Skip to main content

Some of the best rates on savings are available from online banks operated by credit unions based in Manitoba, not banks.

That’s significant if the economic turmoil caused by the pandemic has you concerned about the safety of your deposits. Bank deposits are protected by Canada Deposit Insurance Corp. (CDIC), which has the backing of the federal government. Credit unions have deposit insurance through provincial plans that may or may not have government backing.

Manitoba is worth zeroing in on because the province is home to credit unions that have set up online banks offering very competitive rates on savings accounts and guaranteed investment certificates. Included in this group are Achieva Financial, Hubert Financial, MAXA Financial and Outlook Financial. As of Monday, each was offering 2 per cent on savings, much higher than the big banks.

Deposit insurance for Manitoba credit unions and their online banking divisions is covered through the Deposit Guarantee Corp. of Manitoba, which provides unlimited coverage of all deposits at credit unions in the province. Customers are protected no matter which province they live in. “We have a very strong, robust financial system at credit unions in Manitoba, and we’re quite proud of it,” said Vernon MacNeill, chief executive at DGCM.

DGCM is not part of the Manitoba government, which in turn is not subject to a legislative requirement to guarantee deposits at provincial credit unions. But Mr. MacNeill said DGCM has the power to request government assistance in covering a member insolvency. “We expect the government would definitely look favourably on that,” he said.

DGCM’s annual report says it had assets of $367.3-million as of Dec. 31 that were mostly invested in government bonds with maturities of one to five years. A small portion is held in stocks for long-term growth. It’s important to remember that a troubled credit union would likely have assets to sell off, which can limit the actual amount of assistance required from the reserve fund.

Mr. MacNeill said the reserve fund is only one aspect of how depositors are protected. Manitoba credit unions are required to meet standards for financial solidity that are similar to those applied to banks by the federal Office of the Superintendent of Financial Institutions. DCGM also has the ability to take proactive steps, such as arranging a merger of a troubled credit union with a healthy entity.

According to Mr. MacNeill, Manitoba credit unions run less risky businesses than the big banks because lending to volatile sectors such as energy, tourism and airlines is minimal. He added that Manitoba’s economy is well-diversified and not subject to boom-bust cycles.

There is no particular reason to worry about the safety of deposits at Manitoba credit unions right now. But if you are a worrier, CDIC’s government-backed coverage of $100,000 in principal and interest in eligible accounts is as close to anxiety-free as you’re going to get.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.