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Email this4:14 am
April 28, 2017
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CDIC states that it covers principal and INTEREST earned up to the date when an FI folds. [ total under 100k ]
If an FI folds in the middle of 3 year term, compound GIC, would CDIC pay out a year and six moths worth of interest or only a year?
thx.
4:21 am
October 21, 2013
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Unless they have changed their rules in the last 30 years or so, they would only pay out the 18 months. My father got caught in this when one of them went belly up in the 1980s and lost his very attractive rate. Also, he had to wait months for the money to come, quite a few months, and there was no interest at all during that waiting period. As I recall, it took at least six months, but less than a year. Perhaps faster now due to improved tech, but we won't really know until it is tested.
However, in the case of HCG, I think it's more likely that CDIC would arrange for a takeover, in which case the term would carry on under a different name. CDIC only pays out when they can't convince anyone else to buy the defaulter.
4:30 am
August 4, 2010
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From some CDIC boilerplate:
In the event of failure, depositors do not have to file a claim. CDIC contacts insured depositors advising them of the amount of insured deposits and of the method of payment. The time required to pay out depositors depends on the size and complexity of the failed institution. For smaller institutions, deposits in savings and chequing accounts would be paid out in two days. Trust accounts and mortgage tax accounts would take a few more days.
CDIC may make payment by making the amount of insured deposits available at another member institution, or by issuing cheques to insured depositors. Accrued interest (monthly or annually), will be calculated on eligible deposits up to the date of the deposit insurance payment or the date on which a court application is filed to wind up the failed, whichever comes first, and will be included in the deposit insurance payment, subject to coverage limits.
Note that GICs and ISA savings held in your discount brokerage account might technically be "trusts" if they are in "nominee"/"street" name (like your stocks are, and a separate instance of the $100K limits), but I don't know if CDIC's caveat would include these straightforward situations or they mean more complex sorts of trusts.
4:46 am
December 17, 2016
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NorthernRaven has accurately covered you off with both the payout and the payout time period.
Banking has come a long way from when they used to keep track of your account, by hand calculation, on index cards, in large rolodex machines, at each branch.
8:53 am
April 28, 2017
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NorthernRaven said
From some CDIC boilerplate:[... Accrued interest (monthly or annually), will be calculated on eligible deposits up to the date of the deposit insurance payment or the date on which a court application is filed to wind up the failed, whichever comes first, and will be included in the deposit insurance payment, subject to coverage limits.]
"(monthly or annually)" => so will it be 18 months or 12 months for a 3 year term GIC terminated at the end of 18 months ? ; still vague to me...
thx.
9:39 am
September 11, 2013
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ReX, not really vague - your answer is in your first sentence of your initial query, i.e. you will be paid any interest EARNED to the day the FI folds. You can call their 1-800 number if you want to hear it for yourself, takes a few seconds.
11:37 am
April 28, 2017
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Bill said
ReX, not really vague - your answer is in your first sentence of your initial query, i.e. you will be paid any interest EARNED to the day the FI folds. You can call their 1-800 number if you want to hear it for yourself, takes a few seconds.
I did call them before I posted the question here.
Interest "earned" is construed differently way when it comes to GICs....Revenue Canada prompts you to report your interest income in a given year even though you do not receive a T5. For one of the GICs I acquired mid summer, I understood I had to report income earned up to Dec31...not so, apparently I will get T5 next year for interest earned on the anniversary...end of each year of the term ...that's when it is considered "earned".
So so interest "earned"....."up to" the date FI folds could only be, in the case I quoted, for the first year.
CDIC phone staff read from OP manual and give you the whole mantra. I guess the only way to find out is to go through it. BTW, for non-registered accounts it will take only 3 days for them to issue a check...allow another 5 for Canada Post 
12:04 pm
September 11, 2013
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Rex, for income tax (and accounting) purposes income earned occurs whether or not it's paid. The GIC interest you earned last year should be reported on your 2016 tax return, you're right, even though you're not getting a T5 until this calendar/tax year. No-one does it, everybody just reports based on T5s, and even CRA's computer matches T5s from FIs with what you report, despite the fact the Income Tax Act requires you to report it in the year it is earned, not the year it's paid.
The person I spoke to at CDIC understood the accounting meaning of "earned" and confirmed coverage includes interest earned (accrued) to the date of default.
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