Doubling up

The notice in the newspaper legal section was easy to miss, just one column wide by 10 cm. high. In the ad, Manulife Bank announced an application to the Minister of Finance for a licence to open a trust company, Manulife Trust.

Manulife has owned trust companies before. When Tom Di Giacomo was CEO, Manulife bought a handful of small trust companies and then gathered them all together to create Manulife Bank in 1992, the first insurance company to do so after the rules changed granting such entry into banking.

Why are you applying for a trust company licence, I asked? To offer retail savings products and mortgages, replied a Manulife spokesman.

But, I said, you can provide those through the bank. Is there something about a trust company charter I’m missing?

With that, Manulife clammed up, saying for the near future they would be concentrating on getting the licence. News about products and services would follow later.

To me, it all seemed a bit weird. After all, the things that a trust company can do that a bank cannot do are minor and inconsequential.

Then it stuck me. Manulife wants two institutions falling under the Canada Deposit Insurance Corporation’s provisions that insure $100,000 in eligible investments. High net worth individuals who have more than $100,000 invested with Manulife now have to shift any additional money to another financial institution for CDIC protection. That must have galled Manulife, to see money going to a competitor’s Guaranteed Investment Certificate, money that could have stayed in house and been put to work being loaned out on a profitable five-year mortgage.

With both a bank and a trust company, Manulife clients will have twice as much by way of CDIC backups. Call it doubling up at someone else’s expense.

If anyone has a better explanation, I’d be happy to hear it.