OTTAWA — The federal government is mandating that Canadian banks overhaul how they communicate deposit insurance to customers, requiring prominent Canada Deposit Insurance Corporation (CDIC) warnings in all television, print, and digital advertising starting Dec. 1.
New advertising requirements for banks
According to amendments to the deposit insurance information bylaw published over the weekend in the Canada Gazette, banks must prominently feature CDIC warnings in all advertising. The move aims to significantly improve depositor awareness and understanding of the deposit insurance framework.
“Greater awareness and understanding allow depositors to make informed financial decisions and enhance confidence in the deposit insurance framework and trust in the financial system,” reads an excerpt from a backgrounder published alongside the amendments. “Depositors who are confident their money is protected are less likely to run in times of stress, making awareness a key contributor to financial stability.”
Mandatory staff training on CDIC
Part of the changes include mandatory training for client-facing bank staff about their employer’s membership in CDIC and how the program works. “Research shows that depositors look to their financial institutions and advisors first as a trusted source of information on their deposit protection,” the amendments read. “This training is intended to improve member staff’s ability to provide depositors with relevant and accurate information about CDIC coverage.”
The CDIC is a federal Crown corporation that protects Canadians’ savings by insuring eligible deposits up to $100,000 at member banks and financial institutions. The changes come as part of regular reviews of existing regulations aimed to “materially improve depositor awareness and member-to-depositor disclosure about CDIC and the deposit insurance framework.”
Rarity of bank failures in Canada
Bank failures in Canada are rare. The Calgary-based Security Home Mortgage Corporation collapsed in 1996 due to bad investments and lack of capital during Canada’s mid-1990s real estate crash. The last time a domestic chartered Canadian bank failed was in 1985, with the demise of both the Northland Bank and Canadian Commercial Bank. In both cases, deposits were protected thanks to the CDIC.
Banks will also be given new rules on how CDIC membership is physically advertised in bank branches, simplification on how banks can fulfill these requirements, and must disclose their CDIC membership in television, print, and online advertising.
