# CDIC insurance



## sags (May 15, 2010)

Garth Turner had an interesting blog awhile back, where he pointed out that the concept of CDIC deposit insurance is really a myth.

He used one Canadian bank, the Royal Bank, as an example.

The Royal Bank has 161 Billion in liabilities. They have 9 billion in capital.

If the Royal Bank was to default, the CDIC would be obligated for the other 152 Billion, but they only have 2 Billion in cash.

So, the government of Canada would be liable for the remaining 150 Billion.

That is half of the Canadian budget. 

If this is the circumstance with the CDIC, it is hardly worth consideration in the event of a default.

If the situation was ever so bad that the Royal Bank defaulted, it would bankrupt Canada to bail out the depositors, and there are all the other banks, who would probably also be in trouble.

I guess the message us that a person would be better off buying Royal Bank shares than counting on them, the CDIC, or the government for deposit insurance.

If the Royal Bank goes broke...........everyone goes broke anyways.


----------



## CanadianCapitalist (Mar 31, 2009)

Garth Turner is talking non-sense. I took a look at RY's balance sheet. It does have $9.33B in cash and $161B in liabilities in terms of personal deposits. But that ain't the whole picture. Think of how banks record assets and liabilities. Let's say you deposit $1,000 at your local RY branch. That's $1,000 the bank owes you and recorded as a liability.

http://www.rbc.com/investorrelations/ar_10/balance-sheets.htm

I walk into the branch and take out a $1,000 loan. My loan is recorded as an asset in the bank's books. In 2010, RY had $221B worth of retail loans.

What Garth is saying is that every penny of these loans outstanding are impaired and RY has only $9.33B cash to meet its personal deposit liabilities. That's non sense of course. Let's say for argument sake RY is insolvent. Another bank would come in and take the loan portfolio off RY's hands. 

It's worth asking if CDIC would be able to handle a bank failure. But Garth is cherry picking his figures to make wildly exaggerated claims.


----------



## CanadianCapitalist (Mar 31, 2009)

The post OP is referring to is here:

http://www.greaterfool.ca/2011/05/13/dont-count-on-it/

Here's the cracker though. Garth says don't keep your cash at RY because CDIC may not be there to bail out depositors. So, where does he suggest one keep it? In.... Bank shares! 



> But parceling money up and shipping it around between banks, in deposit instruments which guarantee you’re backsliding, just because you think this is a safe strategy, is actually augmenting risk. You’d be far better buying shares in these banks, or their bonds, or their preferreds because you’d be munching on their profits.


Can't believe this guy qualifies as a "financial advisor".


----------



## andrewf (Mar 1, 2010)

Turns out Garth Turner is an idiot. The only way CDIC would be on the hook for all of RY's liabilities are if its assets all go to zero. Every house it mortgages burns to the ground, every government and corporation it lends to (through bond holdings) defaults, etc.


----------



## Four Pillars (Apr 5, 2009)

Garth is a salesman. Financial services and books.

I'm willing to bet he sells a lot more books than I do.


----------



## humble_pie (Jun 7, 2009)

i'm not going to take the time to read the turner article or discuss its details as extracted & set forth here in this thread.

however to take up a sidebar issue. I do feel that few understand that the protection funds - CDIC & its much flimsier cousin the CIPF - are in place strictly in order to bail out an isolated institution here or there that goes under. They have no money that could save canada in a multi-institutional global financial collapse.

during the terrible crash of 08/09 there was a period when the global banking system cracked & trembled. Obama was elected on 4 nov/08 & the first announcement he made the following morning was to pledge the commencement of QE1 the morning of his inauguration. 

nevertheless, during 2009 the FDIC went bankrupt & survives today only by charging assessments against surviving banks considerably into the future.

here in canada parliament passed an emergency bill early in '09 granting several billion extra $$ to the CDIC if necessary. Not one extra dollar was ever necessary & the world did get past the cracks.

nevertheless, i believe people don't fully understand that in a massive global financial collapse, there would be no insurance monies in any developed country to bail itself out.

i have no idea if turner's figures are realistic - i'd always believed the CDIC could bail out one major chartered bank, would have difficulty with a 2nd in a major collapse. But turner's figs seem to indicate that not even one major could be saved.

we're certainly not in these circumstances now & it's foolish to hold royal or any other big 6 canadian bank up to scorn. But i think it's a good idea to remember that we've never lived through a world in which all the big bank names would come crashing down like dominoes ... and europe seems to tiptoe on that threshhold at present ... and we should never be so smug as to say that the CDIC or the CIPF can & will save us all.


