SINGAPORE — Insurance coverage on bank deposits will be raised from SS$75,000 to S$100,000 per customer from April 1, 2024, the Monetary Authority of Singapore (MAS) said on Friday (Sept 22).

The increase will restore the percentage of fully covered insured depositors to 91 per cent. It has fallen to 89 per cent since the last increase in 2019 from S$50,000 to S$75,000.  

A public consultation paper was published in June to seek views on the proposals to increase the insurance coverage per depositor, and to improve the clarity and operational efficiency of the scheme. 

The scheme, administered by the Singapore Deposit Insurance Corporation (SDIC), insures Singapore-dollar deposits held at a full bank or finance company in Singapore. All full banks and finance companies in Singapore are members of the scheme, except those exempted by MAS. 

Currently, the SDIC will pay out up to S$75,000 per depositor per institution in the event that a bank or finance company in the scheme goes under.

According to MAS, the respondents were supportive of the increased coverage of S$100,000, but a minority of them suggested a higher coverage and broadening the scope of the coverage to include foreign currency deposits. 

In its response, MAS said each increase in the coverage has to be carefully considered, as raising the coverage is not without cost to banks, which will ultimately be passed on to bank 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,” said the authority.

“At S$100,000, it already fully covers the vast majority (91 per cent) of insured depositors under the deposit insurance scheme.”

As for broadening the coverage scope to include foreign currency deposits, MAS has decided to continue excluding those, given that the scheme is intended to protect the core savings of small depositors, which are primarily in Singapore dollars. 

“The proportion of foreign currency deposits held by small depositors is currently not significant,” said MAS, adding that it will continue to monitor the level of foreign currency deposits and review the scheme periodically. 

WHAT IS THE DEPOSIT INSURANCE SCHEME?

The deposit insurance scheme protects insured deposits that are held with a full bank or finance company. Insured depositors are currently covered up to S$75,000. This will increase to S$100,000 from April 1, 2024.

If a deposit insurance scheme member fails, MAS will request the Singapore Deposit Insurance Corporation (SDIC) to step in. SDIC will make the compensation from the deposit insurance fund that is built up from the premiums that deposit insurance scheme members pay annually. 

Individuals and non-bank depositors, such as sole proprietorships, partnerships, companies and other unincorporated entities like associations and societies are covered under the scheme. 

The scheme covers Singapore dollar deposits placed with a deposit insurance scheme member in any of its branches in Singapore. All full banks and finance companies in Singapore are members of the scheme, except those exempted by MAS.

Such deposits include those held in savings, fixed deposits, and current accounts. Money placed under the CPF Investment or CPF Retirement Sum schemes and under the Supplementary Retirement scheme are also covered. 

For people who have multiple accounts with different banks, the deposit insurance limit is applied per depositor per bank. This means their deposits will be covered up to S$100,000 for each bank from April 1, 2024. 

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The majority of the 20 respondents agreed with the proposal to implement the increase from April 1, 2024. Some of them requested a later implementation date, citing the need for rigorous system enhancement processes and user acceptance tests. 

They also said there was “insufficient bandwidth” to meet the deadline as deposit insurance scheme members also had to deal with other system changes, such as new data submission requirements by the SDIC.

Respondents had also sought operational clarifications, asking if outdated account opening forms that reflect the S$75,000 maximum deposit insurance coverage could still be accepted from April 1, 2024.

They also asked if banks and other financial institutions have to formally notify their customers of the increased coverage and if there would be a transition time for them to revise relevant disclosure statements.

MAS said banks may continue to accept account opening forms that have not been updated, provided that notice is given to the depositor on the new coverage.

There is also no requirement to formally notify customers ahead 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.

The deadline for MAS Notice DIA-N01 submissions has been extended by a month to Feb 15, 2024. This notice sets out requirements for deposit insurance scheme members to submit returns relating 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,” said MAS.

Deputy managing director (financial supervision) at MAS Ho Hern Shin said previously that the proposals were not in response to the stresses faced by some overseas banks.

Earlier this year, Silicon Valley Bank and Signature Bank in the US collapsed, while Credit Suisse faced the risk of going under before it was taken over by UBS.

“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 in June.

“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.” CNA

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