SINGAPORE - Insurance coverage on bank deposits will be raised to $100,000 per depositor from $75,000 currently, the Monetary Authority of Singapore (MAS) said on Friday.

The move will take effect from April 1, 2024.

This will ensure 91 per cent of depositors are fully covered under MAS’ Deposit Insurance (DI) Scheme, which is administered by the Singapore Deposit Insurance Corporation (SDIC). 

The scheme provides protection for all Singapore-dollar deposits held at a full bank or finance company.

Full banks are licensed under and governed by the Banking Act, and they may undertake banking activities such as deposit taking and lending.

The coverage limit for Singapore-dollar deposits was last raised in April 2019, from $50,000 to $75,000, protecting 91 per cent of depositors at that time.

Since then, the percentage of fully insured depositors has fallen to 89 per cent as income and deposits grew.

On June 27, MAS issued a consultation paper to raise the deposit insurance limit to $100,000. The consultation period closed on July 31.

A total of 20 respondents, including RHB Group, Maybank, GXS Bank, BNP Paribas and Bank Negara Indonesia (BNI) gave feedback. Eleven respondents requested confidentiality.

“Given the deposit growth and to improve the coverage for small depositors, we agree with MAS’ proposal to increase the coverage limit to $100,000,” GXS Bank said.

BNI added that the higher coverage limit takes into consideration rising affluence in Singapore. This will ensure a higher proportion of insured depositors are covered under the scheme, it said.

OCBC head of wealth advisory Aaron Chwee said the move reinforces the robustness of Singapore’s financial systems and its status as a leading financial centre in the region.

He said both retail consumers and businesses can “consolidate their (deposit) balances – soon up to $100,000 – with a single bank, with the knowledge and confidence that their monies will remain protected”.

UOB head of group personal financial services Jacquelyn Tan added that the revision would encourage customers to continue banking with UOB with additional peace of mind.

A DBS spokesperson said: “DBS is supportive of this move, and we believe that it will provide consumers with greater assurance and peace of mind when they place deposits with banks in Singapore.”

MAS noted that a minority of respondents had suggested having a higher maximum coverage of more than $100,000.

The regulator said each increase has to be carefully considered, as there is a cost to banks.

“As our DI Scheme aims to protect small depositors, its adequacy as a safety net can be assessed by looking at the proportion of depositors who are fully insured,” MAS said.

It added that $100,000 fully covers the vast majority of insured depositors. 

Consumers and analysts The Straits Times spoke to had mixed reactions.

Marketing manager Ang Jian Hui, 37, said he is concerned about how much retail customers will have to pay for the additional coverage.

According to SDIC, every DI Scheme member pays an annual premium, which is charged as a percentage of the amount of insured deposits they hold. The minimum annual premium is $2,500.

With the higher coverage and growth in deposits, the insured deposit base – and premiums – will go up. Each bank will then have to decide if they want to pass on the increased premium or absorb it.

Mr Alfred Chia, chief executive of financial advisory firm SingCapital, said the increased coverage limit will help the digital banks attract more customers. This will lead to more competition among the banks, which “will ensure that they absorb any added costs as much as possible, or all of it”.

Ms Lee Meng, executive financial services consultant at Gen Financial Advisory, said any increase in costs for the banks is not likely to be significant. She said it is a timely move to raise the coverage limit as savings rates are high and many people are keeping their savings in banks.

Still, 32-year-old lab technician Dallas Goh said that “Singapore has not seen a bank failure yet”, so most of his friends and family are not worried they will lose their bank deposits.

Foreign currency deposits will not be covered under the DI Scheme.

This is because the scheme is intended to protect the core savings of small depositors, which are primarily denominated in Singapore dollars, MAS said.

“The proportion of foreign currency deposits held by small depositors is currently not significant.”

On the operational side, MAS said account opening forms which reflect the $75,000 limit will still be accepted from April 1, provided the depositor is subsequently informed of the increased coverage limit. MAS added that banks and finance companies need not formally notify customers ahead of the increase in the coverage limit.

The regulator noted that SDIC will separately update financial institutions on the transition time given to them to revise outdated information on the likes of marketing materials and account opening forms with the new limits.