----------



## kcowan (Jul 1, 2010)

We also need to keep in mind that CMHC guarantees many of the bank's existing liabilities such as a mortgage that turns bad.

So the CDIC is there for the first $100k of deposit insurance. How many people have big bucks like that on deposit. They would spread any GICs around among many FIs if they had more than $100k.

I agree that Garth is there to sell books. Take his financial advice with a grain of salt!


----------



## the-royal-mail (Dec 11, 2009)

>...cherry picking his figures to make wildly exaggerated claims. 

Which is why I pay little attention to the links and figures typically posted in Internet debates. No matter what your opinion is, you can find a stat to back it up. ie. you can find a stat (and post it) to say the glass is half empty. I can find the stat (and post it) to argue that the glass is half full.

Take stats with a grain of salt, and CC's posts beautifully demonstrate the reason for this.


----------



## warp (Sep 4, 2010)

Why anyone listens to anything Garth Turner has to say is beyond me.

The fact that he sells any books at all is a mystery as well.

Shows me that there is a great mass out here looking for any explanation and any answer.


----------



## KaeJS (Sep 28, 2010)

sags said:


> Garth Turner had an interesting blog awhile back, where he pointed out that the concept of CDIC deposit insurance is really a myth.
> 
> He used one Canadian bank, the Royal Bank, as an example.
> 
> ...


^ Everything you said here is based on 150 Billion *assumptions*

CDIC does not insure everything, and what it does insure, it has limits on dollar values.


----------



## gibor365 (Apr 1, 2011)

I just read CDIC website and not 100% about scenarios below:
1. I have joint account with my wife $100,000 and joint GIC certificate $50,000. I understand that only 100,000 will be insured.
2. I have joint account with my wife $100,000 and my individual GIC $50,000 and my wife individual GIC $50,000. I understand that all $200,000 will be insured?
Is it correct?


----------



## AltaRed (Jun 8, 2009)

That is correct. Joint accounts are considered a separate 'person' from an individual. Note one additional thing. If the joint GIC is issued by a different related company, eg. mortgage company or trust company than the bank you have the $100k in, it is considered a separate investment under CDIC.


----------



## james4beach (Nov 15, 2012)

humble_pie said:


> we're certainly not in these circumstances now & it's foolish to hold royal or any other big 6 canadian bank up to scorn. But i think it's a good idea to remember that we've never lived through a world in which all the big bank names would come crashing down like dominoes ... and europe seems to tiptoe on that threshhold at present ... and we should never be so smug as to say that the CDIC or the CIPF can & will save us all.


humble_pie has some good observations.

The CDIC really wasn't stress tested, whereas the FDIC was (they gained lots of expertise). And it's true that the CDIC only has a tiny pool of money worth (what is it like 0.20%) of the total insured deposits in the system.

As humble_pie says the FDIC fund was rapidly depleted through the financial crisis. This could happen to the CDIC too if we get a wave of failures and bad loans.

CIPF is a different matter as this is private, doesn't have government backing, and if you look at the financial statements you'll see that there are plenty of claims they haven't paid out. They're an insurance company, it's in their best interest not to pay out or to delay it. Personally I'm much more concerned about brokers collapsing than CDIC.

