The federal government is proposing the first major overhaul of deposit insurance rules in years, including a higher coverage limit for personal accounts and new protections for businesses and large one-time deposits. Blacklock's Reporter says the changes come as uninsured deposits in Canada far outpace those protected by insurance.In a consultation paper released by the finance department, officials said the current $100,000 deposit insurance cap — unchanged since 2005 — should be raised to $150,000. “There have been significant changes in the economic, social and technological environment since the last review,” the paper stated..The proposal also recommends, for the first time, coverage for business accounts up to $500,000, and up to $1 million in “life event” coverage for individuals receiving large, lump-sum deposits from home sales, inheritances, legal settlements, or divorces.The department noted that Canada’s current limit is among the lowest in the G7. While Japan offers coverage equivalent to $95,220, the United Kingdom insures up to $157,547, and the United States protects deposits up to $349,225. In Canada, $100,000 has been the limit for nearly two decades, even though inflation and rising home prices have significantly increased the average value of individual bank accounts.According to the consultation paper, the total value of uninsured eligible deposits has grown sharply and now far exceeds insured amounts. .Canada Deposit Insurance Corporation members reported $1.2 trillion in insured deposits compared to $2.2 trillion in uninsured deposits. “The proportion of deposits that are insured as a percentage of total eligible deposits across the Canada Deposit Insurance Corporation’s membership has declined from 58% to 36% in 2024, a trend that accelerated during the pandemic,” the department said.Some legislators have previously recommended indexing the insurance cap to inflation. “It should be $121,500 with inflation,” then-Senator Howard Wetston said during a 2018 Senate banking committee hearing. “So why isn’t it $125,000?”.Across the provinces, coverage for credit union deposits varies. Québec offers $100,000 in protection, while Ontario and several Atlantic provinces guarantee up to $250,000. In British Columbia, Alberta, Saskatchewan and Manitoba, coverage is unlimited.Although no Canadian bank has failed since 1985, the finance department’s review notes past failures came at a high cost. The collapse of Alberta’s Canadian Commercial Bank and Northland Bank in 1985 cost the insurance fund $608 million, while the failure of 17 trust and mortgage companies between 1983 and 1987 left it with a $1.25 billion deficit.
