WHAT IS '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.

BREAKING DOWN '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.

RELATED TERMS
  1. Office Of The Superintendent Of ...

    An independent agency responsible for the regulation of banks, ...
  2. Risk-Based Deposit Insurance

    Risk-based deposit insurance includes premiums that reflect how ...
  3. Bank Deposits

    Bank deposits are money placed into a deposit accounts at a banking ...
  4. Foreign Deposits

    Foreign deposits are deposits made at, or money put in to, domestic ...
  5. Brokered Deposit

    A brokered deposit is a deposit to a bank that is placed by a ...
  6. Deposit Broker

    A deposit broker places deposits at a a depository institutions ...
Related Articles
  1. Insurance

    Insurance Companies Vs. Banks: Separate And Not Equal

    Insurance companies and banks are both financial intermediaries. However, they don't always face the same risks and are regulated by different authorities.
  2. Personal Finance

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  3. Investing

    Mutual Funds Are Not FDIC Insured: Here Is Why

    Find out why mutual funds are not insured by the FDIC, including why the FDIC was created and how to minimize your risk with educated mutual fund investments.
  4. Investing

    Certificates Of Deposit

    Safety is a hallmark of the traditional certificate of deposit (CD) sold by a bank or credit union.
  5. Financial Advisor

    Looking for Good Investments in Canada? Try These Stocks (BAM, CTC.A)

    Discover why investing in Canadian stocks makes sense and which Canadian companies to invest in even with oil prices at multi-year lows.
  6. Trading

    Why U.S. Dollars Aren't Accepted in Canada

    Is the U.S. dollar accepted in Canada? Learn about the legal and practical aspects of using U.S. dollars in Canadian transactions.
  7. Investing

    3 Reasons Canada's Economy Matters in 2016

    Discover why Canada's 2015 recession matters and why the United States is particularly dependent on a healthy Canadian economy.
  8. Insurance

    Understanding your insurance contract

    Learn how to read one of the most important documents you own: your insurance contract.
  9. Insights

    Starbucks Has More Customer Deposits than Many Banks (SBUX)

    Recent financial analysis conducted by Standard & Poors shows that Starbuck's holds more customer deposits than several American banks.
RELATED FAQS
  1. Does the FDIC cover business accounts?

    Learn what types of business accounts are insured by the FDIC, and find out how much of the deposits made by a business is ... Read Answer >>
  2. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
Hot Definitions
  1. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  2. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  3. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  4. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  5. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  6. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
Trading Center