Canada Deposit Insurance Corporation
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|Formed||4 March 1967|
|Jurisdiction||Government of Canada|
The Canada Deposit Insurance Corporation (CDIC) is a Canadian federal Crown corporation created by Parliament in 1967. The CDIC insures Canadians' deposits held at Canadian banks (and other member institutions) up to C$100,000 in case of a bank failure. CDIC automatically insures many types of savings against the failure of a financial institution. However, the bank must be a CDIC member and not all savings are insured. The CDIC does not protect against fraud or theft. The CDIC also serves as the lender of last resort for commercial banks in Canada to protect the Canadian banking system from insolvency and bank runs.
The Canada Deposit Insurance Corporation was created 4 March 1967 (under Schedule III, Part 1 of the Financial Administration Act and Canada Deposit Insurance Corporation Act). It is similar to the Federal Deposit Insurance Corporation in the United States. Since 1967, 43 financial institutions have failed in Canada and all 43 were members of CDIC. There have been no failures since 1996. At December 31, 2012, member institutions numbered 82, according to CDIC's Summary of the Corporate Plan, 2013/2014 to 2017/2018.
The roots of the CDIC can be traced back to the 19th century, such as the Upper Canada’s financial problems of 1866, the North American panic of 1873 and the 1923 failure of Toronto’s Home Bank, symbolized today by Casa Loma. Historically in Canada regional risk has always been spread nationally within each large bank, unlike the uneven geography of US unit banking, layered with savings & loans of regional or national size, who in turn disperse their risk through investors. The Canadian banking system is regulated in part by the Office of the Superintendent of Financial Institutions who can, in an extreme case, close a financial institution. Alongside Canada’s mortgage rules, the risk of bank failures similar to the US are slim, but not impossible.
The original amount of insurance per eligible deposit account was $20,000. This was raised to $60,000 in 1983. The present $100,000 in coverage was changed in 2005 from per eligible deposit account to per depositor.
Insurance is restricted to registered member institutions, and covers only the first $100,000 in very specific categories of accounts, such as savings accounts and chequing accounts, guaranteed investment certificates (GICs) and other term deposits with an original term to maturity of five years or less, money orders, travellers' cheques and bank drafts issued by CDIC members and cheques certified by CDIC members, and debentures issued by loan companies that are CDIC members. Credit unions and Quebec and New Brunswick's caisses populaires are not insured federally, because they are created under provincial charters and backed by provincial insurance plans, which generally follow the federal model. Deposits in foreign currencies are not insured, even when held by a registered CDIC financial institution. Guaranteed Investment Certificates with a term longer than 5 years are also not insured. Funds in foreign banks operating in Canada are not covered. Some funds in Registered Retirement Savings Plans or Registered Retirement Income Funds at a bank may not be covered if they are invested in mutual funds or held in specific instruments like debentures issued by government or corporations. The general principle is to cover reasonable deposits and savings, but not deposits deliberately positioned to take risks for gain, such as mutual funds or stocks.
Current financial position
According to the CDIC's 2012 Annual Report, CDIC protects $622 billion CAD in total eligible deposits, and has $2.44 billion CAD in assets to meet insurance claims. This amount represents 0.39% of total eligible deposits. The CDIC is also authorized to borrow up to $19 billion if necessary from the federal government or the financial markets, and may request further funds from Parliament.
List of financial collapses since 1967
- Commonwealth Trust Company 1970
- Security Trust Company Limited 1972
- Astra Trust Company 1980
- District Trust Company 1982
- AMIC Mortgage Investment Corporation 1983
- Crown Trust Company 1983
- Fidelity Trust Company 1983
- Greymac Mortgage Corporation 1983
- Greymac Trust Company 1983
- Seaway Mortgage Corporation 1983
- Seaway Trust Company 1983
- Northguard Mortgage Corporation 1984
- CCB Mortgage Investment Corporation 1985
- Canadian Commercial Bank 1985
- Continental Trust Company 1985
- London Loan Limited 1985
- Northland Bank 1985
- Pioneer Trust Company 1985
- Western Capital Trust Company 1985
- Bank of British Columbia 1986
- Bank of British Columbia Mortgage Corporation 1986
- Columbia Trust Company 1986
- North West Trust Company 1987
- Principal Savings & Trust Company 1987
- Financial Trust Company 1988
- Settlers Savings and Mortgage Corporation 1990
- Bank of Credit and Commerce Canada 1991
- Saskatchewan Trust Company 1991
- Standard Loan Company 1991
- Standard Trust Company 1991
- Shoppers Trust Company 1992
- Central Guaranty Mortgage Corporation 1992
- Central Guaranty Trust Company 1992
- First City Trust Company 1992
- First City Mortgage Company 1992
- Dominion Trust Company 1993
- Prenor Trust Company of Canada 1993
- Confederation Trust Company 1994
- Monarch Trust Company 1994
- Income Trust Company 1995
- North American Trust Company 1995
- NAL Mortgage Company 1995
- Security Home Mortgage Corporation 1996
- Deposit insurance
- Credit unions / Caisse populaire
- Provincial deposit insurance corporations of Canada
- The Right Honourable Robert Taschereau (4 March 1967). "Canada Gazette Part I, Vol. 101, No. 9" (GIF). gazette.gc.ca. Ottawa: Administrator of the Government of Canada. Canada Gazette. Government House. p. 41 (677 Canada Gazette). Retrieved 14 May 2011.
- Alex J. Pollock (March 18, 2010). "Why Canada Avoided a Mortgage Meltdown". The Wall Street Journal.
- "CDIC Annual Report 2012" (PDF). Ottawa: Canada Deposit Insurance Corporation. 2012. p. 3. Retrieved 4 June 2013.