As banks south of the border fall one after another, it is a good time to review what guarantees we have in case if our banks follow suit. I know, “it is different here” and our banks are much more reliable than in the US. But I heard the same “it is different here” with regard to home foreclosures just a month ago, and now foreclosures in BC are exploding, as we can read on the front pages of major local newspapers. I am not predicting mass bank failures in Canada, but this scenario is possible and we need to be prepared.

Canadian Deposit Insurance Corporation (CDIC) insures our bank deposits in case if our bank becomes insolvent. CDIC is a Crown Corporation, which in a nutshell means that it is not formally a part of the government, but the government guarantees its obligations. Not all banks and financial institutions are under the umbrella of CDIC. An institution has to be a CDIC member. Membership fees form the pool of money that will be used to pay the clients of an insolvent member. CDIC covers chequing and savings accounts, term deposits and GICs with an original term to maturity of 5 years or less, money orders, certified cheques, travelers’ cheques and bank drafts issued by CDIC members and accounts that hold realty taxes on mortgaged properties. Other types of accounts may be covered under certain circumstances, but generally are not. Please refer to the CDIC website for details.

If you, for example, have a savings account in a CDIC member chartered bank, you are covered. However, this coverage is not unlimited. CDIC covers only $100,000 per account. And that is where it gets confusing. You can have ten $100,000 accounts in ten banks, and all your money will be protected. If you open ten $100,000 savings accounts in the same bank, you will only have one of them covered. But if you have accounts of different type in the same bank, each of them may be covered separately up to the $100,000 limit.

If you belong to the vast majority of people who don’t have more than $100,000 in a bank, you can relax. Just make sure your bank or institution is a CDIC member. Most of them are. But if you are blessed with wealth, use the old principles of not keeping all the eggs in one basket. Spread your money over a few banks and a few different types of accounts. Getting paranoid about the safety of your money is not a good idea, but making sure reasonable security measures are in place never hurts.

Nikolay Sisan is a Certified Financial Planner and freelance writer in Vancouver.