Page 7 - CDIC Company Profile Ebook

Policy Objectives

Protect and Maintain Develop sound
financial businesses

The public policy objectives of the CDIC in providing deposit insurance are
to protect the rights and interests of depositors in financial institutions, to
maintain credit order, and to enhance sound development of financial businesses.
The meaning of these objectives is described below :

1. Protection of the rights and interests of depositors in financial
institutions

The very difference between a deposit-taking financial institution and
a general industrial or commercial enterprise lies primarily in the fact that
its operating capital comes from the depositing public, so that should its
operations fail not only would its shareholders lose their investment and
its employees lose their jobs but, more importantly, depositors would
suffer losses as well and a crisis of confidence might even ensue. The CDIC
has clearly established the top policy objective of protecting the rights
and interests of depositors in financial institutions so that the public may
save their money with peace of mind.
2. Maintenance of credit order and enhancement of sound
development of financial businesses

Financial institutions play the role of an intermediary in adjusting capital
supply and demand, as well as the role of an important driving force in
economic development. Once they come to mismanagement, not only will
they encounter difficulty in their own ability to make payments but might
even bring on systemic risk and cause damage to economic operation.
Maintenance of credit order and enhancement of sound development
of financial businesses are, therefore, set as policy objectives in order
to maintain the normal operation of economic activities and financial
transactions, and to guide the safe and healthy operations of financial
institutions.

Background of Establishment & Policy Objectives >>>> 07