CDIC and FSRA | General financial discussion | Discussion forum

I don't mind being over insured limits for HISA funds in publicly traded companies (on the TSX) because trouble will start showing up in stock values in the market.

Institutional investors and portfolio managers are much closer to the CEO's office than we are and they'd get active in the market early enough (as in the Home Capital Group case) to give one time to pull (or push) $50k at a time out of the HISA to get under limits.

I am sometimes over CDIC limits at EQ Bank since Equitable Group is BBB rated, traded on the TSX and may get a BBB+ or A- rating once the Concentra deal is done. Besides, one quick move of $50k will fix that problem. So, for me, it depends on the institution.

I don't put 'closely held' institutions in the same transparency column because a lot of things can go wrong behind closed doors before Annual Reports come out in closely held institutions. Consider what happened with Pace where it was a sudden surprise that it was in trouble.

Granted one can argue a CU is not closely held, i.e. it is owned by the total of its membership that are watching its financials like a hawk, AND one might assume the provincial regulator is watching for shenanigans of CUs under its oversight and the robustness of a CU's risk management processes, BUT look what happened to Pace when the non-regulated part of its business took the entire CU under rather suddenly.

I think there is always some risk with non-public traded entities in particular but that could also apply to 'divisions' of publicly traded entities that are not being watched quarterly by analysts et al. Each of us has to make our own judgement on when, where and if we decide to be exposed beyond deposit insurance limits.

At least HISA funds can be moved quickly and that may be the saving grace no matter the type or size of institution. I don't think folks have much to worry about in that instance.

Full disclosure: I had a ton of house money in ING Canada in the 2003-2006 period when I was an ex-pat. Well beyond CDIC insured limits, but it was all HISA. I wouldn't have done it with GICs.

Hubble, credit unions have higher limits than $100k, check each province's set-up. But, yes, unless you have a partner or other person who you can entrust money with, or open joint accounts with, then seems to me you'd need enough accounts to only have $100k in total in all your cash type accounts at each institution.

Another idea is the bank discount brokers will often offer HISA accounts from various institutions, rates will suck but you can usually find a way to conveniently park some that way.

HermanH said
...I am considering the 5-yr 5% GIC from Canadian Western Bank (CWB) group. I can buy $100K from CWB, another $100K from Valiant, and one more $100K from CWB Trust. Each has its own $100K CDIC coverage.......  

Herman,

I looked up CWB Financial Group and cannot find Valiant. Also I don't see deposit services listed as one of the services provided by CWB Trust.

Could you elaborate on how that would work?

Thanks!

Stephen

HermanH said
It should also be noted that the CDIC 100K limit covers both the principal and any accrued interest. Therefore, you would have to buy GIC in amount less than 100K to cover any future interest.

Another way to get additional CDIC coverage is to look for associated entities. For example, I am considering the 5-yr 5% GIC from Canadian Western Bank (CWB) group. I can buy $100K from CWB, another $100K from Valiant, and one more $100K from CWB Trust. Each has its own $100K CDIC coverage.

The big 5 banks usually have several such associated entities. Unfortunately, they rarely have any worthy GICs.  

I am thinking the same thing Herman. They are all three CDIC insured separately and I already have the max in with CWB. I am going to wait until maybe the 15th of July just in case the 5% rate for 5yrs increases. I'll elect to get paid out annually. I'm only considering locking to long term because 35% of my funds are already in HISA or maturing by end of 2022 and a further 30% are maturing in 2023. For the most part the rest (35%) are maturing
between 2024 & 2027. For the leftover amounts maturing in the next 18 months, I'll probably put in some with Peoples 15month, Oaken's 18mo. and EQ's 15 Month. Anyway that is the plan right now.

Getting back to the HISA side of this discussion...

It's true that HISA offers more flexibility than GIC. And so you should be able to get your money out quickly.
However, FIs sometimes put withdrawal limits up in extreme situations, and it's an extreme situation that you are potentially concerned about. If there are legal restrictions on these limits, I don't know what they are - and they could change in an extreme situation. They already make you wait a few days just to get a few thousand in cash of your own money, and that is gradually becoming more limited as they keep less and less cash available in branches. And heaven help you if you want to get it out of a TFSA, that will require making an appointment with someone in many FIs.

Remember the image of Greeks trying in vain to get into their banks to get their money out in the last financial debacle. If they could get in, they could only get about $100. The banks (or the government or perhaps both - can't remember) put very significant withdrawal limits on all accounts at that time. Don't assume it couldn't happen here.

The simple answer to the multi-million dollar hypothetical situation is to put it in Manitoba credit unions. All is insured. I believe some other provinces also offer unlimited credit union insurance but not all are accessible to non-residents.
However, most extremely wealthy people will hire wealth managers, accountants and lawyers to advise them and look after their money - which may be the best route.

if one is even remotely worried about a FI, then one should never put in more than the limit.
And as others already mentioned, even if there are potential red flags, you may miss it, or withdrawal limit imposed, or even a simple outage like Rogers, and you just cant get out quick enough.
And for the person that has $8mm in cash sitting around, there are wealth manager cater to HNW that will manage and have access to funds that are not available to public. No need to open 80 accounts at $100k limit lol.