[lb71]

Some institutions may not be covered by CDIC, but through a provincial association. For example, Achieva Financial, which offers some of the higher GICs rates in the country, offers protection through the Credit Union Deposit Guarantee Corporation of Manitoba, which does not have any limits on deposits.

 

[lb71]

... CDIC guarantee, which is backed by the Government of Canada.

Are you sure about that? CDIC is a crown corporation that insures deposits. Premiums are paid to CDIC, which builds up reserves in case of a bank failure. Now, if one of the big five were to fail, there would most like not be enough reserves to pay out, so there would be political pressure on Ottawa to make the payouts whole, but there is no guarantee the federal government would top them up. I would assume the provincial associations would work in a similar fashion.

(This is similar to the pension benefit guarantee fund in Ontario. With the recent issues with the car companies, the PBGF does not have enough money to cover the full amount of pensions, so there was talk of the Ontario government having to top up the fund in that case.)

 

[lb71]

On page 11 of the 2008 annual report of the Deposit Insurance Corporation of Ontario (CDIC for Ontario credit unions), a graph shows the funding levels of various provincial reserves. Ontario sits at 50 bps. BC, Alberta, Manitoba and Quebec sit in the 80-100 bps range. Saskatchewan is around 175 bps. On the other hand, CDIC sits at 35 bps (page 10) in 2008, below their target of 40-50 bps. (Ontario targets 61 bps).

Now, there has not been a federal failure since 1996, and in Ontario alone there have been 15 credit unions liquidated since 2006 (including 3 this year). So higher funding levels probably are necessary at the provincial level. However, these provincial corporations do not appear to have a problem covering their members.