MAS Releases Second Consultation Paper on Deposit Insurance Scheme
Singapore, 23 April 2004...MAS today released the second consultation paper on the establishment of a deposit insurance ("DI") scheme in Singapore. The key objectives of the DI scheme are to provide an adequate level of protection for small depositors and to dispel any mistaken perception of an implicit government guarantee on deposits.
2 The first consultation paper, issued in August 2002, discussed key features of the scheme such as the coverage limit of S$20,000 per depositor per institution and the funding structure. The second consultation paper makes recommendations on the implementation details for the administration of the DI scheme, including the mandate and governance of the DI administrator, coverage of specific deposits and depositors, the depositor payout process and management of the DI fund.
3 MAS proposes that the DI scheme be administered by a new public agency, incorporated as a company limited by guarantee under the Companies Act. The board of directors of the DI agency will comprise individuals from both the public and private sectors, appointed by the Minister.
4 In line with the focus on small depositor protection for the DI scheme, only deposits in standard current, savings and fixed deposit accounts will be covered by the scheme. An individual's balances in all such accounts will be aggregated and insured up to S$20,000. Deposits under the CPF Investment Scheme will be separately insured. Apart from deposits of individuals, accounts belonging to partnerships, sole proprietorships, and registered and exempt charities will also be insured under the DI scheme.
5 Member institutions of the DI scheme will contribute premiums to build up a DI fund of approximately S$120m over a period of 10 years. The premiums levied on member institutions will be differentiated according to the risk they pose to the DI fund. Member institutions will be charged risk-based premiums as a percentage of the amount of insured deposits they hold subject to a minimum annual premium of S$2,500. The DI fund will be invested in safe and liquid assets such as Singapore Government Securities and Singapore-dollar deposits with MAS.
6 As supervisor of the financial institutions, MAS will decide whether a payout is appropriate in the event of a bank failure. MAS will take account of the various resolution options available in determining whether depositor payout is necessary.