SINGAPORE – Deposit insurance provides a safety net for small depositors in the event that a bank fails, but it is not the primary safeguard, Parliament heard on Monday.
Minister of State for Trade and Industry Alvin Tan said the Deposit Insurance Scheme, which insures up to $75,000 of the savings of a high percentage of small depositors, is meant to complement other existing safeguards.
Singapore has in place a combination of pre-emptive safeguards, including solid regulation, rigorous supervision, proactive cross-border cooperation and effective governance and risk management by the banks themselves, he said.
The adequacy of the Deposit Insurance Scheme can be assessed by the proportion of depositors who are fully covered.
The scheme’s coverage limit in Singapore was last raised in 2019, from $50,000 to $75,000 per depositor at each participating financial institution. At that time, 91 per cent of depositors were fully insured under the scheme.
With deposit growth since then, the percentage of fully insured depositors has fallen slightly to 89 per cent, Mr Tan said.
He was replying to queries from Mr Don Wee (Chua Chu Kang GRC) and Mr Saktiandi Supaat (Bishan-Toa Payoh GRC), who asked if the Monetary Authority of Singapore (MAS) would consider raising the $75,000 per depositor per bank coverage limit insured by the Singapore Deposit Insurance Corporation (SDIC).
Mr Tan replied that the MAS “has just concluded its latest but regular review of the Deposit Insurance Scheme, including the deposit insurance coverage limit and also ways to ensure operational efficacy of the Deposit Insurance Scheme”.
He added that the MAS aims to present these proposals for public consultation by the end of June.
He noted that international regulatory standard-setting bodies such as the Financial Stability Board and the Basel Committee on Banking Supervision will carefully assess the implications arising from recent banking stresses in the United States, while MAS will work with other regulators in these reviews and develop any measures needed to enhance the resilience of Singapore’s banking system.
Mr Tan said current foreign banking woes will not have a direct impact on the Deposit Insurance Scheme’s premiums.
Asked about his assessment of digital bank runs here, Mr Tan noted that digital full banks are also covered under the Deposit Insurance Scheme with a deposit cap of $75,000 per depositor per bank. This means “all of the individuals’ deposits within a digital full bank would be fully covered”.
Digital wholesale banks, on the other hand, are not subject to this cap as they do not take retail deposits.
In the event that a bank goes bankrupt, the SDIC has a target of making payments to depositors within seven days from when a payout is triggered.
The deposit insurance fund is “adequately sized” and is designed to meet a solvency standard of more than 99.9 per cent. This means that at this target fund size, the fund is able to make payments without losses at a confidence level of 99.9 per cent, Mr Tan said.
The target fund size is now calibrated at $690 million, and the deposit insurance fund has about $570 million in total assets. This continues to grow through annual premiums collected.
