Global Risk Institute calls for CDIC deposit insurance overhaul
Global Risk Institute calls for CDIC deposit insurance overhaul | Insurance Business Canada
Insurance News
Global Risk Institute calls for CDIC deposit insurance overhaul
CEO cites the need for an updated approach
Insurance News
By
Terry Gangcuangco
The Global Risk Institute (GRI) has called for a significant overhaul of Canada’s deposit insurance system to better meet the evolving needs of individuals and small businesses.
In a new report, the Canada-based institute said the current model, rooted in 1960s principles, fails to accommodate the financial realities and risks of today’s economy.
With Canada’s GDP (gross domestic product) having doubled to US$2.1 trillion since 2005 and the TSX (Toronto Stock Exchange) index seeing a 72% increase, the GRI highlights a stark contrast in insurance coverage adjustments between Canada and its international counterparts.
For instance, following the financial crisis, the US elevated its insurance coverage to US$250,000, whereas Canada’s remains at CA$100,000.
The GRI suggested that the Canada Deposit Insurance Corporation (CDIC) must modernize its coverage to align with the growth in income and asset values witnessed over the past decades.
Advocating for an enhanced system, GRI president and chief executive Sonia Baxendale said: “An updated approach is needed to bolster the system’s robustness against current and evolving risks. Our report provides recommendations to meet those goals while retaining the public’s confidence in the system.”
Among the suggested reforms are elevating the basic insurance coverage to CA$250,000 per account, introducing voluntary coverage options up to CA$500,000 for personal accounts and CA$5,000,000 for business accounts, and allowing for the possibility of unlimited excess coverage as determined by insurance providers.
The GRI also pointed out the impact of technological advancements and digital technologies, noting that these have altered the landscape of financial transactions, as evidenced by last year’s Silicon Valley Bank deposit run.
Gerard McDonald, managing director and research head at the GRI, said: “Driven by technological change, the operating environment for financial institutions has changed. Looking to the future, we anticipate further shocks from climate change, demographic and geopolitical shifts, and advances in AI (artificial intelligence) and other technologies.
“The deposit insurance system designed to protect small, less sophisticated depositors over 50 years ago needs to be reformed.”
What do you think about this story? Share your thoughts in the comments below.
Related Stories
Keep up with the latest news and events
Join our mailing list, it’s free!
