Is Your Money At Risk if Your Bank Goes for Broke?

Posted on July 18, 2008 at 6:11 pm
Filed Under Financial Markets, Financial Planning

It’s not news for most that some banks in the US are running into severe financial difficulties. What may be news however is that the CIBC may be on the brink of financial insolvency themselves.

Earlier this week, Dundee Capital Markets released a report explaining how CIBC could actually become insolvent. After all, many Canadians are taking their money out of their banks and putting it “under the mattress” where at least they know they won’t lose any money outside of their “inflation losses”. John Aitken is an Analyst with Dundee Securities and he says “Financial services consolidation is closer than most investors would allow, and significantly closer than it was even three months ago”. It’s happened before with financial institutions, in fact 43 times before since 1969.

Your Take-Away: The question most are asking then is what happens to my money if my bank happened to go under? In Canada, we are lucky to have the Canadian Deposit Insurance Corporation (CDIC) who will protect deposits up to $100,000 per depositor with each institution. In other words, if you have less then $100,000 with a bank that goes insolvent, you are guaranteed to get your money back. If you have more then that magic number, you will max out and lose any of the excess above and beyond the protection you are provided.

That said, it may be a bit early to start moving money from one institution to ten others in order to be free to claim with CDIC in the event of an insolvency, but I would suggest not going into this time in the market blindly. Talk to your Advisor, Bank Manager or even Accountant and determine if this is something you should consider. It’s a lot of work, and most likely for nothing considering that most realize that Canadian Financial Institutions are much further ahead then the US, but if nothing else, it doesn’t hurt to know your options.

Until next time, have a Wonderful Weekend!

Chris

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