In a recent study by the Canada Deposit Insurance Corporation (CDIC), researchers found that overall, women are more than 20 per cent less likely than their male counterparts to be aware of federal deposit protection.
The federal Crown corporation says that in Canada, women are at a 50 per cent awareness rate, compared to 71 per cent of men. That awareness drops in adults aged 18 to 34, with women at a 40 per cent awareness rate compared to men, who surveyed at a 62 per cent awareness rate.
“We’ve known that women were trailing men for a little while, but in December we started to peel back the layers and saw that, in fact, women are trailing behind men in every demographic and in every region that we measure,” says Kristine Henry, CDIC’s manager of public awareness communications.
In the coming months, the corporation will dig further into why there is such a large discrepancy in deposit insurance awareness. When Canadians know their money is protected, they are less likely to make rash decisions if they hear about their bank potentially being in trouble or an economic downturn.
In the meantime, in partnership with the CDIC, we take a look at who is protected by deposit insurance in Canada, and what that means for those looking to take control of their financial future.
Deposit insurance: a free benefit of banking in Canada
In Canada, any person who makes an eligible deposit at one of the more than 80 CDIC member institutions in the country is automatically protected. Qualifying deposits fall into several separately insured categories, and include money in savings and chequing accounts, guaranteed investment certificates (GICs) and other term deposits, and foreign currency accounts.
In the case of a bank failure, a customer is protected for up to $100,000 in each of the separately insured categories, including the principal deposit as well as any accrued interest.
Federal deposit protection does not extend to accounts that qualify as investments. So any mutual funds, stocks, bonds, exchange traded funds (ETFs) and cryptocurrencies are not eligible.
It’s a system that has been in place since 1967, when the CDIC was established through an act of Parliament. Fast forward to 2021, and there is a common misconception that banks in Canada cannot fail, says Brad Evenson, CDIC’s director of communications and public affairs. In reality, the country has experienced more than 40 financial institution failures over the years.
“A bank hasn’t failed in Canada for 25 years, so people can be forgiven for thinking that banks don’t fail,” Evenson says. “Canada is not immune. We’ve had 43 members that have failed, and that affected some two million Canadians and $26 billion of their money. But nobody lost a single dollar of deposits that were protected by the CDIC.”
Taking control of your financial future
The CDIC, which is funded through member institution fees, is an important player in maintaining stability in the Canadian financial markets.
“There are a lot of people who are really committed to making sure this thing works,” Evenson says. “We are constantly doing simulations, testing of our equipment, you name it, to make sure that we are as ready as we possibly can be if something goes wrong. There’s almost no small detail that doesn’t get thought up in these simulations.”
To drive home the message that an institution is protected by the CDIC, the corporation’s lock logo is displayed on member banks’ doors and kiosks, as well as on their mobile banking apps and websites. Under the Deposit Insurance Information Bylaw, banks are also required to communicate information about federal deposit insurance to clients when they sign up.
“We’ve done considerable research that shows when Canadians don’t know that deposit protection exists, if they start to get uncomfortable about the economic environment or about their financial institution, they’re more likely to get nervous and withdraw all their money,” Henry says.
She adds that if enough people did withdraw their money over solvency concerns, it could lead to the failure of an institution. When Canadians are aware that federal deposit protection exists, not only does it promote overall stability in the system, it also empowers citizens and gives them a sense of security when depositing their money, she says. That’s why the CDIC is trying to make sure more people know about what it does.
“Our target for our public awareness program is between 60 and 65 per cent for all Canadians, and currently we’re at 61 per cent for all Canadians,” Henry adds. “Now we would like to see awareness with women increase to the 60 to 65 per cent range as well.”
For more information on deposit protection and how it works, visit the CDIC website.