MONEYWISE

WHAT HAPPENS TO YOUR MONEY IF YOUR BANK FAILS?

In the unlikely event a bank were to fail in Canada, CDIC can help in a number of ways – from restructuring the institution to quickly reimbursing your insured money. Image credit: NITIN KHAJOTIA on Pexels.

From NEWS CANADA

Many people worry about what would happen to their money if their bank were to fail. In Canada, there are established rules and organizations to ensure our financial system is strong, resilient and well-regulated to help protect your savings.

In Canada, your deposits and investments may be protected by various government organizations

One of these organizations is the Canada Deposit Insurance Corporation (CDIC). As part of Canada’s financial safety net, it exists to provide deposit insurance on a federal level to keep your money safe if one of its member banks fails. For each member institution, they insure eligible deposits up to $100,000 per category. This includes money in savings accounts, chequing accounts, term deposits (like GICs), and even money in foreign currency (like US dollars).

In the unlikely event a bank were to fail in Canada, CDIC can help in a number of ways – from restructuring the institution to quickly reimbursing your insured money.

What is not protected? Here’s what’s not insured by federal deposit insurance, but may be covered by other organizations:

Mutual funds

Stocks and bonds

Cryptocurrencies (like Bitcoin)

Items in safety deposit boxes

How can you keep your money safe? To make sure more of your money is protected, you can put it in different banks that are covered by federal deposit insurance. You can also have different types of accounts, like personal or joint, to increase your coverage. 

Here’s how to know if your money is protected:

Learn about the different protection frameworks: Become familiar with which financial products are eligible for protection and by whom. There are different organizations that offer protection depending on the type of product, including:

Federal deposit insurance: Protects deposits in banks and other federally regulated institutions.

Provincial deposit insurance: Protects deposits in provincial credit unions.

Investor protection: Offers protection for other investments like mutual funds, stocks and bonds.

Find online resources: You can find out which of these organizations your financial institution is a member of, and how coverage may apply to your financial portfolio by visiting the organization’s website. For instance, CDIC, the federal deposit insurer, provides a list of all its member institutions. They also have additional information and tools, like their online calculator, which you can use to help determine your coverage at CDIC.ca.

Ask questions: Don’t hesitate to reach out to your financial institution to find out how your financial products are protected.

Banks in Canada don’t fail very often because of strong rules and government safeguards. But if one does, understanding the protections in place can help you feel safer about your savings.