updates on eft? | Page 2 | Implicity Financial | Discussion forum

Thanks, Brian.

It's also worth noting that I think SD2013 is confused on how deposit insurance actually works. In the event an institution "fails", it's not as though the institutions' depositors line-up to the deposit insurer with signed claim forms that the ready. No way!

In fact, through quarterly capital adequacy filings with the various provincial and national regulators, credit union centrals and various other internal (i.e., non-public) monitoring by governments, governments have a very keen eye on the financial "health" of an institution. If they saw an institution was potentially troubled, they'd flag that institution, instruct them to raise capital and, if that institution were unable to raise capital, the regulator would then step in and temporarily assume full operational control of the credit union to put it right. That would, most likely, be the merger with a better-capitalized, larger institution with that institution agreeing to assume all of its assets and liabilities and then the previous credit union would be dissolved, with the only losses suffered being the excess member equity shares (which aren't guaranteed, obviously) cancelled. This could include transferring those assets and liabilities to a major Canadian chartered bank.

Only if they could not find another party with which to assume its assets & liabilities would the deposit insurer (including CDIC) have to start issuing cheques to member depositors. I'm not even sure if that's even happened in Canada and, before SD2013 cites the CDIC failed institution list, we don't how those institutions and whether any deposits were lost. We don't know how they were "righted".

The fact is, Canada's banking system is sound. The best in the world. Plain and simple.

If your concern is the lack of trust in the various deposit insurance schemes for bank demand and term deposits, essentially the safest investment vehicles on Earth considering their principal guarantees, then one wonders why you're invested in paper currency at all.

Bottom line: I've only ever stayed within my CDIC limit when I had deposits with Ally Canada (through ResMor Trust Company). Beyond that, I would not even worry one bit whether we had any deposit insurance for any of the Canadian chartered banks. They will continue to exist (and grow) for the next 200 years - and I'll take that to the grave!

Cheers,
Doug

We may need a corporate lawyer to sort out these disagreements definitively. The language on some of these websites is not completely transparent to the average person, in my opinion.

Anecdotally, I vaguely recall when the federal government went through a spate of spinning off government departments to create corporations. Canada Post is an example. It was clear to me at the time that they were doing this to force these organizations to sink or swim on their own precisely so that the government would not be really responsible. Canada Post is a separate corporation, a "group of companies", as its website says, owns or partially owns businesses such as Purolator, and is expected apparently to make a profit. The business of government is not to make a profit but to run essentially common services as effectively and efficiently as possible. The government decided some years ago that the mail was not really their concern, hence the cavalier attitude of Canada Post towards the need for home delivery does not raise a whimper on Parliament Hill.
Now, I am not a corporate lawyer, or any kind of lawyer, but, with this memory in mind, and having read the above arguments, I think it is not completely clear who is taking responsibility for what, corporately speaking.
But, given the history of offloading government business to corporations, I would not assume that any of the above-named insuring bodies would necessarily have the financial backing of government, although they may, and I hope they do. If government was clearly intending to jump in, it would be irrefutably stated, and we would not be having this discussion. The modern rule of thumb, "too big to fail" might dictate what governments are and are not willing to do, on a case-by-case basis. They have, after all, been subsidizing and bailing out selected businesses of all sorts for many years.

It's not true that mergers etc are always the way out of a failing financial institution and that people will not get money back per se. Some years back, in the 1980s if memory serves, there were some failures, and they did go bankrupt, and payouts were made by CDIC. I mentioned this on another thread, but it seems that I may be the only person who remembers this, so I will say it again. A relative of mine was invested with one of these, but I can no longer remember the name of it except that it was a trust company, it was in Ontario, and it was CDIC-insured. He was perhaps an early proponent of the idea of investing in lesser-known institutions as long as they were CDIC-insured. He did get his money back in cash. It took quite a few months. He had to forego interest, as it was a GIC. This was when interest rates had been fairly high but were in a downward trend, so it did cost him money, and for that reason he regretted that he'd taken an unforeseen risk on this institution. Unless the rules have formally changed, which to my knowledge they have not, weaker institutions could be allowed to fail, although there may be more incentive since the recent world financial crises to do otherwise. Why would the insurance exist if the intention was that it would never be used, that institutions would simply merge and pick up the slack?

No bank is ultimately immune, no matter how big or how Canadian. Things can happen. Bad decisions can be made. Some of our big banks have made some really stupid investments (at least in retrospect) and have suffered some big losses, which they subsidize by not treating the average person very well in financial terms. Because of that, I agree that credit unions are not any worse a risk. They tend not to make the riskier investments that the big banks sometimes seem too keen to make. Also, they don't need to, as their horizons and investment needs are smaller.

It's always the events that nobody expected that mess things up royally, the most recent financial meltdown being case in point. A financial advisor I met with a few months ago swore up and down that "nobody" saw it coming, that he'd been at some big financial meeting in New York City a few months prior and none of the impressive panel of experts there saw it coming. Therefore, according to him, I was not to be believed when I said that I saw it coming. The mortgage situation in the US was untenable if anyone was paying attention. It was not even hidden from public view. But apparently the experts weren't connecting the dots. I recall discussing it in some detail with an American friend several months before it happened, and our combined professional expertise is about as far removed as possible from financial affairs.

Neville Chamberlain did not think Hitler was a threat. World War One was set off by an unexpected incident. The roaring '20s were much enjoyed by people who never imagined their wealth could disappear a few years later and lead them to consider suicide. And the recent meltdown with its still-unfolding repercussions wasn't supposed to happen. There are innumerable examples. History is made by what is unforeseen as much as it is by what IS anticipated, perhaps more. The minute someone says that something can't happen, I tend to stop listening.

S*** happens! so, be a contrarian!

