deposit insurance | General comparisons | Discussion forum

I would say yes.

Deposit insurance let's one not worry too much about the stability of the financial institution. It is not intended to fully protect every depositor.

Some depositors will have to do their due diligence to understand and control their risk. People who run business with significant payrolls, for example, of $5 million per month are not going split their deposits 50+ ways to ensure full CDIC coverage.

DBRS, S&P, Moody's, or Fitch will issue ratings on any company that wishes to pay the ratings fee and provides the non-public information needed.

DBRS does rate credit unions. Vancouver City Savings Credit Union currently has a DBRS rating of R-1 (low) on its short term instruments.

One can't do the due diligence needed for deposits on financial institutions that are not willing to provide the necessary information. With no rating, I don't know how much risk I'm taking on with money not covered by deposit insurance.

For an extra 6% or 7% per annum, I'd consider it as a possibility for the stock portfolio. For just an extra ½%, 1%, or 2% per annum, it is just not worth taking on unknown risk.

I go over cdic limits with tangerine. I feel pretty comfortable doing that . Other Financial institutions like Oaken for instance I insured it up with single account, joint acccount, and a in trust account.
I personally love the tangerine promotions, so when they give me one on my single account I load up and get lots of interest! Theres risk of course but I rationalize it with it's not locked in and can be moved immediately and also backed by Scotia bank.

swan, you are looking for something that doesn't exist. There is no formula or universal system of assessing risk and deciding how much money to put into which institutions. I told you earlier, and Bill has told you again now, that you need to do what makes sense to you. There is some kind and degree of risk in absolutely everything.

For maximum protection, if that's what you want, spread your money around as many institutions as possible; use the provisions of the various insurance systems (one may be overwhelmed at some point but others may not).
But, depending on how much money you have, this can be a huge nuisance and inconvenience. I think that, at some point, most people who have enough money decide to consolidate and take some uninsured risk. Where that point comes depends on the individual. And that's where the due diligence really comes in handy, if you are able to do it. With some, it's more difficult. And for many of us, it's next to impossible to know if we can really trust the information we have gathered.

What you are really concerned about, as I hear it, is the housing bubbles in Vancouver and Toronto. You consider that more risky than farms in Manitoba. I don't. Farmers have lost their farms over and over again through the years from bank foreclosures. Remortgaging is a way of life for many farmers. Farming is a risky business, and I consider it more risky than the value of houses in Toronto, the place I am more familiar with. But, even in Vancouver, the basic point is that land is very finite in Vancouver and it will always be valuable, despite ups and down, unless it is wiped out by an earthquake. The housing market can sustain a drop of about 25% without breaking the bank, from what I've seen in the past, maybe a bit more. This is not the first time we've had a bubble. This isn't the US, where they were handing out mortgages like candy before 2008. If our economy goes down in a major way, no province will be immune.
Ontario provides about 40% of Cdn GDP and MB about 3%. There is no comparison. The Ontario economy is diversified and flexible. People who are paying mortgages in Toronto are employed in all kinds of different kinds of enterprises. Farms are farms, and, for most people, the income to pay the mortgage there comes only from farming although some will have off-farm jobs for one spouse to supplement or stabilize family income.

But obviously you feel otherwise. So, please, don't invest in FIs that do business in mortgages in Toronto and Vancouver! That will limit your options very substantially but you will be more comfortable.

Better yet, buy yourself a chunk of land in Manitoba where you can grow stuff and sustain yourself if you need to. You obviously think land in MB is a great investment and you should have no trouble paying the mortgage since you think MB incomes are equal to the task.

Yes, there could be defaults in the high octane housing markets. There will be some, as there always are. But in order to create a crisis big enough to kill some banks, it would have to be mammoth. If that happens, the whole country will be affected and it won't much matter which FI you put your money into.

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Ok, swan, it sounds like you've got it figured out, just follow your analysis and invest in Manitoba.

And I can maybe see some merit in one of your ideas. Prosperity can be "faked" via drawing on your credit card or other lines of credit, and a province (Ontario) whose government goes into debt further by over $20 million every single day maybe isn't as robust as appearances would indicate. The multiplier effect of lots of public sector cheques and paycheques can do wonders for a while but in the long run it's a no-go.