MAS proposes to increase insurance coverage on bank deposits to $100,000 from $75,000
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The proposed change by MAS will result in 91 per cent of all depositors being fully covered by DI.
ST PHOTO: SHINTARO TAY
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SINGAPORE – Singapore plans to increase the protection of small depositors from losses caused by a bank’s inability to honour its obligation.
The Monetary Authority of Singapore (MAS) on Monday announced that it has published a public consultation paper on proposals to increase deposit insurance (DI) coverage per depositor to $100,000 from the current $75,000.
The central bank also sought views on improving the clarity and operational efficiency of the DI scheme.
The MAS said: “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.”
The proposed change will result in 91 per cent of all depositors being fully covered by DI and will ensure that the insurance scheme continues to fulfil its primary objective of protecting small depositors in the event of a bank failure, it added.
The coverage limit was last raised in 2019 from $50,000 to $75,000 per depositor.
MAS said the higher level of DI coverage strikes the appropriate balance between achieving a greater degree of coverage for depositors and managing the cost of the coverage which, if too high, will ultimately be passed on to customers.
To enhance the operational efficacy of the DI scheme, the MAS proposes acquiring the power to stipulate a specific time when deposit balances are taken as final to enhance clarity on how DI compensation is computed.
It also proposes to introduce a time limit for DI compensation claims to help keep administration costs low, given the diminishing likelihood of claims over time.
Ms Ho Hern Shin, deputy managing director of financial supervision at MAS, said the proposals are not in response to the stresses faced by some banks abroad earlier in the year.
Several mid-sized regional banks in the United States failed in March, triggering a sharp decline in global bank stock prices and swift response by regulators worldwide to prevent potential global contagion.
In the same month, Swiss bank Credit Suisse collapsed and was acquired by rival UBS in a government-brokered deal.
“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.
She said that while the DI safety net helps to provide confidence to small depositors, it is not a substitute for sound risk management and effective supervision.
