The Monetary Authority of Singapore is proposing to increase the deposit insurance scheme coverage from S$75,000 to S$100,000.
Under the current coverage, the Singapore Deposit Insurance Corporation will pay up to S$75,000 per depositor per institution if a bank or finance company goes bankrupt.
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“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,” said MAS.
This change will result in 91% of depositors being fully covered by the insurance. It will also ensure that MAS will continue “to fulfil its primary objective of protecting small depositors in the event of a bank failure.” Now, only 89% of depositors are fully insured under the scheme.
In 2019, the coverage limit was increased from S$50,000 to S$75,000.
“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,” according to MAS.
Additionally, MAS is proposing to stipulate a time when deposit balances are taken as final to enhance the clarity of how deposit compensation is computed. The authority also wants to set a time limit for compensation claims.
Earlier this year, Signature Bank and Silicon Valley Bank collapsed, while Credit Suisse faced the risk of going under before UBS took over.
“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,” said Deputy managing director (financial supervision) at MAS, Ho Hern Shin.
“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.”
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