The guarantee, to be backed by S$150 billion of government reserves, will take immediate effect, said the Ministry of Finance and Monetary Authority of Singapore (MAS) on Thursday night.

The move followed similar action by other countries in the region, including Hong Kong, Australia and New Zealand, that have given a blanket guarantee on all bank deposits amid a crisis of confidence in the global financial markets.

The Singapore government said that although the banking system remains sound and resilient, it has decided to take 'precautionary action' to avoid an erosion of banks' deposit base and ensure a level international playing field for banks in Singapore.

The joint MoF and MAS statement said: 'All depositors, big and small, corporates and individuals, including those under the current Deposit Insurance Scheme administered by the Singapore Deposit Insurance Corporation will now enjoy protection from the Government on the full amount of their deposits for the duration of the guarantee,' said the statement.

'The Government guarantee will also be extended to deposits placed with credit co-operatives registered with the Registry of Co-operative Societies.'

MAS reminds financial institutions that they should not misuse the guarantee to take on activities without regard for the risks.

'In the current challenging environment, financial institutions must continue to heighten vigilance and enhance risk management practices. MAS will continue to closely supervise financial institutions to ensure that they operate prudently,' said the joint statement.

Reiterated that Singapore's financial system remains stable and robust, the Government said financial institutions here are required by MAS to have assets exceeding their liabilities by an appropriate margin. They are also required to abide by stringent regulations on capital, asset quality and risk concentration.

'MAS' approach is to emphasise sound regulation and supervision of financial institutions, so that risks can be identified and addressed at an early stage. Banks and financial institutions in Singapore are operating normally, despite the global problems,' said the government.

The Singapore dollar money and foreign exchange market have been calm and banks have been able to obtain funding in the interbank market, it added.

Public confidence in Singapore's markets and financial institutions remains high, it added.

As the financial meltdown spread last week, several jurisdictions have taken extraordinary measures to stabilise financial markets and restart the flow of credit.

In particular, recent plans by the European and US Governments to recapitalise their banking systems and guarantee bank borrowings in the wholesale markets have improved confidence.

Singapore has not had to undertake similar extraordinary measures, in view of the continuing stability and orderly functioning of the Singapore banking system.

Explaining the guarantee move, the Government said: 'The announcement by a few jurisdictions in the region of Government guarantees for bank deposits has set off a dynamic that puts pressure on other jurisdictions to respond or else risk disadvantaging and potentially weakening their own financial institutions and financial sectors.

'This is why although Singapore's banking system continues to be sound and resilient, the Government has decided to take precautionary action to avoid an erosion of banks' deposit base and ensure a level international playing field for banks in Singapore.'

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