The Canada Deposit Insurance Corporation (CDIC) is essential for maintaining the stability of the Canadian financial system. It achieves this by providing deposit insurance and overseeing its member institutions. One of its key tools is the Canada Deposit Insurance Corporation Prescribed Practices Premium Surcharge By-law (the Premium Surcharge By-law). This by-law outlines specific practices that result in additional financial costs for institutions that do not meet certain regulatory requirements. Established on January 26, 1994, the by-law has been amended multiple times.

As a condition of membership, each CDIC member institution is required to pay annual premiums on insured deposits. These premiums contribute to a reserve fund that CDIC uses to resolve the failure of any member institution.

Each year, CDIC classifies member institutions into one of four premium categories based on risk, as outlined in the Differential Premiums By-law. This by-law also incorporates penalties for non-compliance with the Data and System Requirements By-law and the Resolution Planning By-law.

On March 2, 2022, CDIC introduced the Canada Deposit Insurance Corporation Eligible Financial Contracts By-law (EFC By-law). This regulation requires member institutions to update their eligible financial contracts (EFCs) to align with the stay provisions in the CDIC Act. These provisions are designed to manage the resolution process of failing institutions in an orderly manner, preventing a surge of claims or withdrawals that could destabilize the financial system during a crisis.

To reinforce compliance with the EFC By-law, CDIC has proposed amending the Premium Surcharge By-law. The amendment aims to make non-compliance with the EFC By-law a reason for imposing a premium surcharge. This means that member institutions failing to adhere to the EFC By-law could face additional costs.

The amount of the premium surcharge imposed by CDIC is not fixed. Instead, it varies based on factors such as the extent of non-compliance and the overall risk profile of the institution.

Canada (SOR/2023-37), March 15, 2023