Canada’s bank deposit insurer is reviewing deposit insurance limits to safeguard the country’s financial system, the head of the Bank and Trust Companies Association said on Tuesday, after the trade group called for better coverage.
The group, representing the country’s medium and small banks, wrote to Finance Minister Chrystia Freeland last month urging the Canada Deposit Insurance Corporation (CDIC) to double its coverage to $200,000 per depositor.
Canada has the lowest level of deposit insurance among G7 countries, the letter dated Feb. 7 said.
“The CDIC is reviewing their depositor insurance regime to make sure that it is effective,” said Andrew Moor, chair of the group, in an interview. “They are always trying to make sure that things are relevant.”
CDIC did not immediately respond to a request for comment.
In an email, a spokesperson for Freeland said the government was committed to a “strong deposit insurance framework.”
About 65% of deposits at Canada’s top six banks — Royal Bank of Canada, TD Bank, Bank of Montreal, CIBC, Scotiabank and National Bank of Canada — are uninsured, according to DBRS Morningstar.
In addition, the U.S. subsidiaries of the top six have uninsured deposits ranging between 30% and 70%, DBRS estimates.
Around 25% of deposits are uninsured with the mid and small banks, DBRS said in a report released on Monday.
The recent collapse of regional U.S. lenders such as Silicon Valley Bank and Signature Bank has raised questions about the stability of financial institutions across the world.
Calls have grown for the U.S. Federal Deposit Insurance Corp to offer temporary guarantees for all uninsured U.S. bank deposits in the wake of collapse of several U.S. regional lenders.
Despite Canada’s lower deposit insurance cap, analysts have said the U.S. banking crisis is unlikely to spread to the northern neighbor where banks are better regulated and have ample liquidity. CDIC has some 85 members, while FDIC has more than 4,700 institutions.
“Increased protection limits would send Canadians a strong signal about the stability of the financial system while greatly reducing any concern about the damage a ‘run on the bank’ could have on an institution and its depositors,” the Bank and Trust Companies Association said in the letter.
(Reporting by Divya Rajagopal in Toronto and Steve Scherer in Ottawa; Editing by Richard Chang and Josie Kao)