CDIC adds fifth premium category

Summary#

This is an amendment to the Canada Deposit Insurance Corporation Differential Premiums By-law made by the Canada Deposit Insurance Corporation (CDIC). It adds a fifth premium category, changes some scoring and reporting rules for small banks, and aligns the by-law with new Office of the Superintendent of Financial Institutions (OSFI) reporting rules. The changes take effect on April 1, 2025.

What it does#

• Adds a definition and special rules for small banks called Category III SMSB (small and medium‑sized deposit‑taking institutions). Category III SMSBs do not have to provide some reporting items and get a reduced quantitative score that is scaled up by one and one-third when calculating their premium category.
• Expands the premium classification system from four categories to five. The new score ranges and percentage rates (applied to the statutory maximum premium) are:
  • Category 1: total score ≥ 90 → 22.5%
  • Category 2: total score ≥ 80 and < 90 → 27%
  • Category 3: total score ≥ 65 and < 80 → 40.5%
  • Category 4: total score ≥ 50 and < 65 → 72.9%
  • Category 5: total score < 50 → 100%
• Changes how some quantitative calculations are done in the reporting form to match OSFI’s Basel Capital Adequacy Reporting updates. Examples:
  • Credit conversion factors for certain undrawn commitments changed to 10% / 25% / 40% (from 0% / 20% / 50%).
  • The Exposure at Default (EAD) formula now uses 1.4 × (replacement cost + potential future credit exposure).
• Tightens classification for non‑compliance with filing rules:
  • Institutions that miss required filings can be put into premium category 5 while late.
  • Institutions not compliant with data requirements for three consecutive years are put into category 5.
• Updates a number of technical reporting line items and scoring tables so CDIC’s by-law matches current OSFI reporting language and forms.
• Effective date: comes into force on April 1, 2025.

Who's affected#

• Directly affected: CDIC member institutions — banks, trust companies, credit unions and other deposit‑taking institutions that are members of CDIC.
• In particular: small institutions that meet the Category III SMSB definition and all member institutions whose premium category may change under the new five‑category system.
• Indirectly affected: depositors and the public only to the extent that member institutions’ costs change because of different premiums. The rule does not say exactly how much any particular institution will pay.

Why it matters#

• The change aims to make deposit insurance premiums fairer by creating more granularity between low‑ and high‑risk institutions. That could reduce cross‑subsidy where lower‑risk firms subsidize higher‑risk ones.
• Smaller banks get reduced reporting burdens and a tailored scoring approach. That can cut compliance work for those institutions.
• Some member institutions will pay more and some will pay less under the new five‑category system. The by‑law update also makes CDIC’s rules match current OSFI reporting formats, which should reduce confusion about what data institutions must supply.