Do you go over CIDC limit with this bank? | Motive Financial | Discussion forum

Along with Doug's thoughts, I would at the A(low) or A- level, and most likely at BBB (high) or BBB+ where I believe CWB is, but likely not at the Equitable Group level, and most certainly not at the Home Capital Group level (non-investment grade yet I believe).

I believe investment grade is any of the BBB designations, including BBB(low). Given how fine a line that is to slip to BB(high), I tend to dismiss BBB(low) as too risky for my taste.

Surely it depends on more than ratings, significant though they may be.

The more money you have, the more risk you can afford to take and the more difficult it becomes to keep it all insured.

If your "cash" portfolio is, for example, is 2,000,000, then you will have to scramble to divvy it all up so that it's all insured and at good rates, especially if you insist in keeping it in banks.
But if you only have 200,000, then why would you want to risk any of it being uninsured?

One's judgment on this should reflect one's circumstances, not just ratings or the opinions of others on what is acceptable.

Bud said
Think it safe enough to do 200-250k with this name  

Really? Why would you not split your money and use two institutions with 100k and be 100% insured by the gov? If that is too much work I would suggest Tangerine instead as some have been able to get a rate of 2.75% almost the same as Motive for a AA rated institution. If (when?) there is a financial crisis the smaller weaker players are much more at risk. For interest from CDIC website failed members

1996 – Security Home Mortgage Corporation
1995 – NAL Mortgage Company
1995 – North American Trust Company
1995 – Income Trust Company
1994 – Monarch Trust Company
1994 – Confederation Trust Company
1993 – Prenor Trust Company of Canada
1993 – Dominion Trust Company
1992 – First City Mortgage Company
1992 – First City Trust Company
1992 – Central Guaranty Trust Company
1992 – Central Guaranty Mortgage Corporation
1992 – Shoppers Trust Company
1991 – Standard Trust Company
1991 – Standard Loan Company
1991 – Saskatchewan Trust Company
1991 – Bank of Credit and Commerce Canada
1990 – Settlers Savings and Mortgage Corporation
1988 – Financial Trust Company
1987 – Principal Savings & Trust Company
1987 – North West Trust Company
1986 – Columbia Trust Company
1986 – Bank of British Columbia Mortgage Corporation
1986 – Bank of British Columbia
1985 – Western Capital Trust Company
1985 – Pioneer Trust Company
1985 – Northland Bank
1985 – London Loan Limited
1985 – Continental Trust Company
1985 – Canadian Commercial Bank
1985 – CCB Mortgage Investment Corporation
1984 – Northguard Mortgage Corporation
1983 – Seaway Trust Company
1983 – Seaway Mortgage Corporation
1983 – Greymac Trust Company
1983 – Greymac Mortgage Corporation
1983 – Fidelity Trust Company
1983 – Crown Trust Company
1983 – AMIC Mortgage Investment Corporation
1982 – District Trust Company
1980 – Astra Trust Company
1972 – Security Trust Company Limited
1970 – Commonwealth Trust Company

Regular failures until 1996, then zero for 23 years, very strange pattern. Looks like "too big to fail" or its equivalents now apply to all financial institutions, looks like no need to worry about CDIC limits as current generations use money printing or its private-sector variants to keep the parties going.

I can say from personal experience that Shoppers Trust was absorbed into another FI. I believe it was First Line Trust but not sure - at least that's where my money ended up for whatevr reason.

At least one of these FIs, and I believe more than one, did in fact go under. My dad had money with one of them and did get reimbursed from CDIC. I believe it was London Trust but not positive. They had been paying a very good rate, no doubt because they were in trouble, but the public didn't know. Even though dad got his money back, he lost the rest of the term's interest, got no interest while waiting for reimbursement (it took quite a few months) and had to settle for a lower rate somewhere else.

And here's why we haven't had failures since the 1990s.
The government recognized that there was a problem with so many of them being in so much trouble and that this was not good for either consumers or for CDIC. So, regulations were improved so that the FIs had to retain more substantial assets. Doug often refers to the amount they have to have in reserve. That formula was changed in order to prevent more bank failures and rescues.
This is an example of successful government regulation - unless, of course, you enjoy putting your money at unnecessary risk.
I remember when these things happened. It was a big concern at the time, and people wanted something done to prevent more problems.
Those improvements helped keep things stable during the 2008 crisis. The question is now whether they are adequate for a more significant crisis such as Vatox and others anticipate.

Doug said
That list is misleading. Most of this "failed" banks, trust, or loan companies ultimately had their assets and liabilities assumed by another bank.

Can't say the website is here

https://www.cdic.ca/about-us/our-history/history-of-failures/

It says it is a "list of the failures they have handled".
whether or not the assets were ultimately acquired by another institution if CDIC had to cover the insured monies very likely those in excess of the limits got little to nothing on their money.

The point is why risk your safe money in excess of CDIC limits at a weaker player for little to no benefit. For Bud the easy solution with 200K is to use two institutions. Some of us (ahem) are old enough to remember institution failures and the losses/hardships some families incurred and it would be naive to believe that can no longer happen.

Bill said
Good to know better regulation is the reason for FI stability lately.

The banks and their regulators don't tend to allow a mistake to made more than once.

Those failures in the late 1980's and early 90's were from lending on overpriced Toronto commercial real estate. I remember reading that First Canadian Place in Toronto at one point had a higher appraised value than the market value of publicly traded Inco!

When that real estate bubble popped and the loans went bad, there were substantial losses.

Another mistake was that the regulators used to rely on the audited GAAP-based financial reports from the financial institutions. The regulators are not as naïve now.

It can also help when the regulators are involved before the situation gets too bad. Two near-failures, not in that list of failures, are Royal Trust and the Continental Bank of Canada. I recalled the Continental Bank of Canada a while back.