It's an important question. Let me begin by stating the obvious, but it's important to state the obvious. Financial institutions in Canada that are covered by deposit insurance—CDIC deposit insurance—are numerous, and that deposit insurance has the full faith and credit of the Canadian government. If anyone has any concerns about whether their institution is covered, www.CDIC.ca or www.SADC.ca is the way to check your institution. It's covered to $100,000 by account and institution. There are several categories of accounts—individual, joint, TFSA, and RRSP are separate accounts, and trust accounts as well. There are quite comprehensive and considerable insured deposits in Canada. And for the vast majority of Canadians, they are covered by CDIC insurance, so this issue instantly goes away there.
On the second point, the situation in Cyprus, what happened there was that only the banks themselves were funded by deposits. That's number one. Number two, the Government of Cyprus did not have the resources and the backing of their deposit insurance scheme that the Canadian government, a triple-A government, does have. The uninsured deposits in Cyprus were ultimately “bailed in”, so uninsured depositors in Cyprus were taking losses. The Government of Canada, through the Minister of Finance's spokesperson, has said that all consumer deposits will not be subject to a bail-in regime. I will leave it to the government to come back with more details on the regime in due course. They signalled their intent to go in this direction; they can provide more details.
I'll make a general comment, from a global perspective, if I may, about the work that Mr. Macklem and I do through the FSB. In general, in advanced economies, banks are funded by insured deposits that are rock solid, as I just described. Then there are some uninsured deposits, and different countries can make different decisions about whether there is “deposit or preference” for those. To make it simple, they have unsecured debt, and then they have equity. The equity, if a bank gets in trouble, is obviously the first call. In a number of jurisdictions, that unsecured debt would be bailed in if a bank were really in trouble. It would become an equity holder; it would take losses. Different jurisdictions will do things differently. What's absolutely essential is that there is clarity, in advance, about the creditor hierarchy and what order different classes of funders of banks are bailed in.
It's also helpful to go back to the purpose behind all of this, and it's two-fold. First, it's to reduce systemic risk in the system. It ensures that there's clarity, as I say, and that there are adequate resources. If a bank makes mistakes, has big losses, gets itself into trouble, the private shareholders and the private creditors—the debt holders, not the depositors—bear the brunt of those losses, and obviously the management as well.
The second thing is that, in doing that, it brings discipline into the system. It brings capitalism to the heart of capitalism, if you will, in the banking system. It doesn't rely on the taxpayer to support the institution, as we have seen time and time again in the wake of the financial crisis.