Which is one reason I limited my level of stock 'investment'. You can get all your positions right, but then if the broker collapses and there's fraud, you're still going to lose. There have been countless large and disastrous broker collapses in the USA and I'm reading the writing on the wall ... the brokerage industry is riddled with fraud and brokers can't be trusted (and guys like Corzine walk around free men)

They can't even prosecute and bring these guys to justice in the USA. And by all accounts, Canada is weaker in pursuing this kind of crime. After seeing Refco and MF Global, and especially how Corzine wasn't prosecuted, I said to myself ... gotta limit how much I deal with brokers. So money came out of the brokerages and will sit in bank deposits (and floor safes). Why should I deal with an industry that I can't trust? That routinely steals billions in client funds -- like money that's supposed to be segregated.


----------



## gibor365 (Apr 1, 2011)

_As humble_pie says the FDIC fund was rapidly depleted through the financial crisis. This could happen to the CDIC too if we get a wave of failures and bad loans.
_
CDIC is a government company...so imho if many of failures will happen, Bank of Canada just will print more money.... inflation and devalvation of CAD$ will raise a lot, it will hit in any way anyone, but I beleive CDIC will return all money...


----------



## gibor365 (Apr 1, 2011)

AltaRed said:


> That is correct. Joint accounts are considered a separate 'person' from an individual. Note one additional thing. If the joint GIC is issued by a different related company, eg. mortgage company or trust company than the bank you have the $100k in, it is considered a separate investment under CDIC.


In this case I will buy one GIC for myself and 1 GIC for my wife, considering we have joint saving account, we'll have 300K insured by CDIC.
Another question about interest. If I have GIC 5 years, $50,000, interest paid annually. Assume in year 4 bank goes bankkrupt and my GIC grew up to $60,000 in those 4 years. Does $60,000 will be insured or only principal $50,000?


----------



## AltaRed (Jun 8, 2009)

gibor said:


> If I have GIC 5 years, $50,000, interest paid annually. Assume in year 4 bank goes bankkrupt and my GIC grew up to $60,000 in those 4 years. Does $60,000 will be insured or only principal $50,000?


All amounts up to $100k.


----------



## NorthernRaven (Aug 4, 2010)

james4beach said:


> The CDIC really wasn't stress tested, whereas the FDIC was (they gained lots of expertise). And it's true that the CDIC only has a tiny pool of money worth (what is it like 0.20%) of the total insured deposits in the system.
> 
> As humble_pie says the FDIC fund was rapidly depleted through the financial crisis. This could happen to the CDIC too if we get a wave of failures and bad loans.


FDIC and CDIC have somewhat different coverage bases. There are 7000+ FDIC banks, and only 80+ CDIC ones, so the US has an order of magnitude more institutions ever per capita. And in Canada almost 80% of CDIC insured deposits are with the Big Five banks, which are effectively in too big to fail territory. A lot of the market share that in the US goes to a bunch of smaller institutions gets eaten by the big guys in Canada. So the fund (actually about 0.40%, and rising) is essentially covering a much smaller base. I'd imagine the main threats would be small-midsize mortgage outfits.


----------



## james4beach (Nov 15, 2012)

Those are very good points, NorthernRaven, thanks. I share your view that the main risk to CDIC's reserves are probably the high risk specialized lenders (especially those concentrated in mortgages) like Home Trust, Peoples Trust, etc. I earlier took a look at Peoples Trust for instance and their leverage ratio is far higher than the big banks, and their business is so much _less_ diversified than regular banks.

But it also depends on how much faith you have in the Too Big To Fail model. Because let's face it, if any of the Big Five actually fail, CDIC could easily get wiped out.

For what it's worth, the deposit risk grid at greatponzi suggests either putting money in a big bank (due to too-big-to-fail) or a credit union.


----------



## gibor365 (Apr 1, 2011)

james, again, don't you think that if one of big 5 fails, bank of Canada would just print $$$ to cover CDIC?


----------



## NorthernRaven (Aug 4, 2010)

james4beach said:


> But it also depends on how much faith you have in the Too Big To Fail model. Because let's face it, if any of the Big Five actually fail, CDIC could easily get wiped out.


The point about too big to fail isn't that they couldn't fail (although one would assume that the Canadian banks are pretty secure by world standards), but that anything big enough to take one of them down is likely to be systemic, not limited to a particular bank. So you'd get something like a Canadian TARP program, or whatever, but you probably wouldn't be letting them fail and then picking up the pieces. I suspect it would be pretty hard for a big 5 to take enough risk to bring it down that wasn't being done by all the others as well. 

