The Monetary Authority of Singapore (MAS) has published a public consultation paper on June 27 proposing to increase deposit insurance (DI) coverage per depositor to $100,000 as well as to improve the clarity and operational efficiency of the DI Scheme.
Currently, the DI coverage per depositor per scheme member is $75,000. The proposed increase will ensure that the vast majority of smaller depositors will continue to be fully covered — keeping in pace with the growth in average deposit balances.
The proposed change will result in 91% of depositors being fully covered by deposit insurance and will ensure that DI continues to fulfil its primary objective of protecting small depositors in the event of a bank failure.
This level of DI coverage strikes the appropriate balance between achieving a high degree of coverage for depositors as well as managing the cost of the coverage which — if too high — will ultimately be passed on to customers.
Other proposals include providing the MAS with powers to stipulate a specific time when deposit balances are taken as final, so as to enhance clarity on how DI compensation is computed; and introducing a time limit for DI compensation claims to help keep administration costs low.
MAS deputy managing director (financial supervision) Ho Hern Shin clarifies that the central bank’s proposals are not in response to the stresses faced by some banks abroad earlier in the year.
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“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.
“DI complements these safeguards by providing a safety net for small depositors in the event banks were to fail. The DI safety net helps to provide confidence to small depositors but is no substitute to sound risk management and effective supervision,” she adds.
The consultation paper is available on MAS’ website. Interested parties are invited to submit their comments by July 31.
