Suppose Paul has the following deposits with ABC Bank, a member of CDIC. Account

Question

Suppose Paul has the following deposits with ABC Bank, a member of CDIC.

Account type

Funds
(in Canadian dollars except where noted)

Chequing account

$10,000

Savings account

$80,000

USD term deposit

$50,000

3-year GIC

$100,000

7-year GIC

$80,000

a. In the event of bank failure, how much of Paul’s deposits is insured by the CDIC?

b. If the CDIC decides ABC Bank is too big to fail, what will happen?
Of the payoff method and purchase-and-assumption method, which one will CDIC use? Why?

c. Why might the CDIC declare ABC bank too big to fail?

Account type

Funds
(in Canadian dollars except where noted)

Chequing account

$10,000

Savings account

$80,000

USD term deposit

$50,000

3-year GIC

$100,000

7-year GIC

$80,000

Explanation / Answer

(a) The CDIC gives protection up to $100,000 to every contributor, so that would be the sum that Paul would have guaranteed by the CDIC.

(b) In the event that the CDIC shut the bank they would utilize the result technique and not the buy and-supposition strategy. Despite the fact that this would even now just assurance as far as possible and anything over that cutoff would endure as misfortune, this would be the situation if the bank fizzled. Be that as it may, checking the banks movement would be in the contributor's best advantage and haul out and finances in the event that they felt the bank was going out on a limb.

(c) The CDIC would not need that to happen in light of the fact that this would cause a noteworthy monetary disturbance. They would not need investors and leasers to cause misfortunes.

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