For anything short of nuclear meltdown, CDIC has $2.5 billion and the Minister of Finance is authorized to make loans up to some ridiculous notional amount like $19 billion. That's more than enough to handle overly creative mortgage hucksters or western entrepreneurs whose cowboy hats get too big again...


----------



## james4beach (Nov 15, 2012)

gibor: yes I do think the central bank will eventually print money (if that's needed). But I don't necessarily think the whole process would happen too quickly or automatically

There would also be political debate along the way, because I think parliament would have to approve extra credit for CDIC. It's not all just automatic money...

Personally I do have deposits with some big five banks and have no worries about doing so. CDIC insured deposit in a big bank is about as safe a bet as you can possibly get


----------



## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... Because let's face it, if any of the Big Five actually fail, CDIC could easily get wiped out ...


Mabye ... but then again, maybe not.

I suspect a lot would depend on whether it's a system failure or one big five bank failing, as well as the qualify of assets the remaining players are bidding on. While it's a different situation, when Confed Life failed, I seem to recall several players outbidding each other for the assets being liquidated.


Cheers


----------



## gibor365 (Apr 1, 2011)

james4beach said:


> gibor: yes I do think the central bank will eventually print money (if that's needed). But I don't necessarily think the whole process would happen too quickly or automatically
> 
> There would also be political debate along the way, because I think parliament would have to approve extra credit for CDIC. It's not all just automatic money...
> 
> Personally I do have deposits with some big five banks and have no worries about doing so. CDIC insured deposit in a big bank is about as safe a bet as you can possibly get


Yhis is what I was thinking.... if small bank or trust goes bankrupt, I don't see problem for CDIC to cover it , if one of big 5 crushes, government will take needed steps to pay out $$$ to account holders.


----------



## Eclectic12 (Oct 20, 2010)

gibor said:


> .... if small bank or trust goes bankrupt, I don't see problem for CDIC to cover it, if one of big 5 crushes, government will take needed steps to pay out $$$ to account holders.


I'm not sure why there's much thinking involved in the trust and small bank failures being covered by CDIC, beyond worrying about how wide spread the collapse is. Since it's creation in 1967, between banks, trusts and loan companies - forty-three have already failed.

http://en.wikipedia.org/wiki/Canada_Deposit_Insurance_Corporation


As for one of the big five failing - if it's one it's own, then the question is how the combination of CDIC, CMHC and rivals buying assets works out. I'm not sure the gov't needs to step in, unless there is a factor that hits multiple bank in a drastic fashion.


Cheers


----------



## gibor365 (Apr 1, 2011)

Eclectic12 said:


> I'm not sure why there's much thinking involved in the trust and small bank failures being covered by CDIC, beyond worrying about how wide spread the collapse is. Since it's creation in 1967, between banks, trusts and loan companies - forty-three have already failed.


I also checked those failed banks and I see that allmost all of them failed in period 1982-96 , last 17 years there were no failures. Any explanation to this? Maybe CDIC became more strict while insuring the banks?
I came to Canada only in 1999, so just wondering what happened in Canada in this period?


----------



## gibor365 (Apr 1, 2011)

As per CDIC website "
_*In the event of a failure, do I have to file a claim? How does CDIC reimburse deposits held at the failed institution? What is the timeframe before receiving payment?*
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. Depositors are reimbursed as soon as possible, depending on the size and the circumstances.
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 institution, whichever comes first, and will be included in the deposit insurance payment, subject to coverage limits.
_

It's clear in theory, but how it worked in reality? I understand that last failure was long time ago....but would appreciate if anyone had this (no so pleasent) experience. How long and smooth this process goes?


----------



## Rusty O'Toole (Feb 1, 2012)

Banks are subject to regular audits. If their assets ever dip below their liabilities they are supposed to be put into receivership and either closed or reorganized.

