Oral response to parliamentary questions on the review of the deposit coverage limit

Date: For the session of Parliament on May 8, 2023


Mr Don Wee, Chua Chu Kang GRC: To ask the Prime Minister (a) with a maximum cover of up to S$75,000 per bank depositor under the Deposit Guarantee Scheme, what is the current percentage of non-bank depositors covered by the scheme; and (b) whether the Department will consider revising the coverage ceiling.

Mr Saktiandi Supaat, Bishan-Toa Payoh GRC: To ask the Prime Minister (a) what are the lessons of the closing of several American banks due to the flight of uninsured depositors; (b) whether MAS will consider increasing the cover limit of $75,000 per bank depositor insured by the Deposit Insurance Corporation of Singapore; and (c) whether MAS will consider additional banking regulation in addition to existing capital adequacy and leverage ratio requirements, such as accounting for losses on assets revalued to market.

Answer from Mr Alvin Tan, Minister of State, Ministry of Trade and Industry and Ministry of Culture, Community and Youth and MAS Board Member, 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 would consider revising the deposit insurance coverage limit. Prof. Jamus LimOral PQ by Prof Jamus Lim for the sitting of Parliament on or after 09 May 2023: Prof Jamus Lim: To ask the Prime Minister (a) what are the considerations behind the decision to insure deposits in local member banks worth 75 000 USD the deposit guarantee scheme compared to the higher amounts in other jurisdictions; and (b) whether this restriction will be revised in the light of higher per capita incomes. raised a related matter for the next meeting. Mr Supaat also asked about the lessons learned from the closure of several banks in the US due to the flight of uninsured depositors and whether MAS would consider additional banking regulation on top of existing requirements. This answer will cover the questions of all three people’s representatives, for today’s and the next session.

2. Let me say something basic first. Deposit insurance (DI) is not the primary way we protect the interests of depositors, whether small or large. The recent tensions surrounding banks abroad have reminded us that a safe and resilient banking system is based above all on a combination of preventive safeguards – including robust regulation and strong supervision, proactive cross-border cooperation and effective management and risk management by the banks themselves. . We place great importance on these preventive precautions in Singapore. They contributed to MAS’ financial sector supervision being rated as “among the best globally” by the International Monetary Fund following the last Financial Sector Assessment Program in 2019. The DI complements these preventive or anticipatory safeguards by providing safety net for small depositors if banks do fail.

3. International regulatory standard-setting bodies such as the Financial Stability Board and the Basel Committee on Banking Supervision will carefully assess the regulatory and supervisory implications arising from the recent banking stress. MAS will work with other regulators in these reviews and in developing any necessary 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, depositors whose aggregate eligible deposits in a given bank are within the DI coverage limit. The DI cover limit in Singapore was last raised in 2019 from S$50,000 to S$75,000 per depositor at a participating financial institution. At S$75,000, it fully insured 91% of depositors covered by the DI scheme at the time. As deposits have grown since then, the percentage of fully insured depositors has fallen slightly to 89%.

5. Prior to the recent events, MAS had just completed its latest, regular review of the DI scheme, including both the DI coverage limit and ways to ensure the operational efficiency of the DI scheme. MAS aims to present these proposals for public consultation by the end of June.

6. We are not doing this in response to the recent stress among some banks abroad and should avoid overreacting to these developments. Our primary goal should be to ensure that the preventative safeguards I described earlier are in good shape. We will also need to adjust the nominal cover limit for DI from time to time. However, increasing the proportion of deposits that are fully insured, in other words to cover larger depositors, is not without costs for banks, which often end up being costs borne by the bank’s customers themselves. Therefore, any adjustment to the DI circuit must be carefully considered.


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