What Is the Canadian Deposit Insurance Corporation (CDIC)?

Canadian Deposit Insurance Corporation (CDIC) is a Canadian federal crown corporation owned by the Canadian government. The CDIC insures Canadians’ bank deposits up to $100,000 per personal account held in member Canadian banks to protect against losses in the event that the financial institution fails.

Understanding the Canadian Deposit Insurance Corporation (CDIC)

Canadian Deposit Insurance Corporation (CDIC) was formed by Parliament under the Financial Administration Act and Canada Deposit Insurance Corporation Act in 1967 to provide insurance against the loss of deposits and contribute to the stability of the financial system in Canada.

The CDIC is similar to the Federal Deposit Insurance Corporation (FDIC) in the United States. It is a private insurance company, not a bank. The CDIC is funded by premiums paid by member institutions and does not receive public funds to operate. Canadians don’t have to apply for coverage at CDIC member banks, nor do they have to file a claim if there is a bank failure. CDIC insurance pays out members automatically in the case of bank default.

The CDIC insures eligible deposits in Canadian currency. Eligible deposits include savings accounts, checking accounts, term deposits with original terms to maturity of five years or less, debentures issued to evidence deposits by CDIC member institutions, money orders and bank drafts issued by CDIC members, and checks certified by CDIC members.

Financial products not eligible for coverage include uninsured financial products, mutual funds, money market funds, stocks and bonds, foreign currency deposits such as U.S. dollars, digital currencies, treasury bills and bankers’ acceptances, principal protected notes, debentures issued by banks, governments or corporations, and deposits held at financial institutions that are not CDIC members.

Under law, CDIC member institutions must notify depositors when a deposit or deposit-like product is not eligible for insurance. For example, if a term deposit is in a foreign currency, the deposit certificate or receipt must state that it is not insured by the CDIC.

Bank Failure

Between 1967 and 1996, Canada experienced the failure of 43 financial institutions, all of which were CDIC member banks. There have been no failures since 1996.

A bank failure occurs when a bank is unable to meet its obligations to depositors or creditors because it has become insolvent or too illiquid to meet its liabilities. This can happen for many reasons, such as fraud.

When using a bank in either in the United States or Canada, FDIC or CDIC membership is important to consider, as it provides depositors with some insurance against losing their savings.