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'We're in North America': Canadian banking group calls on Ottawa to review deposit insurance limits


A group of Canadian lenders is calling on Ottawa to review current limits on deposit insurance coverage ahead of the 2023 federal budget.

The Bank and Trust Companies Association, which represents 30 small- and medium-sized banks and trust companies, said the limit of coverage has not changed in nearly two decades and fails to adequately address the economic realities Canadians face, particularly since the pandemic.

“For Canadians, having the lowest level of deposit insurance among G7 nations is concerning, but it is compounded by the fact that nearly 20 years of inflation has eroded the value of this insurance,” the trade group wrote to federal finance minister Chrystia Freeland in a letter dated Feb. 7.


The letter was co-signed by company chief executives Andrew Moor of EQB Equitable Bank, Yousry Bissada of Home Trust Company, Michael Jones of Haventree Bank, Grant MacKenzie of Peoples Trust Company and Thomas Weisz of the Effort Trust Company.

Canadian bank deposits are currently guaranteed by the Canada Deposit Insurance Corp. (CDIC), a federal Crown corporation established in 1967.

The amount depositors can get back in the case of a bank closure is limited to $100,000 per category of deposit, per financial institution.

While there are some differences in the insurance regime south of the border, the U.S. limit is US$250,000 (or approximately $340,000) — nearly three-and-a-half times the Canadian cap.

Moor, who heads the lenders’ trade group, said inflation has eroded the value of deposit insurance coverage in Canada since it was last reviewed in 2005, when it was raised from $60,000 to $100,000 per depositor per insured category.

“It would be appropriate to have a higher limit, so regular Canadians don’t have to worry about the money being saved from the bank and that then creates more stability in the financial system,” he said in an interview.

Over the past week, calls to raise this limit in Canada have increased in wake of the collapse of California-based Silicon Valley Bank (SVB), which was shuttered by authorities in the United States after a bank run left the US$200-billion lender without enough funds to survive.

Concerns about deposit insurance levels have also been raised south of the border. A Bloomberg report on March 18 said a coalition of mid-sized U.S. banks had sent a letter to federal regulators seeking to extend FDIC insurance to all deposits for the next two years, arguing the guarantee is needed to avoid a wider run on the banks.

Those calls came after U.S. regulators used a financial stability exemption to guarantee all deposits at SVB and Signature Bank, a second bank that failed this month.

“We’re in North America. It probably makes sense to be somewhere in the $200,000 to $300,000 Canadian (dollar) number,” Moor said, adding that doubling the current limit here was in order.

He believes there will be a process and that the CDIC is constantly looking at the various elements of the program to make sure it’s relevant, he noted, saying he’s sure the matter is under active consideration for the CDIC but it’s really suited for the government to make.

“Both the CDIC and the Ministry of Finance are definitely interested in exploring the issue and making sure that both of them have all the mechanics, CDIC plus the coverage level, are appropriate to achieve what we’re trying to achieve,” he said.

In the letter, he and the other chief executives said all Canadians would be well-served by increased protection limits, which would also send a strong signal about the stability of the financial system and greatly reduce any concern about the damage a bank run could do.

“An increase would not only assuage concerns Canadians may have with their deposit limits, but would also provide stronger footing for our members, who serve a critical function in the financial services sector, to compete for deposits against the largest banks,” the Bank and Trust Companies Association wrote.

The group added that its members are “fully prepared” to accept costs of higher deposit insurance limits, which it said will be borne by participating institutions and not by depositors or taxpayers.

“What is interesting, I have spoken to some of the big banks as well (and) it seems to be broad support across the industry. This is a good idea. This is not one where anyone is gonna think it’s controversial,” Moor said.

In a statement sent to the Financial Post last week, an official from the department of finance said that the safeguards currently in place were “stringent” to “ensure that the deposit insurance framework continues to meet the key objectives of protecting Canadians’ savings, securing the trust and confidence of depositors, and supporting the stability of Canada’s financial system.”

With additional reporting from Naimul Karim

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