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Wealth One Prosperity Rate 5yr @ 2.88%
September 23, 2021
6:52 am
COIN
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The CDIC $100,000 coverage is long overdue for a meaningful increase.

I actually contacted them a few years ago and they said that $100,000 was sufficient. I wrote back and said that is probably because depositors run around to different institutions to increase their coverage. Write to your MP, PM and Minister of Finance to urge them to raise the limit to $250,000 or higher.

September 23, 2021
7:29 am
canadian.100
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COIN said
The CDIC $100,000 coverage is long overdue for a meaningful increase.

I actually contacted them a few years ago and they said that $100,000 was sufficient. I wrote back and said that is probably because depositors run around to different institutions to increase their coverage. Write to your MP, PM and Minister of Finance to urge them to raise the limit to $250,000 or higher.  

FIs pay annual premiums to CDIC on their deposits into a fund to provide for any potential losses. If limit is more than doubled to $250K, then the FIs would likely need to pay a BIG increase to the present premiums. That would certainly affect the interest rates the FIs would pay on your HISAs and GICs. So would you really be okay with earning a MUCH lower interest rate but have the $250K coverage on your deposits? There is a cost to the insurance premiums and the FIs are not going to shoulder the full cost.

September 23, 2021
7:31 am
gicjunkie
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Vatox said
As long as this information is attached to the holdings, it is covered. So $100k for you and $100k joint.

To be eligible for separate coverage as a joint deposit, the following information must appear on the records of the CDIC member institution holding the funds:

a statement that the deposit is owned jointly;
the name and address of each of the joint owners.  

Just confirm with them that you really are getting a joint GIC. They use their own vernacular to describe their accounts - ie "linked accounts". Still don't know what that means. And make sure you will receive a T5 that indicates joint ownership for tax reporting purposes.

September 23, 2021
8:37 am
HermanH
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Thanks for nothing. sf-laugh

Called CDIC and was more confused than ever. The person on the other line just kept repeatedly reading from the script and could/would not answer the simple question.

Called back to WealthOne and the CSR was kind enough to clarify that I did indeed have 100K GIC coverage under my name and an additional 100K GIC coverage jointly.

September 23, 2021
9:32 am
Bill
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CDIC site is full of clear info re. joint accounts like the graphic at this link, no need to talk to anyone:
https://www.cdic.ca/your-coverage/protecting-your-deposit/

Having $100K limit makes no sense for rrsps or rrifs, what do people do that don't want to have a brokerage account, have a number of those accounts at various fi's? Otherwise I'm fine with the $100K limit on non-registered accounts, I'm guessing this is an issue for a very small % of Canadians, apparently everybody's in debt.

September 23, 2021
10:18 am
HermanH
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Yes, I thought I understood the CDIC chart, too, before calling WealthOne. After the CSR denied it, I went to CDIC and the idiot on the line confused me more than ever. I'm glad that the CSR has clarified the situation to my satisfaction

September 23, 2021
2:08 pm
Loonie
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Bill said

Having $100K limit makes no sense for rrsps or rrifs, what do people do that don't want to have a brokerage account, have a number of those accounts at various fi's?  

Some of us just avoid the banks entirely and put the RSP/RIFs in credit unions, where the insurance is unlimited on these accounts - at least in Ontario and MB and I presume elsewhere.
I have been moving ours out of Oaken as they come due, for that reason plus the lack of a registered savings account.

September 23, 2021
4:03 pm
Bill
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My understanding is that CDIC has about 50 - 60 cents available for every $100 of insured deposits in Canada, anybody know what the comparable number is for credit union insurance in Ontario or other provinces? I'm guessing the number can be less as there are way more credit unions than banks, a failure of one would have relatively less impact on the insurance fund.

September 23, 2021
4:49 pm
rodeworthy
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Bill said
My understanding is that CDIC has about 50 - 60 cents available for every $100 of insured deposits in Canada, anybody know what the comparable number is for credit union insurance in Ontario or other provinces? I'm guessing the number can be less as there are way more credit unions than banks, a failure of one would have relatively less impact on the insurance fund.  

From the Deposit Guarantee Corporation of Manitoba (DCGM) 2020 annual report:

…. Our Guarantee Fund stood at $402 million at December 31, 2020, up $37 million from 2019. This represents 117.7 basis points (bps) of deposits and is well within our range of 105-130 bps.

