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Singapore

MAS proposes raising coverage of deposit insurance scheme to S$100,000

Currently, the Singapore Deposit Insurance Corporation will pay out up to S$75,000 per depositor per institution if a bank or finance company in the scheme goes under.

MAS proposes raising coverage of deposit insurance scheme to S$100,000

The logo of the Monetary Authority of Singapore (MAS) is pictured at its building in Singapore in this Feb 21, 2013, file photo. REUTERS/Edgar Su

SINGAPORE: The Monetary Authority of Singapore (MAS) is proposing to increase coverage of the deposit insurance scheme from S$75,000 (US$55,630) to S$100,000.

MAS on Tuesday (Jun 27) published a public consultation paper on the proposals to increase the insurance coverage per depositor, and to improve the clarity and operational efficiency of the scheme.

The scheme, administered by the Singapore Deposit Insurance Corporation (SDIC), insures Singapore-dollar deposits held at a full bank or finance company in Singapore. All full banks and finance companies in Singapore are members of the scheme, except those exempted by MAS. 

Under the current coverage, the SDIC will pay out up to S$75,000 per depositor per institution in the event that a bank or finance company in the scheme goes under.

“The proposed increase will ensure that the vast majority of smaller depositors continue to be fully covered, keeping pace with the growth in average deposit balances,” MAS said.

This change will result in 91 per cent of depositors being fully covered by the deposit insurance scheme and will ensure that it "continues to fulfil its primary objective of protecting small depositors in the event of a bank failure", the authority added.

About 89 per cent of depositors in Singapore are fully insured under the scheme, said Minister of State for Trade and Industry Alvin Tan in May in response to parliamentary questions.

The coverage limit was last raised in 2019 from S$50,000 to S$75,000, fully insuring about 91 per cent of depositors at that time. The percentage of fully-insured depositors has since fallen slightly amid deposit growth, Mr Tan said.

“This level of deposit insurance coverage strikes the appropriate balance between achieving a high degree of coverage for depositors and managing the cost of the coverage which, if too high, will ultimately be passed on to customers,” said MAS on Tuesday.

ENHANCING OPERATIONAL EFFICIENCY

MAS is also proposing that it is given powers to stipulate a specific time when deposit balances are taken as final. This will "enhance clarity" on how deposit insurance compensation is computed, said MAS.

The authority is also proposing a time limit for such compensation claims, to help keep administration costs low given the "diminishing likelihood of claims over time".

These changes will enhance the operation efficacy of the deposit insurance scheme, said MAS.

It added that the proposals arise from its periodic reviews of the scheme.

Deputy managing director (financial supervision) at MAS Ho Hern Shin said that the proposals are not in response to the stresses faced by some banks overseas earlier this year.

Earlier this year, Silicon Valley Bank and Signature Bank in the US collapsed, while Credit Suisse faced the risk of going under before it was taken over by UBS.

“The key to ensuring a safe and resilient banking system is through pre-emptive safeguards, meaning sound regulation and rigorous supervision by MAS, and effective governance and risk management by banks themselves,” Ms Ho said.

"Deposit insurance complements these safeguards by providing a safety net for small depositors in the event banks were to fail. The deposit insurance safety net helps to provide confidence to small depositors but is no substitute to sound risk management and effective supervision."

Source: CNA/cm(mi)

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