Only Singapore-dollar deposits will be covered by MAS insurance coverage

Starting from 1 April 2024, customers will enjoy a raised coverage of S$100,000 per depositor, up from the previous limit of S$75,000. This aims to restore the percentage of fully insured depositors to 91%, after dipping to 89% following the last increase in 2019 from S$50,000 to S$75,000.

The decision to increase the deposit insurance coverage comes after a public consultation paper was released in June.

More from OMY: MAS proposes increased coverage for deposit insurance scheme

Administered by the Singapore Deposit Insurance Corporation (SDIC), this scheme covers Singapore-dollar deposits held at full banks or finance companies in Singapore, with all such institutions being members except for those exempted by MAS.

Under the current scheme, SDIC pays out up to S$75,000 per depositor per institution if a bank or finance company goes under.

The respondents of the consultation supported the raised coverage of S$100,000, though a minority advocated for even higher coverage and expanding it to include foreign currency deposits.

In response, MAS highlighted the need for careful consideration with each increase in coverage, as it incurs costs for banks that may ultimately be passed on to customers.

“As our deposit insurance 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,” stated MAS, emphasising that the current S$100,000 coverage already fully protects the majority of depositors in the country.

Regarding the inclusion of foreign currency deposits, MAS decided to maintain excluding those since the scheme’s primary focus is on safeguarding the core savings of small depositors, predominantly held in Singapore dollars.

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Most of the 20 respondents favoured implementing the increased coverage starting 1 April 2024. Some requested a later implementation date due to the necessity for rigorous system enhancements and user acceptance tests.

They also cited limited bandwidth to meet the deadline, given other system changes like new data submission requirements by the SDIC.

Respondents sought operational clarifications, such as whether outdated account opening forms reflecting the S$75,000 coverage would still be accepted from 1 April 2024. Additionally, they inquired about the need for banks and financial institutions to formally notify customers of the enhanced coverage and whether there would be a transition period for revising relevant disclosure statements.

MAS clarified that banks may continue to accept outdated account opening forms, provided they inform depositors of the new coverage. There is no formal requirement for banks to notify customers in advance of the increased coverage.

“MAS has assessed that it remains useful to disclose the specific maximum deposit insurance coverage in banks’ collaterals to promote public awareness on the extent of protection under the deposit insurance scheme,” said the authority.

MAS also extended the deadline for MAS Notice DIA-N01 submissions by one month to 15 February 2024. This notice outlines requirements for deposit insurance scheme members to submit returns related to their deposit insurance asset maintenance ratio and insured deposit base.

“The revised MAS Notice DIA-N01 will be published by Dec 30, 2023 to take effect for reporting cycles from Dec 31, 2023,” according to MAS.

Deputy Managing Director (Financial Supervision) at MAS, Ho Hern Shin, highlighted that these proposals were not prompted by recent stress experienced by overseas banks, adding that the key to a safe and resilient banking system lies in pre-emptive safeguards, “meaning sound regulation and rigorous supervision by MAS, and effective governance and risk management by banks themselves.”

“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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