What happens in a failure
Canada’s financial system is strong and stable. Canadian financial institutions must meet high standards to maintain their safety and soundness, but like any business, they can fail.
If a bank fails, CDIC has a variety of tools to resolve the situation. We protect depositors and contribute to the stability of the financial system.
What is resolution?
Resolution is the process to restructure or close a financial institution that is failing or likely to fail.
In Canada, CDIC is the resolution authority for all its members – from the smallest to the largest. This means CDIC takes the lead when any of its members reaches the point when it is no longer viable. Since our creation by Parliament in 1967, CDIC has handled 43 failures, affecting more than 2 million depositors. No one has lost a single dollar that is under CDIC protection.
Our objectives in resolution are to:
- Protect eligible deposits
- Maintain the flow of critical financial services
- Protect our economy
- Minimize risk to taxpayers
Resolution tools
CDIC uses a range of tools to resolve failing member institutions. We do more than close banks and reimburse insured deposits. We can also support:
- The sale of shares or assets
- Mergers with another institution
- Recapitalization (infusing capital into the bank)
- Restructuring or other private-sector solutions
We assess the bank’s size, complexity, value, and available private-sector options to choose the best approach. Our mandate to protect deposits, contribute to financial stability and minimize exposure to loss guides us, and we give equal weight to all considerations.