What Happens in a Failure

FAQs about bank failure

Didn’t find the answer to your question on our pages? We’ve compiled a list of questions we’re most commonly asked by Canadians about member institution failures and published them along with our answers here. Still have more questions? Contact us by telephone at 1-800-461-2342 or by email. You can also follow us on social media for regular updates and information about deposit protection.

What is a member institution failure?

A member institution failure occurs when the Office of the Superintendent of Financial Institutions (OSFI) determines that it is no longer viable and requires resolution by CDIC.

In the event of a failure, do I need to file a claim with CDIC to get my money?

There is no need to file a claim. If your deposits are insured, CDIC will pay you automatically in the event your financial institution is closed.

When and how would I get my money in a reimbursement of insured deposits (payout)?

CDIC will process reimbursements automatically based on information available at the member institution at the time of failure. Since reimbursements are mailed via Canada Post, it is recommended that depositors verify possible mailing delays with their post office.

CDIC would reimburse insured deposits up to $100,000 (including interest) per insurance category.

If my financial institution fails, do I still have access to my deposits? Can I deposit, cash or write a cheque on my account at the failed member institution?

Under the CDIC Act, CDIC has certain powers or “tools” to assist it with the resolution of a failed member. Access to deposits is dependent on what tool CDIC employs to resolve the failed member. In many instances, the institution would remain open which would allow continued access to deposits. In some instances, insured accounts would be paid out and access to a chequing account, for example, would cease. You can consult
more information on CDIC’s resolution tools.

Does CDIC coverage of $100,000 include principal and interest?

Yes. Total coverage in each deposit category, including principal and interest, is up to $100,000.

Has a Canadian financial institution ever actually failed?

Since its creation in 1967, CDIC has handled 43 failures, affecting over 2 million depositors. No insured depositor has lost a single dollar under CDIC protection.

Does CDIC have enough money to cover all insured deposits in the event of a member institution failure?

CDIC is well-funded and has the authority to borrow additional funds from the Government if necessary, with Parliamentary approval. Read more about our funding and about other resolution tools.

Can CDIC assist large financial institutions that are failing, or just smaller institutions?

Yes. CDIC is the resolution authority for all its members, regardless of size, and has the tools, expertise and readiness to resolve any of them. Read more about our role as resolution authority.

If one CDIC member fails, should I be concerned about my deposits at other financial institutions?

Your eligible deposits in a CDIC member institution would not be affected by the closure of another CDIC member.

Where should I take my money if my member institution has closed?

CDIC has over 80 member institutions. All eligible deposits in any CDIC member institution are protected up to $100,000 in each of seven separate deposit categories. Close to 98% percent of personal deposit accounts in our members are fully protected by CDIC.

Chequing, Savings, Mortgage Tax and Joint Accounts

CDIC’s goal is to reimburse funds from chequing and savings accounts, joint accounts and mortgage tax accounts to depositors within three business days of the date of failure.

The international standard (PDF, 821 KB) for reimbursement, established by the Financial Stability Board, is seven days.

Trust Deposits

Deposits in valid trusts are protected to $100,000 per beneficiary. CDIC would contact broker-trustees to inform them of its process to reimburse insured deposits. CDIC would remit payment to broker-trustees within seven business days of receiving wire transfer/payment information. Payment would be based on CDIC calculations and deposit information at the failed institution.

Registered Deposits

CDIC would hold registered deposits in RRSPs, RRIFs, and TFSAs for several days 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.

Deposits not eligible for CDIC coverage

Depositors with funds not protected by CDIC will need to file a claim with the liquidation firm when it is appointed by the courts in order to participate in the liquidation and payout of the failed member institution.

Would CDIC cover ALL of my savings?

CDIC protects eligible deposits to a maximum of $100,000 for each of seven deposit categories. Depositors with funds that are not protected by CDIC would be able to file a claim with the liquidation firm after it is appointed by the courts. Contact information for the liquidation firm would be posted on CDIC’s website once the firm is appointed by the Court.

Would my GIC be eligible for coverage?

Term deposits, including Guaranteed Investment Contracts (GICs), with original terms to maturity of five years or less are eligible for CDIC insurance.

That means a GIC with an original term of seven years, for example, is not insured and would not become insured when two years of that term have passed and five years are left. What matters is the original term, not the amount of the term remaining.

What would happen with my operating loan/line of credit in a member institution failure?

