Measures in the 2013 federal budget that propose to require systemically important banks to plan for “bail-ins” in case of failure, have elicited a slew of concerns from Canadians regarding the safety of their deposits at their banks.
Now, the Canada Deposit Insurance Corp. (CDIC) is urging financial planners to help send a message to clients that their deposits insured by the CDIC will continue to be protected.
At the Canadian Institute of Financial Planners annual conference in Niagara Falls on Monday, Claudia Morrow, vice president of corporate affairs, general counsel and corporate secretary with CDIC, said the corporation has received many calls from Canadians since the budget was delivered.
In the budget, the government said it would be proposing to implement a “bail-in” regime for Canada’s systemically important banks. The regime would mean that if a bank were to fail, instead of a taxpayer bailout, the bank could be recapitalized and returned to viability through the conversion of debt into regulatory capital.
This proposal has raised concerns among Canadians that they would lose their deposits in the event of a failure. These concerned ballooned following the recent crisis in Cyprus, in which some individuals were forced to take losses on deposits.
However, Morrow said Canadian deposits which are currently protected by the CDIC would continue to be protected in the unlikely event of a bank failure.
“Investors and creditors would bear the cost of this,” Morrow explained. “A bail-in would not include the insured depositors…CDIC protection would remain intact.”
Morrow called on financial advisors to reassure clients that their guaranteed investment certificates (GICs) and deposits will continue to be protected despite the government’s bail-in proposals.
“You really have access to thousands and thousands and millions of people, and you’re more effective in getting that message out, because clients want to hear what you have to say,” Morrow said. “You’ve got a huge leg-up on us in terms of getting our message out.”