On September 12, 2016, the Canada Deposit Insurance Corporation (CDIC) published for comment a consultation paper (Consultation Paper) proposing amendments to modernize CDIC’s Deposit Insurance Information By-law (By-law), which governs how the CDIC member financial institutions are required to inform Canadians about deposit protection.
This consultation is in addition to the consultation paper titled Deposit Insurance Review that was published by Canada’s Department of Finance (Finance Canada) on September 16, 2016 (see our September 2016 Blakes Bulletin: Deposit Insurance Review: Improving the Current Framework) to solicit feedback on a number of specific proposals to improve the deposit insurance framework. Like Finance Canada’s consultation paper, this Consultation Paper seeks feedback on a number of specific proposals, although notably neither consultation paper references the reforms proposed by the other.
The By-law currently requires members to prominently display CDIC signage at their place of business, provide CDIC brochures in branches, and post a CDIC membership notice on their websites. The last comprehensive review of the By-law dates back to 2006 and the amendments proposed in this Consultation Paper aim to modernize the By-law and improve the clarity, usefulness, and timeliness of information provided by CDIC members to depositors through all banking platforms, including electronic banking.
The proposed changes can be summarized into two themes:
- Provide clear, simple and not misleading information to depositors. Proposals include requiring members to provide depositors with the CDIC brochure (as opposed to simply making it available) prior to entering into a deposit agreement, and updates to the CDIC membership sign. CDIC is also soliciting feedback in relation to proposals regarding the use of trade names by members, and negative and positive representations about deposit product eligibility.
- Ensure all depositors receive useful information on deposit insurance at the appropriate time, prominently displayed across all distribution channels. Proposals include: updates to make the By-law technology neutral; and updates to the display requirements for the CDIC membership sign and brochure to ensure appropriate information is provided to depositors, irrespective of the distribution channel. CDIC is also soliciting feedback on proposals in relation to how member institutions can better ensure their clients are appropriately informed about CDIC deposit insurance protection when seeking out members’ eligible deposit products through financial advisers or deposit brokers.
Careful consideration should be given to the proposals in this Consultation Paper to determine whether they will be workable for all industry participants, products and distribution channels.
The consultation period runs until October 28, 2016.
The CDIC notes that, following this consolation process, further consultation will be undertaken through pre-publication of the amending By-law in the Canada Gazette. The CDIC anticipates that the amending By-law will be in force in June 2017 and that it will provide for a six-month transition period prior to the amendments becoming effective.