As long as this is done they cannot lose more than a tiny amount of the money they are responsible for, well within insurance limits.

And as long as the audits are carried out and the rules enforced no banker will play outside the rules.

The big trouble begins, in cases like Cyprus, where the authorities delay applying the law until major losses take place. The Cyprus banks were in default for more than a year before the government stepped in and by that time, they had major losses on their Greek investments.

This is why the Cyprus government froze their depositors accounts and did a bail in, essentially giving the guilty banks the money their innocent depositors had trusted them with.

It will never be necessary to do this in Canada as long as the present regulatory system is in place and the rules are followed.

Which makes me wonder what they had in mind, when they put in the last budget that a Cyprus style bail in should be made public policy.


----------



## CanadianCapitalist (Mar 31, 2009)

Rusty O'Toole said:


> Which makes me wonder what they had in mind, when they put in the last budget that a Cyprus style bail in should be made public policy.


Not quite. Here's what the budget actually says:



> The Government proposes to implement a ―bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.


http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf


----------



## andrewf (Mar 1, 2010)

Rusty O'Toole said:


> Which makes me wonder what they had in mind, when they put in the last budget that a Cyprus style bail in should be made public policy.


You can wonder all you like, but the government did nothing of the sort. They were referring to bailing in bondholders, not depositors.


----------



## gibor365 (Apr 1, 2011)

I'n not good in economics  but from common logic, problem in Cyprus, Greece etc that they in Euro zone, so unlike Canada or US, they cannot just pront Euro.....


----------



## andrewf (Mar 1, 2010)

That's pretty much it, gibor. Also, the way the banks in Cyprus were structured is quite different (very little in the way of unsecured debt in their capital structure).


----------



## Eclectic12 (Oct 20, 2010)

gibor said:


> I also checked those failed banks and I see that allmost all of them failed in period 1982-96 , last 17 years there were no failures.
> 
> Any explanation to this?
> Maybe CDIC became more strict while insuring the banks?
> I came to Canada only in 1999, so just wondering what happened in Canada in this period?


A lot of them in that period were trusts, which I'd guess had a lot of mortgages. So it is possible the rules were tightened up ... but I suspect it is more likely mortgage rules, rather than CDIC rules.


Note that I recall the banks complaining about too many restrictions & too much gov't rules, culminating in the calls by bank CEOs that to survive in the global market place, they'd have to bulk up by merging.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

andrewf said:


> That's pretty much it, gibor. Also, the way the banks in Cyprus were structured is quite different (very little in the way of unsecured debt in their capital structure).


Am I misreading this?

If it really is the Cyprus banks that had little in the way of unsecured debt - then the security should have been able to be sold to get more money back, correct?


Cheers


----------



## andrewf (Mar 1, 2010)

Once they blew through their equity, there was little unsecured bondholders to absorb losses before eating into deposits.


----------



## alingva (Aug 17, 2013)

CanadianCapitalist said:


> Garth Turner is talking non-sense. I took a look at RY's balance sheet. It does have $9.33B in cash and $161B in liabilities in terms of personal deposits.


 Unfortunately it is not non-sense because the whole fractional reserve banking is based on it. You will not find a bank in the world that has 100% reserves against the liabilities. Probably the max that banks have is 10% (in majority of cases it is close to 2 or 3%).Watch 'Money As Debt' (find on youtube) to understand how the whole system is a total scam. Banks do not have money and BTW, when you deposit money to the bank you lend them your money. When you go to your online banking and you see you have 10K it means you lent the bank 10K and the banks owes you 10K but it is not your 10K that you see, it is bank's liability that they PROMISE to pay you. If they go out of business - they will not pay it. That's why Cyprus can happen anywhere, Canada is not immune to it


----------



## NorthernRaven (Aug 4, 2010)

Oh my god, we're Cyprus! Fortunately, emergency instructions have been vouchsafed to me by the Trilateral Commission:

1) Buy gold
2) Find cave
3) Avoid black helicopters
4) Wait for flying saucer creatures


----------



## andrewf (Mar 1, 2010)

alingva said:


> Watch 'Money As Debt' (find on youtube) to understand how the whole system is a total scam.