Since the failed member institution would be closed, you would no longer have access to any funds from loans, lines of credit or similar credit accounts that you may have had with the member institution. You would need to make credit arrangements with another financial institution.

You would also still need to repay any debts that you owed to the member institution. To do this, you would need to make arrangements with the liquidation firm appointed by the Court to settle the member institution’s business affairs.

Would business accounts be covered?

Eligible deposits in the name of a partnership or corporation are covered to a limit of $100,000 per deposit category. These deposits would be covered separately from eligible personal deposits held in the names of the individuals who own the partnerships and incorporated businesses.

Owners of sole proprietorships, however, would not benefit from separate deposit protection.

How are brokered deposits and deposits held in trust handled by CDIC?

Deposits made by brokers can be either as:

a) an agent (recorded in client’s name)

  • Would be covered as a deposit made by the client and added up with any other client deposits owned under the same category.
  • Payment of non-registered deposits such as savings and chequing accounts, joint accounts, GICs and other term deposits of five years or less, and property tax accounts would be sent
    directly to depositors.

b) a nominee (recorded in broker’s name held in trust for client)

  • Would be covered under the deposits held in trust category and separate from other client deposits (except if they are held in a registered plan).
  • CDIC would contact broker-trustees to inform them of its process to reimburse insured deposits.
  • CDIC would remit payment to broker-trustees within seven business days of receiving wire transfer/payment information. Payment would be based on CDIC calculations and deposit information at the failed institution.

How are deposits held jointly paid out?

Jointly held accounts are covered up to the $100,000 maximum per category, and joint owners together would receive a single payment.

Does CDIC coverage of $100,000 include principal and interest?

Yes. Total coverage in each separately insured category, including principal and interest, is up to $100,000.

What would happen if I obtained a pre-approved mortgage right before the failure? What would its status be?

You would need to contact the liquidation firm appointed to settle the member institution’s business affairs.

If one CDIC member fails, should I be concerned about my deposits at other financial institutions?

Your eligible deposits in any other CDIC member institution would not be affected by the closure of a CDIC member and would remain protected up to $100,000 in each of seven separate deposit categories.

Could I transfer my insured deposits directly to another member institution instead of waiting for a cheque in the mail?

No. Cheques for insured deposits in savings accounts and joint accounts would be mailed to depositors.

Where should I take my money if my member institution has closed? How would I know which institution is safe?

All eligible deposits in any CDIC member institution are protected up to $100,000 in each of seven separate deposit categories. More than 95 percent of personal deposit accounts in our members are fully protected by CDIC.

If my member institution fails, what would happen to the automatic withdrawals I set up to pay my bills?

If your member institution failed and you use automatic withdrawals/payments from your accounts to pay mortgages, loans, taxes or to cover regular bills such as those for utilities or credit cards, these would no longer be processed.

You would need to contact your service provider/utility/other lender and relevant tax authorities to see whether scheduled payments from your accounts were processed prior to their closures. You would also need to make arrangements with them for future bill payments and to cover off any outstanding amounts.

What about paying mortgage and other debts?

If a CDIC member institution were to fail, customers would still be responsible for repaying money they owe. This includes mortgage payments. The liquidation firm appointed to settle the business affairs of the failed member institution would collect this money and contact customers to discuss their payments.

Can I deposit, cash or write a cheque on my account at the failed member institution?

Since deposits cannot be used or accessed once a CDIC member institution has failed, it would no longer be possible to deposit a cheque, to cash a cheque, or to write new cheques for funds held at the failed member institution. Uncashed cheques issued from an account at the failed member institution (even if written prior to the closure) would be returned.

Uncashed cheques issued by the failed member institution for interest earned on deposits would be included in the deposit insurance payment.

What would happen to direct deposits to my account at the failed member institution?

Direct deposits (such as paycheques or pension payments) into accounts at the failed member institution would no longer be processed. Depositors would have to contact the person or organization issuing these deposits to make new arrangements.

Could I have my insured deposits transferred directly to another member institution instead of waiting for a cheque in the mail?

No. CDIC only issues cheques as payment for insured deposits in chequing, savings and joint accounts. Access to bank accounts for transactions would no longer be possible. Consult the question “When and How Would I Get My Money …” in this FAQ for CDIC’s handling of registered deposits and deposits held in trust in a failure.

What would happen with my operating loan/line of credit?

Since the failed member institution would be closed, you would no longer have access to any funds from loans, lines of credit or similar credit accounts that you may have had with the member institution. You would need to make credit arrangements with another financial institution.

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