CDIC compare to credit union insurance | GIC discussions | Discussion forum

No, of course it can't. Neither can CDIC cover everything, even with its borrowing power.

I think we have to accept two things:
1. Each government will do whatever it decides to do when/if the time comes, to supplement the insurance agencies.
2. The system is arranged in such a way that the only place you can put your cash is in a bank, trustco or CU. You may think it's 'your' money but that's conditional.
And maybe a third thing: almost none of us really knows how the banking system works behind closed doors, and those few aren't talking.

Thus, people put some of their money in other kinds of investments. Nothing is 100% completely safe., Nothing. The best thing is to make sure you have a sound roof over your head, no debt, and support a very large pension plan. Don't knock CPP. This is one area where biggest is bestest! - or at least has the best odds of success. Help your friends and neighbours when you can; and pray!

This was just discussed in the "DICO legally dissolved........" thread, check it out.

I'm actually glad FSRA has made this explicit.

I blame many of the CUs for telling members that the insurance is backed up by the province. I've been told this more than once. Even when I asked for proof or argued with them, they insisted. In the case of DUCA, which I remember particularly well, she handed me a shiny pamphlet as if that were definitive but it avoided the question.

A Black Swan event is, by definition, not widely anticipated (if at all) and has devastating consequences. Thus, we can't say how likely it may be.

AltaRed said
This was just discussed in another thread. Deposit insurance entities, including CDIC, only have a certain amount of assets to cover "total assets under coverage". That is because: 1) there is almost no chance of a Black Swan event that causes multiple institutions to go under at any given short period of time, e.g. one year, requiring the insurer to pay out on multiple institutions, and 2) the regulator would likely be stepping in well before insolvency of an institution such that the institution may be able to cover 60 cents of every dollar on deposit and deposit insurance only needs to pick up the remaining 40 cents of every dollar.

Well said, AltaRed. Agreed. 🙂

Without checking details, I think the sorry case of PACE credit union is an example where most of the insured deposits were already covered by PACE assets and FSRA didn't have to cough up that much money. The bigger issue with PACE was the uninsured Preference shares held by customers for which there was no deposit insurance coverage.

Though not 100% certain, my understanding in this case is that FSRA (nee DICO) deposit insurance funds were not tapped to cover insured or uninsured deposits. All deposits were simply transferred to Alterna Savings and Credit Union, with Alterna paying what was quite likely a fire-sale price for PACE Savings and Credit Union. The portion Alterna paid, in turn, would've been transferred to the insolvency trustee and used to help pay claims (notably, the PACE and subsidiary preference shares). To the extent any FSRA deposit insurance funds were used, it may have been to partially compensate Alterna for taking on assets (loans) that were impaired due to lax/poor lending adjudication criteria. In other words, I am quite confident zero PACE clients lost a dollar of insured or uninsured deposits. (Their PACE member equity shares, however, would be worthless and would be at the bottom of the creditor stack, even below the PACE subsidiary preference shareholders.)

Cheers,
Doug