SD2013, I'm tiring of having to re-read (over and over) your posts that say the same thing ad nauseum, so in fairness, I tuned out after the first couple paragraphs.

Bottom line: you said the guarantee by DICO was somehow superior in its "direct guarantee" by the Ontario government. In reality, it is no more and no less backed by the Ontario government than B.C. and Manitoba credit unions are backed, directly or indirectly, by their respective provincial governments. This is confirmed by the CUDIC of BC and DGCM of MB websites as well as the DICO and CDIC websites of which you cite. Not sure where you're getting your information, but all of the websites clearly back what I'm saying.

Everyone: be careful of the gross factual inaccuracies posted by "SD2013" in which he/she claims his information is factually accurate yet consistently refuses to provide actual hyperlinks that directly back up what he/she is saying.

Thanks!

Enough said,
Doug

Thanks for taking the time to share the link, Greg. I would never have been able to discover that new slang term (hadn't heard of it) if you had told me to simply "Google it". It shows the helpfulness and power of citing sources through links!

Cheers,
Doug

If you have nothing to hide, SD2013, why won't you link directly to material that backs up your oft-cited performance statistics, strip bond returns, supposed government "guarantees" and the like?

Why won't you lay out your entire family's financial information, including full asset allocation across multiple asset classes and true performance returns that take into account lump-sum contributions, inheritances received and withdrawals?

I enjoy your posts on GICs and high-interest savings accounts but your posts on "strip bonds" exclusively as if they are somehow the sought after, almost "risk free" asset class with a "guarantee" or "guaranteed" rate of return ad nauseum is more than tiring.

I hate to be too negative here, but I've now had at least a half dozen complaints privately from other forum members who have written to me via "private message" (even though I'm not even a moderator here) expressing concerns as to continuous spread of misinformation & lack of transparency vis a vis "strip bonds", deposit insurance and performance returns specifically. Additionally, as you've seen, the number of people expressing this concern publicly more than outweigh the positive support those posts have received.

I realize everyone has a right to freedom of expression, but so as not to effectively "monopolize" the top 15 threads on this board's homepage, I emplore you to limit your posts on "strip bonds", deposit insurance and historical portfolio performance returns (all three of the above) to a single thread within a single forum. And, when you're replying to someone else's posts on high interest savings accounts or GIC rates, don't "hijack" their thread about by repeating your oft-cited concerns over Manitoba credit unions being somehow "less safe" than Ontario credit unions. Don't repeat the same information in every post you make on strip bonds. Instead of trying to go for the "longest post" on the board, that simply restates what you've said ad nauseum, why not try for brevity? Try and explain your thoughts in five sentences across two or three paragraphs or less.

Your assistance in helping to restore this board's positive and informative "vibe" is appreciated.

Thanks,
Doug

I agree, it doesn't sound like the MB govt is guaranteeing DGCM.
I guess the lingering question, to which there is no knowable answer, is whether government would in fact step in if the situation got "too big to handle", perhaps akin to "too big to fail".
I would be interested to know what percentage of Manitobans' savings are held in credit unions versus banks. If it turns out that it's an overwhelming majority, or that the CUs dominate in a majority of electoral ridings, we might see the provincial government leap into action if needed. But with a guarantee that has no monetary limits other than the ability of the institutions in question to continue to take deposits and the reports of auditors, it's hard to see how ANY body could guarantee everything without condition in a meaningful way.
An interesting question that occurs to me is WHY didn't the government participate in this guarantee, whereas it appears that for CDIC the government does stand behind it. I suspect it's because they could get away with not doing it, whereas for the Feds, if the big banks fail, it would be tantamount to the country completely falling apart. Wondering if the QC govt stands behind the Caisses Populaires, as they are part of the fabric of francophone society in QC.

As to Loonie's comment, I agree. I don't believe that the Manitoba government are "officially" backing the DGCM. But I do know that back in the 80's, when rates went crazy and there were a number of credit unions in difficulty, the province did step in and backed these credit unions until they were merged into stronger ones. The government didn't spend any money, they simply backed some loans until everything got sorted out. No credit union member lost a penny, including interest. Back then there were something like 150 credit unions but they only have 37 or something like that now. Much larger and much stronger system than it has ever been.

I've read somewhere that the provinces where the credit unions are the strongest as far as market penetration is Manitoba first at somewhere around 47% with Saskatchewan a close second, then BC, etc. The Caisse system in Quebec is also very strong as far as market penetration. Ontario was one of the weakest at somewhere around 13%. That's not to say that Manitoba credit unions are any stronger than Ontario credit unions. The point I'm making, is that it would be very unlikely that the Manitoba government would let the credit union system fail if 47% of it's population have money in a Manitoba credit union.

Thanks for the info on market penetration. I agree that this puts a lot of pressure on any MB sitting gov't to respond to a crisis.

Wow, Norman! That's really interesting.
So, what this appears to boil down to is that the MB CUs have better deposit insurance ratio than CDIC, but CDIC has more legislated borrowing power to compensate. Both of them have miniscule assets compared to deposits, no matter how you slice it.
So, it's all a c**p-shoot in the end?
If all hell broke loose, you might be right that MB would bring their limit down, but I think it more likely that they would go on a percentage basis, like a bankruptcy, so much on the dollar, hitting all assets equally.
I wonder how these ratios compare to the reserves of Assuris and of the Investment Dealers Assoc (at least I think that's what it's called - the group that insures the integrity of your investments with brokerages).

I think we're back to the age-old advice, "diversify!" Put your assets in several baskets. (Even the BigBanks want us to diversify - they just want us to put it all in their basket first )

Meanwhile, lobby for financial reforms and better consumer protection overall. For starters, the federal Ombudsman for banking services should have powers of enforcement.