My memories of the global financial crisis are still so vivid, I think it incredible to note that we’re more than 10 years beyond its arrival. I was at Moody’s Canada during that time and have since held senior roles with the National Bank of Canada and the Department of Finance, so I suppose you could say I’ve seen the industry, and the aftermath of the crisis, from all sides. Perhaps it’s no surprise then, that in my new role as CEO of Canada Deposit Insurance Corporation, I am obliged to think instead that we are 10 years closer to the next one. So, I ask myself, will we be ready?
The Government of Canada has amended the Canada Deposit Insurance Corporation (CDIC) Act to modernize and enhance Canada’s deposit insurance framework. The changes will come into force in two phases – April 30, 2020 and April 30, 2021 – to allow CDIC, its member institutions, and other stakeholders to make procedural or operational adjustments.
Canadian banks are some of the most technologically advanced globally and have been rapidly partnering with FinTech firms, as well as adopting their own innovations. As Canada’s resolution authority, CDIC stays current with and considers the implications of FinTech developments in banking.
CDIC, as the Resolution Authority for its member institutions, has been working with Canada’s domestic systemically important banks (DSIBs) over the past few years on developing resolution plans which describe how DSIBs, in the unlikely event of failure, could be resolved in an orderly manner, while ensuring the continuity of critical financial services.
In its 2018/2019 to 2022/2023 Corporate Plan, CDIC committed to seek the views of member institutions through a member survey measuring the effectiveness of CDIC’s interactions with its member institutions. This initiative is in support of CDIC’s objective to foster a collaborative and productive relationship with member institutions.
As Canada’s deposit insurer and resolution authority for federally-regulated deposit-taking institutions, CDIC’s ability to deliver on its mandate rests on a sound understanding of key trends and developments in member institutions’ activities and business environment. One critical aspect of the business environment for CDIC is the manner in which member institutions fund their lending activities. CDIC closely monitors and analyzes available data and information on our members’ financial risk profiles and funding activities to gain a deeper understanding of the Corporation’s insurance obligations and risk exposures.
Consultations and other documents, and deadlines for members
As at December 31, 2018, CDIC’s most recent published financial results, the Corporation’s ex ante funding stood at $4.9 billion, or 59 basis points of insured deposits compared to its minimum target level of 100 basis points of insured deposits. Currently, CDIC expects to meet its minimum target by March 31, 2026.
With the coming into force of the bail-in regulations on September 23, 2018, Canada’s bail-in regime is now in place. This is a major milestone for Canada’s resolution regime and provides CDIC with a powerful tool to resolve a domestic systemically important bank (D-SIB) in the unlikely event that it fails or is about to fail.
Canada has not experienced a bank failure since 1996—22 years ago. While that is great news, it also means that many people may not think about the consequences for their savings, if their financial institution were to fail. This poses a challenge for CDIC: how to inform Canadians about the automatic CDIC protection that exists for an event they don’t think will happen?