Singapore is known for its robust banking system, ensuring the stability and soundness of financial institutions within its jurisdiction. The Monetary Authority of Singapore (MAS) plays a vital role in supervising banks and finance companies, promoting risk management systems, and maintaining internal controls. However, to provide an additional layer of protection to depositors, Singapore has implemented a Deposit Insurance Scheme (DIS). This essay explores the coverage, types of deposits insured, limitations, and the functioning of the Deposit Insurance Fund.
Coverage and Protected Deposits
Under the DIS, the Singapore Deposit Insurance Corporation (SDIC) safeguards the core savings of small depositors in the event of a full bank or finance company failure. Individuals, as well as non-bank depositors, including sole proprietorships, partnerships, companies, and unincorporated entities like associations and societies, are covered by the scheme.
Singapore dollar denominated deposits held with a DI Scheme member in any of its branches within Singapore are insured. This includes savings accounts, fixed deposit accounts, current accounts, and various government-backed schemes such as the CPF Investment Scheme, CPF Retirement Sum Scheme, and Supplementary Retirement Scheme. The SDIC may also include other products as prescribed by the Authority, ensuring a comprehensive range of insured deposits.
While the DIS provides extensive coverage, it’s important to note certain exclusions. Foreign currency deposits, structured deposits, and investment products like unit trusts, shares, and securities are not covered by SDIC. These types of financial products fall outside the scope of the Deposit Insurance Scheme and are subject to separate risk considerations.
In the event of a DI Scheme member’s failure, insured deposits are aggregated and protected up to a maximum of S$75,000 per individual, excluding monies under the CPF Investment Scheme and CPF Retirement Sum Scheme. For sole proprietors, insured deposits in their name are combined with those of their sole proprietorship. Deposits held in trust and client accounts by non-bank depositors are insured up to S$75,000 per account without aggregation.
It’s important to understand that insured deposits are not separately protected within different branches of a DI Scheme member. Deposits held in various branches of the same DI Scheme member are combined and insured up to S$75,000. However, monies placed under the CPF Investment Scheme and CPF Retirement Sum Scheme are aggregated and separately insured up to S$75,000.
Deposit Insurance Fund
To ensure the availability of funds for compensation in the event of a DI Scheme member’s failure, a Deposit Insurance Fund (DI Fund) has been established. DI Scheme members contribute premiums to this fund, which can only be invested in safe and liquid assets approved by the Minister. These assets include securities issued by the Singapore Government or MAS, deposits with MAS, debentures or debt securities issued by Singapore Sukuk Pte. Ltd., and other approved assets.
Premium contributions to the DI Fund are levied annually, with rates varying based on the risk posed by member institutions. The premiums charged are calculated as a percentage of insured deposits held by the institution, with a minimum annual premium of $2,500. SDIC has the authority to impose late payment fees on DI Scheme members to ensure timely contributions. Detailed regulations governing premium rates and calculations are outlined in the Deposit Insurance and Policy Owners’ Protection Schemes (Deposit Insurance) Regulations 2011.
Singapore’s Deposit Insurance Scheme provides peace of mind to depositors by safeguarding their core savings. While the MAS oversees the stability and risk management of the banking system, the DIS acts as an additional layer of protection for small depositors in the event of a bank or finance company failure. The scheme covers a wide range of deposits, with specified limits and exclus