Changes to Canada Deposit Insurance Framework
CDIC articles and updates
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.
Summary of Changes to Deposit Insurance Coverage
|Change to deposit protection||Effective date|
|Expanded coverage of eligible deposits held in foreign currencies||April 30, 2020|
|Extended coverage of eligible deposits with terms greater than 5 years||April 30, 2020|
|Elimination of coverage for travellers’ cheques (travellers’ cheques are no longer issued by CDIC member institutions)||April 30, 2020|
|Separate coverage for up to $100,000 in eligible deposits held under Registered Education Savings Plans (RESPs)||April 30, 2021|
|Separate coverage for up to $100,000 in eligible deposits held under Registered Disability Savings Plans (RDSPs)||April 30, 2021|
|Removal of separate coverage for deposits in mortgage tax accounts (these deposits will be combined with eligible deposits in other categories such as savings in one name)||April 30, 2021|
|New requirements for deposits held in trusts, including nominee brokered deposits that enhance CDIC’s ability to extend protection to these deposits and reimburse them quickly after a CDIC member failure.||April 30, 2021|
1. Amended requirements for deposits held in trust, co-owned deposits and deposits held under registered plans
The amendments to the CDIC Act include changes related to the coverage of deposits held in trust, deposits that are co-owned by two or more persons (i.e. jointly held), and deposits held under registered plans (i.e. RRSPs, RRIFs, RESPs, RDSPs, and TFSAs).
CDIC will amend its Joint and Trust Account Disclosure By-law (JTDB) to reflect changes affecting these deposits. The coming-into-force of the amendments to the JTDB will be aligned with the changes to the CDIC Act with respect to the separate coverage for eligible deposits held under Registered Education Savings Plans (RESPs) and Registered Disability Savings Plans (RDSPs), and the new requirements for deposits held in trusts, i.e., April 30, 2021.
CDIC will work with member institutions, brokers and other stakeholders to implement the new requirements.
2. New requirements specific to nominee brokered deposits and deposits in professional trustee accounts
The amendments to the CDIC Act introduce new reporting and disclosure requirements for eligible deposits held by nominee brokers and professional trustees (e.g., trustees such as lawyers, public trustees, etc.). These changes will affect how these deposits receive deposit insurance coverage.
CDIC will amend its Joint and Trust Account Disclosure By-law to further elaborate on these requirements and will engage with member institutions, brokers and professional trustees to ensure that these new rules are well understood to promote strong implementation.
3. Updated Data and System Requirements (DSR)
The Data and System Requirements will be amended to reflect changes in coverage and continue to support CDIC’s mandate to reimburse depositors quickly and accurately in the event of a failure.
In order to allow sufficient time for CDIC member institutions to update their systems, compliance with the updated requirements will be in April 30, 2021. Until then, member institutions are expected to comply with DSR 2.0 (PDF 1.2 MB) and are required to certify compliance as part of the submission of the Return of Insured Deposits.
4. Premiums Reporting and Payments
CDIC will update its forms and guidance with respect to completion and submission of the Return of Insured Deposits (RID) in respect of the 2020 and 2021 premium years.
Updated forms and guidance will reflect that the volume of insured deposits in respect of the 2020 premium year must recognize eligibility of deposits with terms greater than 5 years and deposits held in foreign currencies. The calculation of the volume of insured deposits must also reflect the elimination of travellers’ cheques as an eligible deposit.
Updated forms and guidance for the 2021 premium year will reflect that the Return of Insured Deposits due on July 15, 2021 must recognize all eligible deposits and separate categories under the new framework.
Deposit Insurance Information By-law
To help ensure depositors are aware that a deposit is not eligible for CDIC deposit insurance protection, the Deposit Insurance Information By-law (“DIIB”) provides that members must “negative stamp” certain instruments with a prescribed warning statement that highlights that the product is not insured by CDIC. In addition, members may choose to negative stamp certain documents with one of the prescribed warning statements.
The DIIB prescribes the warning statements, which currently include the following “Only deposits held in Canadian currency, having a term of five years or less and payable in Canada are eligible to be insured under the Canada Deposit Insurance Corporation Act”.
Changes will be made to the prescribed warning statements currently contained in the DIIB to reflect that insurance coverage will no longer be limited to Canadian currency, and the existing threshold of deposit terms will no longer be specified as five years or less. The amendments to the DIIB will come into force on April 30, 2020, and member institutions must ensure compliance with the amended DIIB as at that date.
The By-law also requires member institutions to display brochures at places of business, and to provide depositors with an abbreviated brochure as part of the account opening process. As a result of changes to the coverage framework, CDIC will revise its brochure and abbreviated brochure in respect of both coming-into-force dates. Members will be required to update their processes to ensure compliance as at the various coming-into-force dates (i.e., April 30, 2020, and April 30, 2021). Updated brochures will be available 60 days in advance of each coming into force date on the CDIC display requirements web page.
It is important to note that all current requirements and deposit insurance coverage rules continue to apply until the new rules come into effect. When the new requirements do come into effect, they will apply equally to all existing and new deposits held at CDIC member institutions.
CDIC’s goal is to support a timely and effective implementation of these changes. To assist with this transition, CDIC will keep member institutions, financial professionals, trustees and other key stakeholders informed about the implementation process so they can plan and deploy appropriate resources accordingly. CDIC will publish guidance, new templates and continue to consult with the industry.
For more information
If you have any specific questions about any of the key areas affected by changes to deposit insurance, please contact us at email@example.com.