Oral reply to Parliamentary Questions on review of the deposit insurance coverage limit
Date: For Parliament Sitting on 8 May 2023
Mr Don Wee, Chua Chu Kang GRC: To ask the Prime Minister (a) with the maximum coverage of up to S$75,000 per depositor per bank under the Deposit Insurance Scheme, what is the current percentage of non-bank depositors covered by the scheme; and (b) whether the Ministry will consider a review of the coverage cap.
Mr Saktiandi Supaat, Bishan-Toa Payoh GRC: To ask the Prime Minister (a) what are the lessons from the closure of several US banks due to uninsured depositor runs; (b) whether MAS will consider raising the $75,000 per depositor per bank coverage limit insured by the Singapore Deposit Insurance Corporation; and (c) whether MAS will consider additional bank regulation on top of existing capital adequacy and leverage ratio requirements, such as the reporting of mark-to-market asset losses.
Answer by Mr Alvin Tan, Minister of State, Ministry of Trade and Industry and Ministry of Culture, Community and Youth, and Board member of MAS, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:
1. Mr Don Wee and Mr Saktiandi Supaat had asked whether MAS will consider a review of the deposit insurance coverage limit. Assoc Prof Jamus Lim
2. Let me first make a basic point. Deposit Insurance (DI) is not the primary way in which we safeguard the interests of depositors, be they small or large. The recent stresses involving banks abroad have reminded us that a safe and resilient banking system is underpinned most fundamentally by a combination of preemptive safeguards - including sound regulation and rigorous supervision, proactive cross-border cooperation, and effective governance and risk management by banks themselves. We put a lot of store by these preemptive safeguards in Singapore. They have contributed to MAS’ financial sector oversight being assessed to be “among the best globally” by the International Monetary Fund after the most recent Financial Sector Assessment Programme, in 2019. DI complements these preemptive or ex-ante safeguards, by providing a safety net for small depositors if banks were indeed to fail.
3. International regulatory standard setting bodies, such as the Financial Stability Board and Basel Committee on Banking Supervision, will be carefully assessing the regulatory and supervisory implications arising from the recent banking stresses. MAS will be working with other regulators in these reviews and in developing any needed regulatory responses to enhance the resilience of the banking system.
4. Our DI scheme aims to protect small depositors. Its adequacy as a safety net can be assessed by looking at the proportion of depositors who are fully insured - in other words, the depositors whose aggregated eligible deposits at a bank are within the DI coverage limit. The DI coverage limit in Singapore was last raised in 2019 from S$50,000 to S$75,000 per depositor per participating financial institution. At S$75,000, it fully insured 91% of depositors covered under the DI Scheme at the time. With deposit growth since then, the percentage of fully insured depositors has fallen slightly to 89%.
5. Prior to the recent events, MAS had just concluded its latest, regular review of the DI Scheme, including both the DI coverage limit and ways to ensure the operational efficacy of the DI Scheme. MAS aims to present these proposals for public consultation by the end of June.
6. We are not doing so in response to the recent stresses among some banks abroad, and should avoid overreacting to these events. Our principal objective should be to ensure that the preemptive safeguards which I described earlier are in good shape. We will also have to adjust the nominal coverage limit for DI from time to time. However, raising the proportion of deposits that are fully insured, in other words to cover larger depositors, is not without costs to banks, which will often ultimately mean costs borne by bank customers themselves. Each adjustment to the DI scheme hence has to be carefully considered.