-6 of those cases, HSBC Bank Canada was the acquiring bank, the most recent of which became Prenor Trust Company of Canada, which was ultimately merged into HSBC Loan Corporation (Canada) that, in 2015-2016, was merged into HSBC Mortgage Corporation (Canada).

Hope that helps,
Doug

October 8, 2019
7:26 pm
Bill
Member
Members
Forum Posts: 1426
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Regular failures until 1996, then zero for 23 years, very strange pattern. Looks like "too big to fail" or its equivalents now apply to all financial institutions, looks like no need to worry about CDIC limits as current generations use money printing or its private-sector variants to keep the parties going.

October 8, 2019
9:03 pm
Jon
Member
Members
Forum Posts: 295
Member Since:
August 9, 2014
sp_UserOfflineSmall Offline

Bill said
Regular failures until 1996, then zero for 23 years, very strange pattern. Looks like "too big to fail" or its equivalents now apply to all financial institutions, looks like no need to worry about CDIC limits as current generations use money printing or its private-sector variants to keep the parties going.Β Β 

So much pessimism here, perhaps banks are better manage and regulated these day.

Not to mention bank have little risk with mortgages anyway, thanks to CMHC and the huge amount of funding going into the real estate market from China (Which is not good for our political system because people that have real estates are more pro-establishments, and those money also fuel bigotry as people blame China for their problem).

Will things suddenly change, of course! But if China go belly up, we will have much more to worry about than our FI (we may even have to contempt with war and refuge, depends on mode and speed of failure).

October 9, 2019
3:48 am
Loonie
Member
Members
Forum Posts: 5464
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

I can say from personal experience that Shoppers Trust was absorbed into another FI. I believe it was First Line Trust but not sure - at least that's where my money ended up for whatevr reason.

At least one of these FIs, and I believe more than one, did in fact go under. My dad had money with one of them and did get reimbursed from CDIC. I believe it was London Trust but not positive. They had been paying a very good rate, no doubt because they were in trouble, but the public didn't know. Even though dad got his money back, he lost the rest of the term's interest, got no interest while waiting for reimbursement (it took quite a few months) and had to settle for a lower rate somewhere else.

And here's why we haven't had failures since the 1990s.
The government recognized that there was a problem with so many of them being in so much trouble and that this was not good for either consumers or for CDIC. So, regulations were improved so that the FIs had to retain more substantial assets. Doug often refers to the amount they have to have in reserve. That formula was changed in order to prevent more bank failures and rescues.
This is an example of successful government regulation - unless, of course, you enjoy putting your money at unnecessary risk.
I remember when these things happened. It was a big concern at the time, and people wanted something done to prevent more problems.
Those improvements helped keep things stable during the 2008 crisis. The question is now whether they are adequate for a more significant crisis such as Vatox and others anticipate.

October 9, 2019
5:06 am
Bill
Member
Members
Forum Posts: 1426
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Good to know better regulation is the reason for FI stability lately.

October 9, 2019
6:14 am
pwr1019
Member
Members
Forum Posts: 3
Member Since:
October 7, 2019
sp_UserOfflineSmall Offline

Doug said
That list is misleading. Most of this "failed" banks, trust, or loan companies ultimately had their assets and liabilities assumed by another bank.

Can't say the website is here

https://www.cdic.ca/about-us/our-history/history-of-failures/

It says it is a "list of the failures they have handled".
whether or not the assets were ultimately acquired by another institution if CDIC had to cover the insured monies very likely those in excess of the limits got little to nothing on their money.

The point is why risk your safe money in excess of CDIC limits at a weaker player for little to no benefit. For Bud the easy solution with 200K is to use two institutions. Some of us (ahem) are old enough to remember institution failures and the losses/hardships some families incurred and it would be naive to believe that can no longer happen.

October 12, 2019
7:20 am
Norman1
Member
Members
Forum Posts: 2500
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

One is not taking much risk with Motive-branded deposits.

As Doug mentioned, the Motive-branded deposits are really deposits of CDIC member Canadian Western Bank. The bank currently has a DBRS long-term debt rating of A (low). Same rating the Province of Newfoundland and Labrador has.

So, the estimated default risk of a Canadian Western Bank/Motive deposit is about the same as that of a Province of Newfoundland and Labrador bond.

October 12, 2019
7:40 am
Norman1
Member
Members
Forum Posts: 2500
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Bill said
Good to know better regulation is the reason for FI stability lately.

The banks and their regulators don't tend to allow a mistake to made more than once.

Those failures in the late 1980's and early 90's were from lending on overpriced Toronto commercial real estate. I remember reading that First Canadian Place in Toronto at one point had a higher appraised value than the market value of publicly traded Inco!

When that real estate bubble popped and the loans went bad, there were substantial losses.

Another mistake was that the regulators used to rely on the audited GAAP-based financial reports from the financial institutions. The regulators are not as naΓ―ve now.

It can also help when the regulators are involved before the situation gets too bad. Two near-failures, not in that list of failures, are Royal Trust and the Continental Bank of Canada. I recalled the Continental Bank of Canada a while back.

October 12, 2019
7:42 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 2909
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

Thanks, Norman. Yeah, the biggest risks are actually with most of the Canadian credit unions. I think Meridian Credit Union and Coast Capital Savings Federal Credit Union are rated about the same as, slightly higher than, or possibly lower than, Home Trust Company and Home Bank. In fact, Desjardins is the highest rated "credit union" in Canada and I think that gets them, maybe BBB+? Haven't looked lately though.

Still, I'm willing to take some risk with non-insured deposits because, as mentioned and as Loonie referenced, government regulation is more stringent and, nearly all the time, deposit insurance regimes aren't even tapped: deposits are just absorbed. In short, deposit insurance schemes are more or less a government cash grab (albeit one which carries hefty contingent liabilities!) from the big banks and the credit unions. sf-cool

Cheers,
Doug

No permission to create posts

Please write your comments in the forum.