deposit insurance scheme, which commenced on 1
April 2006, will compensate individuals and charities
for the first S$20,000 of their SGD deposits in
standard savings, current and fixed deposit accounts,
net of liabilities, if their bank or finance company
fails. Moneys held under the Central Provident
Fund (CPF) Investment Scheme will be insured separately
from the depositor’s other deposits, up to
S$20,000. This follows the enactment of the Deposit
Insurance Act in September 2005.
The Singapore Deposit Insurance Corporation
(SDIC), a separate entity incorporated as a company
limited by guarantee under the Companies Act,
will administer the deposit insurance scheme
and manage the deposit insurance fund. Its board
of directors will be accountable for its actions
and decisions to the Minister in charge of MAS.
The scheme compensates depositors through a
fund built up from annual contributions by full
banks and finance companies. The fund will raise
a sum of S$120 million from banks and finance
companies over ten years.
Banks operating in Singapore are required to meet MAS’ high
prudential standards. However, while the risk of failure of a strong
and well-managed bank is low, it can never be reduced to zero.
To protect the core savings of Singapore depositors, the Government
decided to introduce a deposit insurance scheme while the economy
and the banking system are strong. A deposit insurance scheme in
Singapore will strengthen protection for small depositors who are
often not in a position to assess the safety and soundness of the
banks they deal with.
The deposit insurance scheme will set out explicitly
the scope of protection given to depositors and
remove the perception that the government will
guarantee deposits in case of a bank failure.
The scheme has been carefully designed to meet
these objectives while at the same time minimising
costs to banks and depositors.