RESPONSE TO FEEDBACK RECEIVED -
CONSULTATION ON DRAFT DEPOSIT INSURANCE AGENCY RULES
On 27 December 2005, MAS released a consultation paper inviting comments on the draft Deposit Insurance Agency Rules.
The consultation period closed on 27 January 2006. MAS thanks all respondents for their comments. This document sets out MAS' responses to these comments. The Singapore Deposit Insurance Corporation Limited ("SDIC") which has been set up to administer the deposit insurance scheme ("DI scheme") and manage the deposit insurance fund will be issuing the Rules shortly.
Premium Contribution
A respondent asked whether there will be a refund to Scheme members if upon re-computation of premium contributions, it appears that the Scheme member has paid premium contribution in excess of the amount payable.
MAS' Response
Under Section 27 of the Deposit Insurance Act, any amount of premium paid in excess of the amount payable under the Act will be refunded to the Scheme member.
Late Payment Fees
Clarification was sought on the relevant late payment fees. A respondent also commented that the late payment fees were higher than the penalty for breach of the requirements for Scheme members to maintain minimum cash balances.
MAS' Response
The revised rules will provide a clearer computation of the late payment fees. The late payment fees shall, subject to section 25(3) of the Deposit Insurance Act1, be the amount computed in accordance with the following formula:
A x r/365 x (SIBOR + 10%), where
"A" is the amount of premium contribution or additional premium contribution as the case maybe, which is due and owing;
"r" is the number of days after the payment due date by which the Scheme member is late in making payment; and for the purposes of this computation
"SIBOR" means the 3 months' S$ Singapore Interbank Offer Rate fixed by the Association of Banks in Singapore, as at the payment due date; or
If the payment due date is on a Saturday, Sunday or public holiday, "SIBOR" shall be as at the next business day.
The late payment fees are comparable to the penalty imposed by MAS for the breach of minimum cash balances requirements.
Payment of Compensation to Insured Depositors
A respondent suggested that the SDIC should set out a time frame for payment of compensation. Clarification was sought on whether the banking secrecy provisions in the Banking Act would impede the payout process. A respondent also asked for further clarification on the kind of assistance the SDIC will require from a failed Scheme member.
MAS' Response
We agree that it would be a good practice for the SDIC to work towards setting a timeframe for payment of compensation. The SDIC will aim to refine its procedures and method of payout over time and eventually specify a time frame by which payment of compensation should be made.
Under the Rules, the failed Scheme member will be required to provide information to the SDIC or its agent bank which is required to determine the eligibility and entitlement of its insured depositors to compensation. The Deposit Insurance Act has provided a carve-out from banking secrecy provisions, for the purpose of payment of compensation under the DI scheme.
Register for Insured Deposits
Some respondents suggested that a template for the proposed register for insured deposits should be provided.
A respondent asked for further details on how the register is to be made available to the public. Clarification was also sought on whether outstanding balances by insured depositors need to be disclosed.
A respondent suggested that there is no need to list different variations of savings accounts separately in the register of insured deposits. There were also a query on what kind of changes to the register would Scheme members be required to notify SDIC. A respondent asked whether Scheme members could charge depositors for taking extracts of the register.
MAS' Response
The register for insured deposits should list the deposit products offered or maintained by the Scheme member which constitute an 'insured deposit' under the Act. The purpose of such a register is to provide clear information to depositors on which deposit products offered by the Scheme member are eligible for deposit insurance coverage. There is no need for Scheme members to disclose the details of each insured depositor or his outstanding balance in the register. We have provided an example of the form of the register in the revised Rules. This register should be made readily available to depositors or any other person upon request. Changes to the list of deposit products which constitute an 'insured deposit' should be notified to the SDIC.
If a Scheme member offers variations of a type of deposit account (such as a few kinds of savings accounts) which are offered to customers under different names or descriptions, all the different variations which would constitute insured deposits should also be listed in the register.
An explicit charge for access to the register for insured deposits goes against the principle that the register should be made readily available to depositors or any other person upon request.
Disclosure Statement
Some respondents commented that the proposed disclosure statement may create the wrong impression that each deposit account is insured up to $20,000 regardless of the depositor's aggregate deposits and even if the depositor is not an individual or charity. It was suggested that Scheme members be allowed to formulate their own disclosure statements.
Some respondents asked for clarification on the publications which need to include the disclosure statement.
Many respondents requested for a grace period to include the disclosure statement in their publications.
Some respondents asked whether it is necessary to provide a one-time notification to all insured depositors upon the launch of the DI scheme.
MAS' Response
We agree with Scheme members and will leave it to Scheme members to decide on the form of the disclosure statement as long as the information is provided in a clear manner. We have also decided not to prescribe the font size for the disclosure statement, but the disclosure statement must be clearly legible. This is reflected in the revised Rules.
The statement should be included in marketing materials, account opening forms and deposit account statements relating to deposit products which constitute an insured deposit. There is no need to include the disclosure statement in ATM receipts, transaction advices or terms and conditions relating to such deposits.
We will provide a transitional period of 6 months for Scheme members to include the disclosure statement in their publications. This means that Scheme members have until 1 October 2006 to include the disclosure statement in the relevant publications relating to insured deposit products. However, requirements pertaining to the register of insured deposits will take effect on 1 April 2006.
There is no requirement under the Rules for Scheme members to provide a one-time notification to insured depositors upon the launch of the DI scheme.
MONETARY AUTHORITY OF SINGAPORE
23 February 2006
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