Member risk monitoring
CDIC contributes to the stability of the Canadian financial system by providing deposit insurance against the loss of eligible deposits at member financial institutions and acting as the resolution authority.
Our activities are further informed by:
- The International Association of Deposit Insurers’ (IADI) core principles: These principles establish an international framework for effective deposit insurance practices.
- The Financial Stability Board’s Key Attributes: These attributes set out the core elements necessary for an effective resolution regime.
Risk monitoring
CDIC assesses member institutions’ (MIs) risk profiles to identify issues at an early stage so that appropriate action can be taken to minimize CDIC’s exposure to loss effectively and efficiently in accordance with CDIC’s powers and objects.
CDIC continuously monitors its MIs to identify those that pose a heightened level of risk to CDIC. CDIC’s risk assessment approach is based on the following key principles:
- Our ongoing monitoring is commensurate with MI’s level of risk, size, and complexity.
- Our approach is forward-looking. CDIC assesses MIs against current risks but also against those that could plausibly materialize in the future.
Factors considered by CDIC to assess member risk
To determine CDIC’s level of monitoring, its resolution preparedness activities, and the MI’s Risk and Resolvability Score for Differential Premium System1 purposes, CDIC analyzes a number of quantitative and qualitative factors, which are described below, with professional judgment applied. These assessments are conducted on an ongoing basis.
CDIC primarily uses regulatory data filed by MIs through the Regulatory Reporting System (RRS) as the basis for assessments. This data is supplemented by information from the agencies that regulate and supervise MIs, as well as forums, including but not limited, to the Financial Institutions Supervisory Committee (FISC), Senior Advisory Committee (SAC), Systemic Risk Surveillance Committee (SRSC)2, and Supervisory Colleges.3 In certain cases, information obtained directly from MIs is also used.
When assessing an MI’s financial riskprofile, CDIC builds on the financial criteria set out in the DPS[1], which is based on point-in-time data. This enables CDIC to incorporate all available information, both historic and forward looking on an ongoing basis. CDIC’s financial risk monitoring considers the following factors:
- Asset quality: Reflects the existing and potential risk in an MI’s asset portfolio. The factors considered include, but are not limited to, credit performance, adequacy of allowances for expected credit losses, portfolio diversification, and collateral quality.
- Earnings: Reflects the ability of an MI’s earnings to support operations and maintain appropriate capital and allowance levels. The factors considered include, but are not limited to, the quantity and sustainability of earnings, the quality and sources of revenue, and cost efficiency.
- Capital: Reflects the adequacy of capital to absorb unexpected losses. The factors considered include, but are not limited to, the quantity and quality of capital relative to the MI’s risk profile and compliance with regulatory minimums. Access to additional capital, such as from market sources or a parent.
- Funding: Reflects the reliability of an MI’s access to sources of funds and their stability, particularly under market stress. The factors considered include, but are not limited to, the level of diversification, frequency and magnitude of fluctuations, and sensitivity of funding costs to market conditions.
- Liquidity: Reflects the ability of an MI to address potential disruptions in access to funding using readily available liquidity. The factors considered include, but are not limited to, the adequacy of liquid resources relative to current and future funding needs, the availability of assets readily convertible to cash, and the institution’s capacity to maintain liquidity under stress scenarios.
Additionally, CDIC leverages insights from the agencies responsible for the supervision and regulation of MIs and considers their overall compliance with relevant regulatory and supervisory requirements.
MIs fall into one of three groups that increase with risk. MIs in the High and Critical risk groups are notified in writing by CDIC of their status. These MIs are subject to enhanced levels of monitoring and resolution preparedness activities and will not be eligible for full points under the MI’s Risk and Resolvability Score for Differential Premium System purposes.
Table: Risk Groups
| Group descriptions | |
|---|---|
| Acceptable Risk | CDIC is not aware of information that compromises the viability of the institution. |
| High Risk | The MI has been notified it is subject to enhanced monitoring as information has come to CDIC’s attention about financial or regulatory weaknesses or deficiencies that, if left unaddressed, could compromise the viability of the institution. |
| Critical Risk | The MI has been notified it is subject to enhanced monitoring as information has come to CDIC’s attention about financial or regulatory weaknesses or deficiencies that, if left unaddressed, will likely compromise the viability of the institution. |
[1] Refer to the Differential Premium Manual (2026) for more details on the Risk and Resolvability Score.
[2] Refer to: Financial System Committees
[3] Supervisory colleges are multilateral working groups of financial sector regulators that are formed for the purpose of enhancing effective consolidated supervision on an ongoing basis.