It's like telling someone to read the Bible to understand that Jesus is their lord and personal saviour...


----------



## james4beach (Nov 15, 2012)

andrewf said:


> Once they blew through their equity, there was little unsecured bondholders to absorb losses before eating into deposits.


That sounds like a pretty good description

This is why it's very important that banks have sufficient (tangible) equity ... i.e. capital. Bank capital is the reserves and cushion that can be depleted upon suffering losses, *before* starting to touch bank liabilities like deposits and bonds. If there's enough capital, then deposits are safe. If there isn't enough capital to absorb losses, then deposits are at risk.

Every lender to a bank (i.e. everyone with deposits, GICs, bank bonds) should be concerned with how much capital the bank has.

You can keep on top of this by watching some big five bank capital stats on this web site, especially tables B and C. Table B measures the bank's ability to handle loan losses from capital, and Table C shows leverage (reciprocal of capital, using tangible common equity). Watch the numbers quarter to quarter and if you see a deterioration it would indicate the bank's capital position is worsening.


----------



## andrewf (Mar 1, 2010)

But how much is enough is a probabilistic question.


----------



## james4beach (Nov 15, 2012)

Oh yes definitely, it's all about probability. There is no hard number about how much capital is "enough". However, there is academic study in the area and opinions of experts from the FDIC, as referenced by former US TARP Inspector, Neil Barofsky

He says:

Tom Hoenig, vice chair of the FDIC, says banks should have 10% tangible common equity (versus total assets)
FDIC's Sheila Bair says we should have 8%
"But the academic research indicates it should be far higher than that, maybe 20% to 30%, to really be safe when you have institutions of the size and character of the ones we have."

So FDIC experts and academics say the right number is 10% to 20% or more.

Canadian banks have only 3.2% (inverse of 31:1 leverage) using apples-to-apples metrics, that is tangible common equity versus total assets.

Pretty clear to me that Canadian banks have insufficient capital. Canadian bank capital would have to be more than tripled to reach the "sufficient" mark set by the experts.

Of course nobody in Canada cares about this ... you can hear the media spew on and on about how amazingly safe and well capitalized our banks are.


----------



## Eclectic12 (Oct 20, 2010)

james4beach said:


> Oh yes definitely, it's all about probability. There is no hard number about how much capital is "enough" ...
> 
> So FDIC experts and academics say the right number is 10% to 20% or more ...
> 
> Pretty clear to me that Canadian banks have insufficient capital. Canadian bank capital would have to be more than tripled to reach the "sufficient" mark set by the experts ...


Of course another factor is what assumptions did the FDIC experts make and how applicable those assumptions are to the smaller Canadian market that seems to have more restrictions on it ... (or at least that's what the Canadian bank CEOs pushing the gov't for changes claimed ... ).


Cheers


----------



## dBII (Mar 12, 2013)

Please excuse my naïveté. My understanding is that so called "bail-ins" don't necessarily mean that the bank walks away with your deposits, it is that, in the event of a bank crisis or "run", your deposit would become "locked-in" and the bank can use your money to finance their debt obligations. You would then be issued bank equity notes "promising" the return of your deposit. Is that any farther removed from banks investing depositors money elsewhere that the depositors have no say in - even riskier investments that they would not normally be involved?


----------



## CDIC_SADC (Oct 1, 2013)

dBII said:


> Please excuse my naïveté. My understanding is that so called "bail-ins" don't necessarily mean that the bank walks away with your deposits, it is that, in the event of a bank crisis or "run", your deposit would become "locked-in" and the bank can use your money to finance their debt obligations. You would then be issued bank equity notes "promising" the return of your deposit. Is that any farther removed from banks investing depositors money elsewhere that the depositors have no say in - even riskier investments that they would not normally be involved?


Hi, this is Doug from CDIC communications.

@dBII The federal government is developing a “bail-in regime” for the big banks that would impact shareholders and creditors and not depositors in the event bank capital was being depleted. The Finance Minister has said it would not include insured deposits, which would still be protected up to a maximum of $100,000 per insured category by CDIC. 

