MAS Releases Consultation Paper on Deposit Insurance Scheme
Singapore, 6 August 2002.... The Monetary Authority of Singapore (MAS) today released a Consultation Paper on the proposed features of a deposit insurance scheme in Singapore.
The scheme will cover all Singapore dollar deposits held by individuals up to a limit of $20,000. It will be backed by a fund targeted to reach 0.3% of insured deposits or an estimated $120 million. The fund will be built up over a period of 10 years, based on premium contributions from all Full Banks and finance companies that offer retail deposit facilities. The premiums levied on institutions will be differentiated according to the risk of loss they pose to the fund.
"In designing the deposit insurance scheme, we were guided by three key considerations. First, we wanted to keep the cost of deposit insurance low while ensuring adequate protection for the majority of depositors. Hence, the moderate fund size and gradual build-up period. Second, we wanted to ensure an equitable allocation of cost among participating institutions. Hence, risk-based premiums. Third, we wanted to maintain market discipline and minimise moral hazard. Hence, the limited coverage," said Mr Ravi Menon, Executive Director (Supervisory Policy and Banking).
MAS reiterated the main objectives of the deposit insurance scheme: to provide a basic level of protection for small depositors, and to dispel the mistaken perception of an implicit government guarantee on deposits. Deposit insurance will be a complement to MAS' supervision of banks, and will enhance depositor protection by providing greater certainty of and clarity in depositor compensation.
Following the consultation, MAS will proceed with the next phase of the deposit insurance study, which will focus on implementation details such as the governance structure, legislation, and depositor compensation procedures.
MAS invites comments on the proposals set out in the Consultation Paper. The Consultation Paper consists of two parts. The first sets out the objectives and proposed structure of the Singapore deposit insurance scheme. The second part is a technical addendum and describes the recommendations on funding and premium structure put forward by the external consultant engaged by MAS for this study.
The Consultation Paper is attached below. The closing date for the consultation is 5 September 2002.