Who protects your savings in the event of bankruptcy?

Since the collapse of Silicon Valley Bank and the sharp drop in Credit Suisse’s stock, savers have been assured on all platforms that the Canadian banking system is sound. However, do you know which of your investments are protected in the event of bankruptcy and who takes care of them?

Amazingly, The Press ran into a maze trying to obtain answers to basic questions on this subject from the institutions concerned. The Autorité des marchés financiers (AMF) first directed us to the Office of the Superintendent of Financial Institutions (OSFI), which told us to contact the Canada Deposit Insurance Corporation (CDIC), while the Secretariat of the Canadian Securities Administrators (CSA) has redirected The Press to the Office of the Superintendent of Financial Institutions (OSFI) and the Autorité des marchés financiers (AMF). Back to the starting point. The AMF and the SADC finally communicated information by e-mail.

Antoine Chaume, financial planner and wealth management advisor at Assante Capital Ltée Équipe Major, finally cleared up for us the insurances, the amounts and the various organizations that intervene in the “unlikely case of bankruptcy”, should we recall.

Am I protected only up to $100,000 as we often hear? No.

The AMF protects deposits made with each of the Desjardins caisses in Québec and the Fédération des caisses Desjardins du Québec. CDIC deals with federal banks and financial institutions.

Deposits are insured up to $100,000 per deposit category.

A client of a bank branch or a credit union that has each of the deposit categories could therefore be insured for a total of $800,000. If the client has all eight classes at two different institutions, they are insured up to $1,600,000.

Am I insured for my mutual funds? It depends where.

Stocks, mutual funds, exchange-traded funds, bonds, treasury bills, cryptoassets and cryptocurrencies are not included in the protection of the AMF nor that of the SADC.

They are, however, insured for up to $1 million when purchased from your Investment Dealers Association of Canada (IDA) registered investment dealer.

For example, BMO Nesbitt Burns, BMO InvestorLine, Desjardins Securities, B2B Bank Securities Services, National Bank Financial, Credit Suisse Securities (Canada) and Assante Capital Management Ltd. are members.

If the Dealer Member becomes insolvent, your investments are insured by the Canadian Investor Protection Fund (CIPF), known as the Canadian Investor Protection Fund (CIPF) until 1^er last January.

The million-dollar question: why are mutual funds insured up to $1 million when a customer buys them from an investment dealer, but not from their bank branch? This situation suggests that it is better to buy mutual funds from a stockbroker. None of the institutions contacted wanted to come forward. “I don’t have the answer to your question. Our field of expertise and our mandate are limited to filings with our member institutions,” said the SADC spokesperson by email.

Unsurprisingly, cryptoassets are not covered.

Each of the registered retirement accounts (RRSP, RRIF, LIF), general accounts (TFSA, cash and margin accounts) and registered education savings plans (RESP) are guaranteed up to $1 million. Which can mean $3 million in coverage for the customer who has those three accounts.

“The guarantee does not protect against the insolvency of the final product in which one invests. It protects the insolvency of the broker who is the transmission belt,” explains Antoine Chaume.

“We’re not talking about a loss of market value,” he says. We are talking about the insolvency of the firm with which we are working. »

Am I insured for my GICs? Sometimes yes, sometimes no.

The situation is reversed here: GICs are not insured when you buy them from your stockbroker with whom you have an account. Nor for online brokerage accounts.

“Disnat and Market Q are not SADC members. With regard to the financial products offered on Disnat or Market Q, only GICs issued by member institutions would benefit from the protection of the SADC”, indicates Mathieu Larocque, of the SADC.

GICs are protected up to $100,000 when purchased at Desjardins caisses in Quebec and the Fédération des caisses Desjardins du Québec, or at the 86 member institutions of the SADC, whether banks, corporations trust and loan companies and federal credit unions.

The GIC is a product that can be held in an RRSP, a TFSA and an RESP, among others.

“This means that a depositor can enjoy protection well over $100,000 with a single institution, and can further increase their protection by placing insurable deposits with any other member institution.” , specifies by email Mathieu Larocque, of the SADC.

“Thus, a depositor holding a GIC of $100,000 in a basic savings account and a balance of $100,000 in an RRSP would be insured up to $200,000. However, if a depositor holds two $100,000 GICs – from the same member institution – in an RRSP, they would be insured up to $100,000 since both types of deposits belong to the same category and are at the same institution” , explains by email Mathieu Larocque.

“In this example, the individual could increase their level of protection to $200,000 by placing the second $100,000 GIC at another member institution,” he says.

A consumer could therefore hold 10 GICs of $100,000 in 10 different institutions and have coverage of $1 million.

Since this Saturday 1^er April, deposits in the tax-free savings account for the purchase of a first home (TFSAP) also benefit from a separate protection of up to $100,000.

In the event of bankruptcy, will I receive a check? Not quite.

If an institution under its jurisdiction goes bankrupt, the AMF will reimburse the protected deposits, it writes on its site, within seven working days of the bankruptcy.

However, the AMF requires Québec institutions to adopt a recovery plan in view of a possible major crisis and this plan contains, among other things, the strategies that the institutions would implement to continue their activities and remain viable, if applicable, inform the AMF by email.

“The reimbursement of insured deposits is only one of the options available to us,” indicates the SADC, which is financed by the premiums paid by its member institutions. In the event of the bankruptcy of an institution, CDIC has recourse to its investment portfolio and its borrowing power.

SADC can also facilitate a transaction with another financial institution, set up a bridge bank or provide financial assistance.

In such scenarios, the member institution would continue to operate and depositors would continue to have access to their savings.

“Since 1967, there have been 43 bankruptcies of financial institutions in Canada,” recalls Antoine Chaume. No customer lost money. Most of the time, the “buyer” of the activities compensates for the capital involved.