Safest Banks: Is Canada in the Top 10?

We generally believe, living in Canada, that we have the safest banking system in the world. Certainly we’re in the top 10, right?

It depends on who does the ranking, it seems. Global Finance Magazine, for example, did its 23rd annual ranking in September of 2014.  Not one of the Canadian banks made the Top 10; but TD Bank Group did make spot #11 as the highest ranked Canadian bank in 2014 and continued that ranking in the first quarter of 2015, by the same organization.

How safe is the money in your Canadian bank accounts? According to Wikipedia, there have been 43 bank failures since 1967, and none since 1996.  So the answer is, very safe.

In addition, the Canada Deposit Insurance Corporation (CDIC) was established in 1967 to guarantee investments up to $100,000 in savings, chequing and Guaranteed Investment Certificates (GICs) as well as term accounts with maturities of five or fewer years. Also covered are money orders, bank drafts and travellers’ cheques, provided your bank or financial institution is a member of CDIC.

What deposits are not guaranteed by CDIC? Notably, credit unions and caisse populaires are not covered by CIDC, as they are provincially backed; nor are deposits in foreign currencies. Bonds, treasury bills, mutual funds and individual stocks are not insured, whether held in TFSAs, registered or non-registered accounts; nor are term deposits of more than five years.

The institution you deposit money to must be a member of CIDC, and a list can be found on their website:  http://www.cdic.ca/Pages/Members.aspx

Is $100,000 the maximum you can be covered for, no matter how much you have on deposit with one bank? The $100,000 of insurance coverage applies per account you hold at an institution. So, you can hold accounts in your individual name, jointly with someone else, in trust, in a registered account or in a separate account holding money to pay realty taxes, for example, and each one will be covered up to $100,000. The 2014 Federal Budget announced a comprehensive review of the deposit insurance framework to ensure it is adequate for Canadian savers; however, the 2015 budget made no further mention of this.

How probable is a bank failure in Canada? It’s not very likely. While Canada did not make the Top 10 list in Global Competitiveness, the World Economic Forum has ranked Canadian banks as the most sound in the world for the seventh consecutive year in its Global Competitiveness Report 2014-2015. It’s something to be cherished by investors in an uncertain world.

Evelyn Jacks is President of Knowledge Bureau, a national educational institute focused on excellence in financial education. Follow her on twitter @evelynjacks.