The Canadian Department of Finance (the "Department")
has released a consultation paper entitled "Deposit Insurance Review" seeking
input on how to improve Canada's current deposit insurance
framework. In the context of a continuously evolving financial
sector, the aim of the Department is to ensure that the framework
continues to adapt to the marketplace and that the scope of the
products covered by the framework are adequately addressed.
Since the 2008 financial crisis, financial regulatory reforms
have been introduced with the goal of reducing the probability of a
future financial crisis. The Department has emphasized that deposit
insurance is an important element of the financial safety net
— it promotes financial stability and contributes to
maintaining public confidence in the financial system. The
consultation paper has been released pursuant to the federal
government's Budget 2014 which announced the review to ensure
continued protection of Canadians' savings.
The following three core policy objectives guide the review:
Protecting depositors: the deposit insurance
framework should protect depositors by ensuring that it provides an
adequate scope and level of coverage.
Supporting financial stability: the deposit
insurance framework should contribute to the stability of the
financial system in Canada and act as a disincentive for bank runs
Promoting efficient and competitive financial
services: the deposit insurance framework should encourage
market discipline and should not act as an impediment to
Canada's deposit insurance coverage framework is
administered by the Canada Deposit Insurance Corporation
("CDIC") and consists of three main elements: the
coverage limit, the coverage categories, and the scope of eligible
deposits. Investment products that do not constitute "eligible
deposits" within the coverage categories are not covered by
The Department notes that deposits in Canada have been steadily
increasing over time. As of April 30, 2016, total deposit
liabilities held at CDIC members totaled $2.72 trillion, which is a
51% increase since 2011. Approximately 97% of all eligible deposit
accounts are fully covered under the current framework. In terms of
total dollars deposited, 27% of the total value of deposits held by
CDIC member institutions is covered. The Department has stated that
its findings suggest that deposit insurance coverage is largely
functioning well and meeting its primary objective, that major
changes to the framework are not required and that the current
deposit insurance limit of $100,000 remains appropriate. Despite
this, the Department believes there are areas of improvement which
merit further discussion.
Review and Submission Process
The Department has identified a few areas of potential
improvement to the framework. In this connection, the Department
has posed a number of questions falling under three broad
categories for stakeholders to consider in their submissions:
Streamlining deposit categories
Should the mortgage tax account be removed as a deposit
Should Registered Education Savings Plans (RESPs) and
Registered Disability Savings Plans (RDSPs) be added as new deposit
categories or should all registered products be amalgamated into
one deposit category?
Updating the scope of eligible deposits
Should travellers' cheques be removed as eligible
Should deposit insurance coverage be extended to term deposits
with terms of maturity greater than five years? Should there be a
Should foreign currency be included as an eligible deposit?
Should only certain foreign currencies be insured? If so, which
currencies should be covered and why?
Should deposit insurance coverage be extended to include
temporary high balances? If so, which transactions should be
covered? How would these transactions be identified? What would be
the appropriate definition of "temporary"?
Addressing the complexity of trust deposits
How can the quality of beneficiary information be
How should brokered deposits be treated under the deposit
Are beneficiaries aware of the consequences of their broker not
providing beneficiary information?
Are the reporting and record keeping requirements for
professional trusts clear?
Stakeholders are invited to submit written comments by
November 30, 2016.
We are and will be working with a number of clients in reviewing
the consultation paper and making submissions. We would be pleased
to assist you in making a submission. Please do not hesitate to
call or write any of the authors in this connection.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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