To calm the panic spread that many banks might collapse, the MAS had issued an emergency guarantee blanket on all deposits here when the global financial crisis erupted in late 2008.

As the guarantee is set to end on Dec 31 this year, the MAS is proposing to expand this insurance on banks by next year with the following two enhancement:

• Increase the deposits guaranteed from $20,000 to $50,000 per account-holder per bank.
• Non-bank depositors, such as companies, will have their deposits protected.

Click here to find out more about what is Deposit Insurance Scheme.

THE Monetary Authority of Singapore (MAS) said last night that it will ensure local banks are ‘not disadvantaged’, adding that it is studying measures other countries have taken to shore up confidence in their financial systems.

Its statement came a few hours after Hong Kong guaranteed all bank deposits, a move that has put pressure on Singapore’s authorities to follow suit.

It also came after a second day of surging share markets driven by growing investor confidence that the financial crisis may finally be at a turning point.

The central bank said it ‘is assessing the impact of the extraordinary measures taken elsewhere. We will take the necessary steps to ensure that banks in Singapore are not disadvantaged and are able to operate on an equal footing with other banking systems internationally’.

Banking sources here told The Straits Times it is a sign that MAS is considering securing all bank deposits in Singapore.

Several governments have already done so: Germany and France are trying to rebuild trust in banks with state guarantees worth more than ¥1 trillion (S$2 trillion) combined, while Australia and New Zealand have also fully backed bank deposits. The US announced yesterday it is investing US$250 billion (S$366 billion) in banks as ‘an essential short-term measure’.

But the final impetus for MAS appears to be Hong Kong’s move to guarantee all deposits until 2010. A local banker, who declined to be named, said: ‘Imagine if rich people, who are able to move funds freely, want to place their money in Hong Kong instead.

‘We’re not saying Singapore is not safe. But given the current situation, people might be thinking about moving their funds where there is greater assurance.’

Bankers were unsure how long MAS would guarantee deposits for – if at all – but they said the objective would ‘just be to calm nerves’.

All savings in a full bank in Singapore are insured for up to $20,000 under the Deposit Insurance Scheme of the Singapore Deposit Insurance Corporation.

MAS reiterated that Singapore’s financial system remains stable and robust, with institutions here sound and operating normally.

It said: ‘Our domestic Singapore dollar money and foreign exchange market have been calm and banks have been able to obtain funding in the interbank market. Confidence in Singapore’s markets and financial institutions remains high.

‘We have not had to take any exceptional measures.’

michtay@sph.com.sg

By Imelda Saad, Channel NewsAsia |  Posted: 29 May 2008 1850 hrs

SINGAPORE: Banks and financial institutions here are gearing up to ensure speedy insurance payouts to depositors in the event of closure.

The Singapore Deposit Insurance Corporation (SDIC) has gazetted that all full banks and financial companies implement systems to facilitate the transfer of funds within three weeks.

The US sub-prime crisis got investors jittery about their deposits in financial institutions.

Even though there are no cases of banks going bust here, the Monetary Authority of Singapore (MAS) does not guarantee the soundness of individual financial institutions.

Under the law, all full banks and financial institutions must automatically insure customers’ deposits for up to S$20,000, and the insurance corporation is now moving to ensure faster payouts.

Customers can also apply for emergency payouts in the interim, if they need money urgently.

Ooi Sin Teik, CEO of Singapore Deposit Insurance Corporation, said: “The whole objective behind this three-week target is not only to assure depositors that their money is protected, but also to pay them as quickly as possible. Hopefully, this will give them greater confidence in the financial system.

“If this system is not in place, looking at jurisdictions around the world, it could take as long as four months before depositors get paid.”

The Singapore Deposit Insurance Corporation said although the new initiative has nothing to do with the US sub-prime crises, its implementation is timely.

To get financial institutions ready, the deposit insurance corporation will test out its new system over the next four months.

“Banks and finance companies have until October 1 of this year to get themselves operationally ready, so that at the time they are notified, they can provide SDIC with the information at a very short notice,” said Mr Ooi.

The compensation will be paid out of the Deposit Insurance Fund which, to date, stands at about S$42 million.

- CNA/so