CDIC Differential Premiums Overhaul

Summary#

The proposed Canada Deposit Insurance Corporation Differential Premiums By-law would change how the Canada Deposit Insurance Corporation (CDIC) sets the annual deposit-insurance premiums that its member institutions pay. The main practical effects are more frequent risk assessments, a move from 4 to 5 premium categories, and new scoring rules that will change some institutions’ premiums up or down.

What it does#

• Replaces the current differential premiums system with a new, more detailed system laid out in the proposed Canada Deposit Insurance Corporation Differential Premiums By-law.
• Increases premium categories from 4 to 5.
• Changes classification of brand-new members:
  • New members (operating as members for less than two full premium years) would generally be placed in Premium Category 2, unless they meet certain exceptions.
  • If the Office of the Superintendent of Financial Institutions (OSFI) assigns a stage of intervention to a new member, that institution would be placed in Premium Category 3.
• Moves member classification from annual to semi-annual, with classifications as of January 15 and July 15 each year.
• Introduces two regular data returns:
  • A fall return due October 31 (data as of the end of the institution’s second quarter).
  • A spring return due April 30 (data as of the end of the institution’s most recent financial year).
  • Revised returns or declarations must be filed by July 2.
• Sets a minimum annual premium of $5,000 and an assessment formula using the average of the two semi‑annual premium rates (A × B × (C + D) ÷ 2), where A is 1/3 of 1% of insured deposits and B is volume of insured deposits as of April 30 in the previous premium year.
• Introduces a stricter treatment for late or missing returns: missing returns can result in being classed in Premium Category 5 (highest rate) for the period in question.
• Changes the scorecard used to assign premium categories:
  • Removes some metrics (like Stress‑Tested Net Income and Efficiency Ratio) and adds new liquidity and funding measures.
  • Adds separate quantitative criteria for domestic systemically important banks (D‑SIBs) and for other categories of small and medium deposit‑taking institutions (SMSBs).
  • Replaces the existing CDIC qualitative component with a new Risk and Resolvability Score (RRS) that can add up to 15 points.
  • Revises the examiner’s rating scale from 5 points to an 8-point scale with a maximum of 25 points.
• Key schedule figures for premium rates (by total score bands) are:
  • 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%
• Timing and implementation in the proposal:
  • The by‑law text says it would come into force on April 29, 2026 (with one clause on July 16, 2026).
  • The first fall return under the new rules would be due October 31, 2026 and the first premium year using the semi‑annual averages would begin May 1, 2027.
  • Note: the document also contains an earlier reference to an effective date of April 1, 2025; the text is inconsistent on that point.

Who's affected#

• All member institutions of the Canada Deposit Insurance Corporation — that is, federally and provincially regulated deposit‑taking institutions that pay CDIC premiums.
• In particular:
  • Domestic systemically important banks (D‑SIBs) — they have some separate quantitative tests (e.g., Liquidity Coverage Ratio and Net Stable Funding Ratio).
  • Small and medium‑sized deposit‑taking institutions (SMSBs), which are split into categories with different tests.
  • New member institutions (those with less than two full premium years as members).
  • Institutions that fail to file returns on time (they face automatic categorization at the highest premium rate for the period).
• Indirectly, depositors and the broader financial system could notice effects if institutions change behaviour in response to the new rules (the document does not say deposit insurance coverage amounts change).
• The proposal says small businesses would not be directly affected.

Why it matters#

• The changes aim to make premium charges more closely reflect each institution’s current financial and resolution risk. That means some banks or credit unions could pay higher premiums, while others could pay less.
• Semi‑annual scoring and earlier penalties for late data are likely to push institutions to fix problems faster and to keep reporting up to date.
• New liquidity and funding measures (and a stronger qualitative RRS) make the system more sensitive to problems that could cause failures, which is meant to protect depositors and reduce costs to the CDIC membership overall.
• For member institutions, this implies more frequent data submissions and possibly changes to capital, liquidity, or funding practices to improve their scores and lower premiums.
• The proposal is at the consultation stage: it was published on January 18, 2025, and interested parties had 30 days to comment (the public notice gives a 30‑day comment period).