I hope this information is helpful.

Regards

Doug Watt
CDIC


----------



## fraser (May 15, 2010)

We spend ZERO time worrying about how safe our deposits are in Canada's chartered banks. 

We are aware of the CDIC limits per account and structure our deposits accordingly.

I think that there are far greater issues pertaining to investment risk that take precedence for us. 

We filter out the fear mongering on this issue.


----------



## andrewf (Mar 1, 2010)

CDIC_SADC said:


> Hi, this is Doug from CDIC communications.
> 
> @dBII The federal government is developing a “bail-in regime” for the big banks that would impact shareholders and creditors and not depositors in the event bank capital was being depleted. The Finance Minister has said it would not include insured deposits, which would still be protected up to a maximum of $100,000 per insured category by CDIC.
> 
> ...


Thanks for reiterating this point. There is a lot of fear mongering going on by those with an interest in undermining confidence in the financial system.


----------



## james4beach (Nov 15, 2012)

CDIC_SADC said:


> @dBII The federal government is developing a “bail-in regime” for the big banks that would impact shareholders and creditors and not depositors in the event bank capital was being depleted. The Finance Minister has said it would not include *insured deposits, which would still be protected up to a maximum of $100,000 per insured category by CDIC.*


Thanks Doug and that's consistent with my understanding as well. Insured deposits are safe (at least, under the current government and minister... future government policy is impossible to predict)

It's extremely important to make sure your deposits are insured. Even in Cyprus, with the bail-in, insured deposits were safe. It's uninsured deposits you have to be careful of.

And there are a lot of uninsured deposits out there of course. For instance corporate accounts and condo reserve funds. Or someone not bothering to put the effort in to diversify the issuers. I strongly, strongly recommend making sure your deposits are insured.


----------



## james4beach (Nov 15, 2012)

CDIC_SADC said:


> Hi, this is Doug from CDIC communications.


Hi Doug Watt,

Thanks for taking some time to do this public outreach. I have lots of faith in the CDIC and re-iterating my statement earlier in this topic: I believe that a CDIC insured deposit in a big bank is about as safe a bet as you can possibly get

Could you please show one of your colleagues - a risk analyst maybe - the information I wrote in this earlier post:
http://canadianmoneyforum.com/showthread.php/7385-CDIC-insurance?p=199159&viewfull=1#post199159

Your colleagues at the FDIC seem to think that much higher levels of bank tangible common equity (TCE) are required, than exist in Canada. Now as Eclectic12 wrote, perhaps those FDIC recommendations don't apply to the Canadian market place at all. Still, global peers are judging us on these metrics. And I'm talking non risk weighted assets. This is the direction the Basel committees are going for future guidelines. It would be in Canada's best interest to start firming up the TCE vs assets (not risk weighted) bank guidelines, because then we can get ahead of the global curve and really demonstrate our leadership in having the safest financial institutions in the world.


----------



## andrewf (Mar 1, 2010)

james4beach said:


> T
> It's extremely important to make sure your deposits are insured. *Even in Cyprus, with the bail-in, insured deposits were safe. * It's uninsured deposits you have to be careful of.



This is not quite true. The first plan that was announced confiscated a fraction of all deposits--essentially defaulting on the deposit insurance. It was later modified to take a larger slice of uninsured deposits only.


----------



## andrewf (Mar 1, 2010)

james, I don't think you'll hear a reply on that one from CDIC.


----------



## james4beach (Nov 15, 2012)

andrewf said:


> This is not quite true. The first plan that was announced confiscated a fraction of all deposits--essentially defaulting on the deposit insurance. It was later modified to take a larger slice of uninsured deposits only.


You're right, I forgot (details were here). The first plan would have taken some insured deposits and that's what started causing panic in Europe. They backtracked from that idea. Of course this harmed the bullet proof perception of deposit insurance, so the Cyprus example has an effect everywhere in the world.

And yeah I'm not holding my breath on the CDIC's reply, but I just hope they're aware of all that.


----------

