Deposit Insurance Changes
Deposit Insurance Changes
If First West becomes a federal credit union, there will be changes in how eligible deposits are insured. Currently, eligible deposits held with First West are insured to the full amount through the Credit Union Deposit Insurance Corporation (CUDIC).
Provinces can review and change deposit insurance coverage and as a result, the coverage through CUDIC has changed several times over the years. For example, the change to unlimited deposit insurance was made by the B.C. government during the 2008 recession as part of a plan to protect British Columbians’ deposits during a time of economic uncertainty. Across Canada, the deposit insurance coverage ranges from province to province.
As a federal credit union, eligible deposits will be insured through the Canada Deposit Insurance Corporation (CDIC), meaning CUDIC coverage will no longer apply, including to those deposits not eligible for CDIC coverage.
CDIC’s deposit insurance provides coverage for eligible deposits held in CDIC member institutions. CDIC insures eligible deposits separately (up to $100,000, including principal and interest) in each of the following categories:
- deposits held in one name: a chequing account, savings account and any unregistered term deposits would be combined for a maximum coverage limit of $100,000
- deposits held in joint names (in the names of two or more people) are insured separately from the owner’s eligible deposits held in other insured categories; each eligible joint deposit is protected for up to $100,000 per set of joint owners, regardless of the number of people who own the deposit
- eligible deposits held in an RRSP are insured for up to $100,000
- eligible deposits held in an RRIF are insured for up to $100,000
- eligible deposits held in a tax-free savings account are insured for up to $100,000
- trust accounts: the total eligible deposit held in a trust is insured to a limit of $100,000 per named beneficiary provided certain reporting and disclosure requirements are met
- property tax holding accounts are insured up to $100,000, but see further details on the following pages
Effective April 30, 2022, CDIC’s coverage categories will expand to include eligible deposits held in RESPs and RDSPs at CDIC member institutions. As a result, eligible deposits held in an RESP or an RDSP at a CDIC member institution will be separately insured for up to $100,000. Also, effective April 30, 2022, property tax holding accounts will no longer be insured as a separate insured category, but will remain eligible for coverage (within one of the remaining CDIC coverage categories).
Also, under CDIC there is no need to file a claim. If a CDIC member institution closes, CDIC will reimburse insured deposits (including interest) within days of the event.
What is CDIC?
CDIC is a federal crown corporation—established by the Government of Canada—that provides deposit insurance coverage for its members. CDIC is well-funded and has the authority to borrow additional funds from the federal government, if necessary, with Parliamentary approval. If First West becomes a federal credit union, it will become a member of CDIC and First West’s members will have the same deposit insurance coverage as other CDIC member institutions, such as Canada’s major banks. Since its creation in 1967, no insured depositor has lost a single dollar under CDIC protection.
DEPOSIT INSURANCE CAN BE TAILORED FOR YOUR NEEDS
CDIC provides deposit insurance coverage of up to $100,000 for each of the categories described on the previous page. This means that if a member has more than $100,000 in a savings account, amounts above $100,000 could be moved from the savings account to a TFSA or RRSP and be separately protected by CDIC’s deposit insurance coverage, up to $100,000. Also, it is worth noting that a spouse’s eligible deposits are separately covered by CDIC insurance. Joint accounts that a member may hold with his or her spouse are protected by CDIC’s deposit insurance coverage separately from the member and his or her spouse’s deposits held in their own name. First West’s member service advisors are well-equipped to help members determine appropriate coverage strategies based on their circumstances.
MEMBER IMPACT
As of April 30, 2021, less than 3.5% of First West’s members would be affected by the change from CUDIC to CDIC. For more than 96% of First West’s members, the $100,000 for each of the above CDIC categories would be sufficient and would fall within CDIC’s coverage limits.
180-DAY TRANSITION PERIOD
If First West becomes a federal credit union, there will be a 180-day transition period during which CDIC will provide the same coverage as CUDIC on “pre-existing” deposits that are eligible under CDIC’s deposit insurance coverage. “Pre-existing” deposits are deposits held by First West on the continuation date. With the exception of eligible pre-existing term deposits, the transition period will start on the day First West becomes a federal credit union and end after 180 days. Eligible pre-existing term deposits (e.g. GICs) will be fully insured until they mature or are redeemed.
