Rob Carrick
March 31, 2020
CROSS THE BANKING SYSTEM OFF YOUR LIST OF THINGS TO WORRY ABOUT
Over the past few weeks, a significant number of people have expressed concern about the safety of their deposits and guaranteed investment certificates at the big banks.
“We track sentiment and we are picking that up in our numbers as well,” Peter Routledge, president and CEO of Canada Deposit Insurance Corp., said.
Mr. Routledge’s response to these fears: “In this environment, there is no safer place for your money than a CDIC-protected bank account.”
He offers two reasons why your CDIC-protected money is safe, the first being that lessons learned from the 2008-09 financial crises were used to make banks and the banking system financially stronger and more resilient. The second is CDIC’s track record: “No one has ever lost a dollar that was insured by CDIC,” Mr. Routledge said.
CDIC counts big and alternative banks as members and it protects seven different categories of eligible deposits for up to $100,000 each, including principal and interest. Those categories are deposits held in one name, a joint account, a registered retirement savings plan, a registered retirement income fund, a tax-free savings account, an in-trust account and an account to pay property taxes on a mortgaged property.
A mantra to adopt as you safeguard your finances in the months ahead: trust, but verify. Applied to CDIC, you’d want to know what resources are available to make up losses if a bank fails.
Mr. Routledge said CDIC has a $5.7-billion fund available to cover losses. It’s safely held in a five-year ladder of government bonds, which means equal investments in bond with terms of one through five years. This is safe investing 101 stuff.
More money is available through what can best be described as a $25-billion line of credit with the federal government. Additional funds would be available, but Parliament would have to evaluate the request.
What happens if bank does fail? “You don’t have to do anything,” Mr. Routledge said. “We go find you if something awful happens. We give you full access to your deposits, up to the limit.”
For another take on the safety of the banking system, let’s check in with one of the country’s top authorities. David Dodge has served as Bank of Canada governor, a senior bureaucrat in the federal finance and health departments and a director of major corporations. He’s now a senior adviser at the law firm Bennett Jones.
Mr. Dodge could not be clearer about the safety of banks. “The last thing that any central bank or any government would permit is for the financial system to collapse and for the banks to fail,” he said in an interview last week.
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