This is kind of scary!
Check out this story from Truth-Out.org – It Could Happen Here: The Confiscation Scheme Planned for US and UK Depositors
Although I’m not sure what the Canadian Bank Act would have to say about this it is clear that in other developed countries it is possible that a bank failure, or even a liquidity crisis, could result in loses for depositors.
In Canada we have the CDIC (Canadian Deposit Insurance Corporation), which was set up by the Federal Government to underwrite depositors funds up to $100,000 in the event of a banking failure. But they make it very clear on their website that not all deposits are protected, especially in the event of fraud or theft. A case could be made that most, if not all of these large-scale bank failures we’ve seen in the past few years are as a result of some form of fraud by bank managers so strictly speaking, maybe it could happen here.
In my opinion the best thing to do would be to have an emergency fund and investment portfolio diversified over more than one bank and investment firm to ensure that no matter what happens, you don’t end up completely wiped out.