CDIC Differential Premiums By-law

Summary#

The government agency Canada Deposit Insurance Corporation (CDIC) has published a proposed Canada Deposit Insurance Corporation Differential Premiums By-law that would change how CDIC charges annual deposit-insurance fees to its member banks and other deposit-taking institutions. The notice was published on January 18, 2025 and invites comments for 30 days; it would move to a two‑times‑a‑year rating system and change the scorecard that sets premium rates.

What it does#

• Increases the number of premium categories from 4 to 5 and sets new percentage rates for each category:
  • Premium Category 1: total score ≥ 90 → 22.5%
  • Premium Category 2: total score ≥ 80 and < 90 → 27%
  • Premium Category 3: total score ≥ 65 and < 80 → 40.5%
  • Premium Category 4: total score ≥ 50 and < 65 → 72.9%
  • Premium Category 5: total score < 50 → 100%
• Moves from an annual classification to a semi‑annual classification:
  • CDIC would classify members on January 15 (using fall data) and July 15 (using spring data).
  • Members must submit a fall return by October 31 and a spring return by April 30 each year.
• Changes how the annual premium is calculated:
  • The annual premium would be based on the average of the two premium rates (January and July) using the formula A × B × (C + D) ÷ 2, where A is 1/3 of 1%, B is the member’s volume of insured deposits as of April 30 of the previous premium year, and C and D are the percentage rates tied to the January and July categories.
  • The minimum annual premium remains $5,000.
• Adds rules for new members and specific cases:
  • New members (operating less than two full premium years) would generally start in Premium Category 2, unless OSFI assigns a stage-of-intervention (then Category 3) or other exceptions apply.
  • If a required fall or spring return is late, CDIC treats the missing period using the Premium Category 5 rate (the highest rate).
• Updates the scoring system used to place institutions in categories:
  • Introduces a new Risk and Resolvability Score (RRS) assigned by CDIC to replace CDIC’s previous qualitative component.
  • Changes the examiner’s rating scale from 5 points to an 8‑point scale and reduces its maximum score weight.
  • Revises quantitative metrics: removes some overlapping metrics and adds new liquidity and funding measures (e.g., Liquidity Coverage Ratio, Net Stable Funding Ratio, and new ratios for non‑D‑SIB institutions).
• Timing and implementation notes in the draft:
  • The draft text says the By‑law would come into force on April 29, 2026 (the Regulatory Impact Analysis Statement also contains a different earlier date of April 1, 2026, so the source is inconsistent about the exact in‑force date).
  • CDIC says the first fall return under the new system must be submitted by October 31, 2026 and the first premium year calculated under the semi‑annual approach would be the year starting May 1, 2027.

Who's affected#

• CDIC member institutions — mainly banks and other federally or provincially regulated deposit‑taking institutions that pay deposit‑insurance premiums.
• Domestic systemically important banks (D‑SIBs) — the draft includes specific metrics and scoring for D‑SIBs.
• Smaller and mid‑sized deposit‑taking institutions — the scorecard adds separate criteria for different size categories.
• Indirectly, depositors and customers — because changes in institutions’ insurance costs can influence business decisions and potentially fees, though the draft doesn’t say premiums will be passed on to customers.
• If unclear: the draft does not list every affected group; for example, it does not name specific banks or credit unions that will move between categories ahead of time.

Why it matters#

• The proposal aims to make CDIC’s premium system more responsive to actual risk. That means institutions judged riskier could pay more, while safer ones could pay less.
• Changing to twice‑a‑year ratings means CDIC can react faster to changes in a member’s financial condition. That could encourage institutions to fix problems sooner.
• The new reporting schedule and new scorecard metrics add more data and deadlines (fall and spring returns). Missing or late returns can trigger the highest premium rate, so there is a practical compliance risk for institutions.
• For the public: this is mainly a change to how deposit‑insurance fees are set. It is not a direct change to deposit insurance coverage levels. The proposed By‑law is open for comment (see the 30‑day comment window after January 18, 2025).