Debentures, principal protected notes and term deposits


Certain debentures issued to evidence deposits by member institutions that are not banks are the equivalent of a certificate for a term deposit and are eligible for CDIC insurance.

However, a debenture issued by a bank, other corporation or government is a debt security and is not the equivalent of a certificate for a term deposit. Such debentures are not eligible for deposit insurance.

Principal Protected Notes

Most Principal Protected Notes (PPNs) are tradable debt securities issued by an agent with the repayment of the investment’s principal guaranteed by a financial institution. CDIC does not consider these to be deposits as defined under the CDIC Act and they are therefore not insured by CDIC.

However, it is important to note that some index-linked products that are referred to as “PPNs” may indeed be eligible for deposit insurance.

Under the CDIC Deposit Insurance Information By-law, member institutions must provide notification to depositors when a deposit (or deposit-like) product is not eligible for CDIC deposit insurance. Such notification must be in the form of a warning statement on the certificate or instrument evidencing the deposit. If you are not sure if your product is eligible for CDIC protection, check the PPN certificate carefully, look for a warning statement, and speak to a representative from your financial institution about the applicability of CDIC deposit protection.

Term Deposits

Eligibility for insurance

Term deposits, including Guaranteed Investment Certificates (GICs), are eligible for CDIC deposit protection. For example, a GIC with an original term of seven years, would be eligible.

Indexed-linked deposits

Market-linked or index-linked term deposits are term deposits whose returns are linked to a variation in a stock exchange index or other similar index. An index-linked deposit would be insurable only if the principal is fully repayable (at maturity or otherwise).

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