Assets increased to $37.6 billion [in 2020]

September 23, 2021
6:43 pm
Loonie
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rodeworthy said

From the Deposit Guarantee Corporation of Manitoba (DCGM) 2020 annual report:

…. Our Guarantee Fund stood at $402 million at December 31, 2020, up $37 million from 2019. This represents 117.7 basis points (bps) of deposits and is well within our range of 105-130 bps.

Assets increased to $37.6 billion [in 2020]  

Interesting.
If my math is correct, that would be $1.0691 per $100. I'm very tired now, so I'd appreciate it if someone checked the math.

September 23, 2021
8:33 pm
Norman1
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Loonie said

Interesting.
If my math is correct, that would be $1.0691 per $100. I'm very tired now, so I'd appreciate it if someone checked the math.

Deposits are liabilities and not assets for financial institutions and deposit insurers.

The $37.6 billion of assets is not the deposits. Later on in the annual report, it mentions that deposits in the system were $34.2 billion.

September 23, 2021
9:45 pm
Loonie
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OK. So, with even fewer deposits to insure, the ratio of reserves to deposits would be even higher , $1.1754 per $100, I think.

I don't think banks and CUs are directly comparable though. Their business models, regulations, risks, etc are different. I believe, for example, that MB CUs are not permitted to finance loans for undertakings outside the province.

September 24, 2021
6:21 am
Bill
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So the credit unions have significantly more in the insurance fund pot than CDIC, plus a failure of one would be relatively smaller, so again in better shape. Though "too big to fail" factor for banks probably means gov't would step in if a bank failure that affected lots of Canadians was not resolved by the industry, not so assured re. credit union failure. Not clear if a bank like Wealth One would qualify for special treatment, I don't exceed the limit with them.

September 24, 2021
7:17 am
Loonie
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As far as CDIC is concerned, I think insured deposits in small banks are very well protected precisely because the fund CAN handle them, which they couldn't for a large bank.
On this forum most of us don't hold significant deposits in the big banks most of the time anyway. The brokerages would have different insurance.

At least in MB, i believe the gov't would also have to step in if the insurance proved inadequate. CUs are very popular in MB, so it would be poltiically very high risk not to. The question in my mind is whether they could find the money to do so. This article is dated but gives the general idea of their popularity with individuals and small-medium businesses. https://www.cucm.org/press/manitoba-credit-unions-continue-to-lead-the-province-in-market-share

September 24, 2021
8:49 am
smayer97
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Also keep in mind new laws that were passed now allowing BAIL-INS, meaning banks would have the right to take money from depositors directly to cover their losses under certain conditions, whatever those may be, similar to what Cyprus did a few years back.

September 24, 2021
8:58 am
canadian.100
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Loonie said
As far as CDIC is concerned, I think insured deposits in small banks are very well protected precisely because the fund CAN handle them, which they couldn't for a large bank.

At least in MB, i believe the gov't would also have to step in if the insurance proved inadequate. CUs are very popular in MB, so it would be poltically very high risk not to. The question in my mind is whether they could find the money to do so. This article is dated but gives the general idea of their popularity with individuals and small-medium businesses. https://www.cucm.org/press/manitoba-credit-unions-continue-to-lead-the-province-in-market-share  

You may think CDIC can easily cover small banks but cannot handle a big bank in trouble - in reality that does not matter because the fed govt/Bank of Canada would provide support/liquidity to the big banks if needed to stabilize the system. I think the big banks are actually much more solid than you give credit - most Canadians would never deal with banks such as WealthOne Bank if CDIC did not guarantee their deposits. I sure would not as their profit situation has been marginal when I looked at their financial statements.

Re the Manitoba CUs, I agree the Manitoba govt would likely step in to support any cracks in their stability even though the Manitoba Govt itself does not legally guarantee one's deposits in Manitoba CUs.

September 24, 2021
9:13 am
Loonie
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smayer97 said
Also keep in mind new laws that were passed now allowing BAIL-INS, meaning banks would have the right to take money from depositors directly to cover their losses under certain conditions, whatever those may be, similar to what Cyprus did a few years back.  

