Canada's banks protected by regulations unlikely to collapse, experts say
The recent collapse of three banks, two American and one Swiss, has countries coming together, in an effort to balance teetering markets, and perceived global instability.
Experts say with Canada's strict regulations and protection measures for bank customers, it is unlikely to happen here.
In recent weeks, back-to-back failures of American money institutions Silicon Valley Bank and Signature Bank, followed by Credit Suisse in Europe, may have some Canadians concerned of a similar situation. Duane Francis, portfolio manager and senior financial advisor with Capital Wealth Partners and Mandeville Private Client Inc. says while nothing is impossible, Canadian policies are designed to prevent a collapse.
"Since this has happened, it started kind of a contagion across the globe so now you're starting to see concerns are all banks going to be painted with the same brush. I don't think it's going to be a big concern for Canadians but it's definitely a concern globally, as no one likes uncertainty," he says. "Canada is very different than the U.S. We have regulations and there is insurance in place. The Canadian Deposit Insurance Corporation was started in 1967 and they created that agency to protect Canadians."
Bank customers are insured up to $100,000 per institution on cash accounts, term deposits, and guaranteed investment certificates. This also applies to other accounts within the institutions like RSPs, TFSAs and education savings plans.
"So you could have up to about $900,000 insured if you have these different accounts," says Francis. "There is also the Canadian Investor Protection Fund, which a firm like ours and dealers, like our member firms, have protection over and above the CDIC, up to $1M of general investments. Plus a registered retirement savings plan, retirement investment fund, those types of investments are also protected up to $1 million ... so you could have up to $3M of protection in case your member firm is insolvent or bankrupt."
Canada's last major banking collapse was in 1923, when The Home Bank of Canada went bust. Its failure, and the estimated 60,000 people who lost their life savings, became a watershed moment for the government, which enacted strict federal policies that remain in place a century later.
"There are no major banks, no major institutions since that time that have failed," says Francis. "And since 2001 to 2023 they are have been 562 institutions in the United States not including SVB, or any other of these banks that have failed. In Canada over the same time period, zero."
Francis advises those who want to add extra protection diversify portfolios, have money in accounts at separate institutions, keep some cash on hand just in case, be sure to monitor bank accounts for activity and, if you have questions or concerns, speak with a professional who can help navigate the financial seas.
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