What Happens in a Failure

Reimbursement of insured deposits

In certain cases, a failed bank is closed, all contracts are terminated and its critical financial services are no longer available, including access to accounts.

So that insured depositors have their money as quickly as possible, CDIC would automatically launch its rapid reimbursement process. This means that:

  • Insured depositors do not have to file a claim.
  • CDIC would reimburse insured deposits up to $100,000 per insurance category.
  • Payments to the depositor would be completed via cheque.

The reimbursement process varies according to the relationship the depositor has with the failed bank. In many cases, depositors have a direct relationship through “demand deposits” which is money held by a Member Institution that the depositor can withdraw at any time on demand e.g. savings, chequing accounts and joint accounts. Payouts for these types of deposits would be executed within days from the date of failure.

Trust deposits

Deposits in valid trusts are protected to $100,000 per beneficiary.

In the case of brokered trust deposits,CDIC would contact broker-trustees to inform them of the specific reimbursement process, including payment instructions. CDIC would then remit insurance payments to broker-trustees within seven days of receiving the required information. Payment would be based on CDIC calculations and deposit information at the failed institution.

Registered Deposits

CDIC would temporarily hold registered deposits in RRSPs, RRIFs, RESPs, RDSPs and TFSAs while it works with the Canada Revenue Agency to ensure they remain tax-sheltered. CDIC would contact these depositors directly to inform them of next steps including how to transfer insured registered deposits to a new institution without negative tax consequences.

Deposits not eligible for CDIC coverage

Depositors with funds that are not protected by CDIC would be able to file a claim with the liquidation firm when it is appointed by the courts.

Liquidation and payout is a tool that would likely only be used in the case of small to medium-size banks, not domestic systemically important banks (D-SIBs).

For more information about the reimbursement process, consult our backgrounder or our FAQs.

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