Canada’s Zag Bank to be canned
As the result of a decision taken by the bank’s shareholder, Desjardins Group, Canada-based Zag Bank will begin winding down its operations with a target of Q2 2019 for closure.
According to the bank, depositor funds and accrued interest are “entirely safe”, backed by Zag and Desjardins.
“As it commences the wind down, the group will continue to support and maintain the bank’s obligations towards its depositors, clients and employees”, says David Raju, president and CEO of Zag Bank.
In terms of the decision to end it all, Denis Berthiaume, senior EVP and chief operating officer of Desjardins, explains: “We recently reviewed our activities in Ontario and in the Western and Eastern provinces and decided to concentrate our efforts, resources and investments on innovation and growth in P&C insurance, wealth management and payment services.
“As a result, we determined that an online or direct bank was no longer a strategic fit with our long-term strategy.”
Clients can withdraw the funds in their high interest savings accounts if they choose, but the bank is no longer opening any new accounts or accepting new deposits.
On 1 December 2018, remaining deposits in high interest savings accounts will be returned to clients who haven’t already withdrawn their funds.
Zag employs “approximately” 60 people based in Calgary, Toronto and Montreal. Desjardins says: “Each of them will receive the necessary support to pursue new opportunities within Desjardins Group and beyond.”
The last word in that sentence sounds ominous.
The financial impact of Zag Bank’s wind down will mainly be accounted for in Desjardins’ Q3 financial results. Since it represents less than 1% of the group’s assets, it will not be “significant”.
Zag, formerly Bank West, a federally regulated bank founded in 2003, was acquired by Desjardins in 2011 as part of the acquisition of Western Financial Group.
In 2014, it was renamed Zag Bank and repositioned as a direct bank, offering various financial products through online and mobile applications to consumers across the country, except in Quebec. Zag is a member of the Canada Deposit Insurance Corporation (CDIC).