Are your deposits at Canadian financial institutions safe? + MORE Jun 10th

They are held at three different banks at the moment and are largely in GICs and high-interest savings accounts.

We are aware that up to $100,000 is insured through the CDIC (Canada Deposit Insurance Corporation) at each bank, but at the one bank where we have our TFSAs, we are over that amount.

What would you suggest we should do?

—Mrs. B

The risks of exceeding deposit limits at Canadian banks

Silicon Valley Bank (SVB) failed in March and was taken over by the U.S. Federal Deposit Insurance Corporation. SVB’s customers were primarily venture-backed tech startups, but the bank was hardly a small player. It was the 16th-largest bank at the time it failed, and its failure was the second largest in U.S. history.

The two primary issues with SVB were questionable risk management and high uninsured deposits. The bank did not manage its interest rate risk well, having a lot of short-term deposits invested in long-term bonds…

Are GICs a good idea for retirement?

As you noted, Rodeen, guaranteed investment certificate (GIC) rates have risen to levels we have not seen in over 15 years. There are one- to five-year rates that are between 4% and 5%, and even slightly over 5% if you shop around. You may not get these rates at major banks, where rates may be 1% to 2% lower than that, but credit unions, trust companies and online banks generally offer a healthy premium.

Are GIC rates going up in Canada?

A year ago, GIC rates were just starting to rise but were still less than 3%. The reason they are so much higher now is worth considering. The January 2023 year-over-year inflation rate fell to 5.9%, after rising at a 6.3% rate for 2022…