FIRST WEST IS FINANCIALLY STRONG AND STABLE
First West has a long history of responsible, sustainable growth spanning more than 75 years. Using a variety of safeguards and processes, such as comprehensive risk management systems, we are better suited to protect member deposits and ensure liquidity. If First West becomes a federal credit union, it will need to comply with federal liquidity and capital adequacy guidelines. This will only enhance First West’s ability to remain a secure and financially strong credit union and First West will continue to protect its members’ deposits.
First West has never made a claim against deposit insurance.
WHAT IS NOT COVERED BY CDIC’S DEPOSIT INSURANCE
CDIC’s deposit insurance will not apply to the following:
- membership shares issued by a federal credit union
- any shares issued by a federal credit union
- deposits that are payable outside of Canada
- debentures issued by a federal credit union
- shares issued by other corporations
- mutual funds
- traveller’s cheques
- bonds, notes, treasury bills and debentures issued by governments or corporations
- money orders, certified cheques, drafts and prepaid letters of credit in respect of which a federal credit union is not primarily liable
- principal-protected notes (with some exceptions)
- safe-deposit box contents
- securities held for safekeeping
Examples of how deposit insurance will change
EXAMPLE OF CURRENT CUDIC COVERAGE (BEFORE FEDERAL CONTINUANCE)
PRODUCT | AMOUNT | CUDIC COVERAGE |
Deposits are held in one name | ||
Simply Free Account® | $6,000 | $6,000 |
Savings Account | $55,000 | $55,000 |
US Chequing Account | $7,000 | $7,000 |
3-Year Term Deposit | $80,000 | $80,000 |
Term Deposit (5-year term) held in an RRSP | $125,000 | $125,000 |
Mutual Funds | $85,000 | Not an eligible deposit |
EXAMPLE OF TRANSITIONAL CDIC COVERAGE
(FOR 180 DAYS AFTER BECOMING A FEDERAL CREDIT UNION)
PRODUCT | AMOUNT | CDIC COVERAGE |
Deposits are held in one name | ||
Simply Free Account® | $6,000 | $6,000 |
Savings Account | $55,000 | $55,000 |
US Chequing Account | $7,000 | $7,000 |
3-Year Term Deposit | $80,000 | $80,000, until maturity |
Term Deposit (5-year term) held in an RRSP | $125,000 | $125,000, until maturity |
Mutual Funds | $85,000 | Not an eligible deposit |
This member’s pre-existing eligible demand deposits, minus any withdrawals, would be eligible for CDIC deposit insurance coverage. Eligible term deposits would receive insurance coverage until they mature or are redeemed. If a member makes any new deposits during the 180-day transition period, those deposits would be insured separately by CDIC’s standard coverage.
EXAMPLE OF CDIC COVERAGE
(Following transition period)
PRODUCT | AMOUNT | Amount insured before term deposits mature | Amount insured after term deposits mature |
Deposits are held in one name | |||
Simply Free Account® | $6,000 | $68,000 | $100,000 |
Savings Account | $55,000 | ||
US Chequing Account | $7,000 | ||
3-Year Term Deposit | $80,000 | $80,000, until maturity | |
Term Deposit held in an RRSP | $125,000 | $125,000, until maturity | $100,000* |
Mutual Funds | $85,000 | Not an eligible deposit | Not an eligible deposit |
After the 180-day transition period ends, standard CDIC deposit insurance coverage would protect eligible deposits up to $100,000 in each of the eligible categories described above. If one of a member’s eligible deposits was greater than $100,000, First West could assist with ensuring available options are considered to maximize CDIC coverage.
* If proceeds are re-invested in an eligible category under CDIC’s deposit insurance framework and subject to the coverage limit of $100,000 per eligible category.
If you have any questions regarding deposit insurance, visit:
- First West Credit Union: firstwestcu.ca
- Credit Union Deposit Insurance Corporation: cudicbc.ca
- Canada Deposit Insurance Corporation: cdic.ca
You can also download Schedule 1: Notice Pursuant to the Disclosure on Continuance Regulations.