CDIC Act Phase II Delayed to 2022

Summary#

This order — Order Amending paragraph (a) of Order in Council P.C. 2019-222 (SI/2020-36) — moves the effective date for part of the changes to the Canada Deposit Insurance Corporation Act from April 30, 2021 to April 30, 2022. Other changes in the same package keep their original effective date of April 30, 2020.

What it does#

• Delays the start date for certain deposit-insurance changes (the “Phase II” items) so they now take effect on April 30, 2022 instead of April 30, 2021.
• Keeps the earlier “Phase I” changes in force as of April 30, 2020.
• The delayed Phase II items cover:
  • treating registered savings plans (like RESPs and RDSPs) the same way for deposit insurance so each registered product category gets the same coverage;
  • removing a separate coverage category for mortgage tax accounts (funds will still be covered under other categories if they meet the rules);
  • clarifying and improving rules for trust deposit accounts so payouts can be faster and record-keeping clearer.
• The Phase I items already effective include:
  • removing travellers’ cheques as an insured deposit (they are no longer issued by member institutions);
  • removing the five-year term limit on GICs;
  • extending coverage to foreign-currency deposits.
• The order was made at the request of member institutions and financial industry groups to give firms more time because of the impacts of the COVID-19 pandemic.

Who's affected#

• Canada Deposit Insurance Corporation (CDIC) members — banks, federal trust and loan companies, federal credit unions, and other deposit-taking institutions — will need to implement the changes but get more time for the Phase II items.
• People with savings protected by CDIC — all depositors in Canada — are affected indirectly because the rules about what types of deposits are covered change. Deposit insurance in Canada covers eligible deposits up to $100,000 per insured category.
• Consumers with registered plans such as RESPs and RDSPs, and people with funds in mortgage tax accounts or trust accounts, are the ones whose coverage rules are being changed or clarified.
• The federal government says the delay has no direct financial cost to the government.

Why it matters#

• The delay gives banks and other deposit-taking institutions more time to update systems and processes while they focus on pandemic-related challenges. That reduces operational strain during a crisis.
• When the Phase II rules do take effect on April 30, 2022, some deposit types (registered plans, trust accounts, mortgage tax accounts) will be treated differently for insurance purposes. That can change how much protection people have in specific situations and how quickly they would get paid if an institution fails.
• The overall aim of these changes is to modernize deposit insurance, make coverage easier to understand, and strengthen financial stability. The order simply shifts the timing for part of that modernization.