The Federal Deposit Insurance Corporation (FDIC) is a US-based agency that offers deposit insurance to people that deposit their savings with banks or other financial institutions based in the US – known as “depositary institutions”. The FDIC does not cover Canadian depository institutions. In Canada, we have a different body called the Canada Deposit Insurance Corporation (CDIC).
While there are some fundamental differences between the FDIC and CDIC, both agencies exist for a similar purpose to protect depositors from a bank failure.
What is the CDIC?
The Canada Deposit Insurance Corporation (CDIC) was established in 1967 by the Canadian Parliament. As a Crown corporation, the CDIC protects over $1 trillion of deposits made across 80+ member institutions including Canada’s Big Six banks (TD, BMO, RBC, Scotiabank, CIBC, National Bank).
If a CDIC member institution faces failure, the CDIC will step in to reimburse that institution’s depositors. This is called deposit insurance and is used to improve the confidence of depositors in the nation’s banks. Ultimately, the CDIC strengthens trust and stability in the national financial system.
Coverage amounts & limitations
CDIC’s coverage doesn’t extend to every financial product offered by a member institution. In general, only the following receive CDIC coverage: (i) checking and savings accounts, (ii) Guaranteed Investment Certificates (GICs) and term deposits, and (iii) foreign currency deposits.
Each depositor can be reimbursed $100,000 in each of the following covered categories:
- Up to $100,000 of cash held in a checking or savings account in your name
- Up to $100,000 of cash held in joint checking or savings accounts
- Up to $100,000 for each beneficiary for savings in trust
- Up to $100,000 of funds held in TFSAs
- Up to $100,000 of funds held in RRSPs or RRIFs
- Up to $100,000 of funds held in RESPs
- Up to $100,000 of funds held in RDSPs
In an instance of bank failure, the CDIC has tools to ensure that you can retain access to your funds in just a few days. The process is entirely automatic and the institution will contact you to get the process underway.
Differences between CDIC & FDIC
Despite their similar mandate, there are a few key differences between Canadian and American deposit insurance.
Coverage: As stated above, the CDIC covers checking and savings accounts, GICs and term deposits, and foreign currency deposits. The FDIC covers checking and savings accounts, money market deposit accounts (MMDAs) and certificates of deposits (CDs).
Amount of Coverage: The CDIC offers up to $100,000 of coverage per insured category (detailed above). The FDIC offers up to $250,000 of insurance coverage per depositor per bank in each covered category.
Member Institutions: The CDIC covers Canadian depositary institutions while the FDIC covers American depositary institutions. Deposits held at Canadian banks’ US subsidiaries (such as TD Bank) are covered by the FDIC.
Credit Unions: The FDIC does not cover deposits held at credit unions. Credit union deposits are insured by the National Credit Union Administration (NCUA). On the other hand, the CDIC insures credit union deposits for federal credit unions (FCUs). Provincial credit unions are governed by the laws of the province in which they operate.
FAQs About FDIC insurance and CDIC insurance
A member institution that is FDIC-insured has eligible deposits protected by the Federal Deposit Insurance Corporation (FDIC). Any deposits up to a total of $250,000 held within a FDIC member institution in a checking or savings account would be reimbursed to the depositor in the event of the institution’s failure. It’s important to note that only US financial institutions can be FDIC-insured. In Canada, most financial institutions are CDIC-insured.
The main difference between the CDIC and FDIC is that the CDIC covers deposits held with Canadian financial institutions, while the FDIC covers deposits held with US financial institutions. There are also some differences in terms of coverage. The CDIC insures up to $100,000 for each depositor in each covered category, while the FDIC insures up to $250,000 for each depositor in each covered category. Each institution also offers coverage of slightly different financial products. While both cover checking and savings accounts, the FDIC covers certificates of deposit and MMDAs while the CDIC covers GICs and foreign currency deposits.
The FDIC was established in June 1933 when President Franklin Roosevelt signed the Banking Act of 1933. This Banking Act was enacted during the Great Depression to restore trust in the American financial system.