What Happens in a Failure

Resolution tools for small and medium-size banks

CDIC has several tools to assist or resolve a failing member institution. The selection of a resolution tool would depend on the circumstances. Factors such as the size and complexity of the bank, its franchise value, as well as the current availability of any private sector solutions, would be key considerations in deciding which tool to use.

Resolution Tool Description Legislation
Reimbursement In certain cases, a failed bank is closed and CDIC launches its rapid reimbursement process so that insured depositors have their money as quickly as possible. This process is automatic and depositors do not have to file a claim. More Information on Reimbursement. CDIC Act, s. 14
Assisted Transaction CDIC can assist with the sale of a failing institution to a viable buyer by providing financial support (ex. loans, guarantees or loss-sharing arrangements). More information on Assisted Transactions. CDIC Act s. 10
Financial Institution Restructuring Provisions (FIRP) CDIC can assume temporary control of a bank for up to six months to force restructuring measures which the private sector cannot accomplish in the same time frame. More information on FIRP. CDIC Act, s. 39.13(1)(a)(b)
Bridge Bank The Minister of Finance can create a new bank (called a “bridge bank”) temporarily owned by CDIC. Selected assets and critical services from the failing institution are transferred to the bridge bank, in which CDIC maintains core services for up to five years after which point the institution is returned to the private sector or wound down. At a minimum, all insured deposits would be transferred to the bridge bank. More information on Bridge Bank. CDIC Act s. 39.13(1)(c)
Financial assistance CDIC can provide financial assistance to its members, including loans, guarantees, deposits, or loss-sharing agreements or by acquiring shares. CDIC can provide this assistance on a stand-alone basis, to assist in a private transaction, or in combination with any of its other resolution tools. CDIC Act s. 10

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