Why FI rely on GIC INSTEAD of borrowing from bond market? | GIC discussions | Discussion forum

Truth is they DONT rely on GIC funding.

One major advantages GIC over bonds is there is a min size you need for any bond issues to make it economical and worthwhile, it will be a laugh to issue say just a $20mm bonds, while they can get to that number thru thru branch GIC sales easily. And imagine trying to match up terms (e.g. 1 vs 5 years) as well.

Also GIC is an excuse to get them to the face of the clients, to cross sell other products. Branch does not have the ability to handle corp bonds, you need the investment dealer.

Finally issuing bonds need not be a cheaper funding source than GIC. GIC just like a corporate bond, is priced off a credit spread over GC to some extent (the CDIC protection kind of makes GIC "cheaper" to the issuer).

GIC brokers offering a higher rate is a market inefficiency that CUs are "ok" to pay away. To me that is more old school traditional treasury management that CUs are just not optimizing their funding cost. Just like big banks use to actively employ mortgage brokers, but now most are done in house....