The cost of insolvency of an FI to CDIC is offset in part by the deposit insurance premiums paid by the bank.

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Deposit insurance premiums are paid by FIs to CDIC to insure their deposits. In case of insolvency, CDIC provides insurance coverage to depositors up to a certain limit. The cost of insurance is borne by the bank in the form of premiums. Therefore, the cost of insolvency is partially offset by the deposit insurance premiums paid by the bank to CDIC.

The Cost of Insolvency of an FI to CDIC Is