I'm vague on this provision. Can you provide a reference that the lay person could understand?
I haven't paid much attention to the bail-in concept.
I was under the impression that those who held preferred shares would take a hit somehow as part of this.

September 24, 2021
9:32 am
Loonie
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canadian.100 said

You may think CDIC can easily cover small banks but cannot handle a big bank in trouble - in reality that does not matter because the fed govt/Bank of Canada would provide support/liquidity to the big banks if needed to stabilize the system. I think the big banks are actually much more solid than you give credit - most Canadians would never deal with banks such as WealthOne Bank if CDIC did not guarantee their deposits. I sure would not as their profit situation has been marginal when I looked at their financial statements.

  

With regard to the big banks, I wasn't really commenting on how solid they might be. i was just speaking about what CDIC could do, namely that they couldn't possibly cover a big bank.
The Feds probably would intervene in some way if it came to that. I thought this was obvious as it has been discussed on numerous previous threads.
On the other hand, it's hard to know how this would work. If one fails, there is a good possibility they all would. It's hard to imagine government making them all whole. If so, it would make a joke out of the concept that banks are private enterprise. The government (or Canadian people) would effectively own the banks by virtue of their massive infusion of cash. Bank policies would be dictated by government as a condition. The question is whether legislation and policy would recognize that. We can't just give them an indefinite free ride. That's why a lot of people are uncomfortable with the notion of "too big to fail". As a private enterprise, there has to be risk that they assume - and eat if necessary, along with their shareholders.

September 24, 2021
10:59 am
canadian.100
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Loonie said
With regard to the big banks, I wasn't really commenting on how solid they might be. i was just speaking about what CDIC could do, namely that they couldn't possibly cover a big bank.
The Feds probably would intervene in some way if it came to that. I thought this was obvious as it has been discussed on numerous previous threads.
On the other hand, it's hard to know how this would work. If one fails, there is a good possibility they all would. It's hard to imagine government making them all whole. If so, it would make a joke out of the concept that banks are private enterprise. The government (or Canadian people) would effectively own the banks by virtue of their massive infusion of cash. Bank policies would be dictated by government as a condition. The question is whether legislation and policy would recognize that. We can't just give them an indefinite free ride. That's why a lot of people are uncomfortable with the notion of "too big to fail". As a private enterprise, there has to be risk that they assume - and eat if necessary, along with their shareholders.  

I understood very well what your point was re CDIC.
In regard to your comments re the private sector should have limited free rides - that is true in theory but not the way it works in reality. The big banks would get bailouts by govt in the rare chance they became unstable - but as you well know reality is the govt has bailed out private sector firms for a long time (even before COVID) such as GM and Chrysler ($14 Billion) Bombardier (billions and billions by repayable loans which never were repaid), Air Canada ($6B in 2021 alone), SNC Lavallin (billions in loans) etc. The executives of these firms still seemed to collect big salaries and bonuses while funds for such were effectively provided by Govt handouts - "lines of credit", repayable loans, incentives but a lot of it NEVER gets paid back - yes, it is the taxpayer effectively picking up the tab.
Yes this has been discussed previously and will be discussed again when the next bailout of some big (too big to fail) private sector firm occurs - in the cause of "saving jobs" or stabilizing the economic system, or ensure an essential service or for some other reason which politicians and bureaucrats sell to the public. Wasn't there recently some talk about "govt support" for private sector firm Greyhound when they cut their bus service? Have not heard anything more on that.
Bottom line - the Govt will continue to support/bailout/provide incentives/ or your expression "provide a free ride" to private sector firms which "should be" on their own and shareholders "should" take the hit.

September 24, 2021
12:38 pm
Bill
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Bail-in info on CDIC site:
https://www.cdic.ca/what-happens-in-a-failure/resolution-of-large-banks/resolution-tools-for-d-sibs/bail-in/

It says "Bank customers’ deposits are not bailed-in and this resolution tool doesn’t reduce the deposit protection offered by CDIC.........Losses that arise due to the bank’s failure would be covered by the bank’s shareholders and certain investors, not by taxpayers or depositors."

No worries re the big banks, they've been around nigh on 2 centuries, give or take, through wars, depressions, massive social & tech changes, etc, (e.g. Bank of Montreal has paid dividends every year since 1829), they'll outlive us all.

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