SDIC aims to pay depositors within three weeks in the event of bank failure
Singapore, 29 May 2008 – In the event of failure of a full bank or finance company, the Singapore Deposit Insurance Corporation (SDIC) aims to compensate insured depositors within three weeks of an order by the regulator to pay out of the Deposit Insurance Fund.
Depositors who need money urgently can apply for emergency payouts, which would be processed expeditiously, the SDIC said today.
Singapore consumers enjoy the benefits of a sound banking system. It is the aim of the Monetary Authority of Singapore (MAS) to ensure the stability of the banking system in Singapore. However, the MAS does not guarantee the soundness of individual financial institutions. Therefore, a Deposit Insurance Scheme has been set up to protect the core savings of small depositors in Singapore.
When a bank or a finance company fails, the MAS may decide that a payout becomes necessary and will notify the SDIC to act accordingly.
Ooi Sin Teik, CEO of SDIC, said: “While we recognise that every failure is unique in its scale and complexity, our goal is to complete a payout as quickly as possible once the MAS has determined that a payout to depositors by the SDIC is necessary.”
The three-week timeline for compensation payout is made possible by new rules that require full banks and finance companies to implement systems and processes that will enable the SDIC to speedily obtain information about depositors and their accounts.
Set up two years ago, the SDIC administers the Deposit Insurance Scheme in Singapore. Under the Scheme, customers with Singapore dollar deposit accounts with a Scheme Member are automatically insured for up to $20,000. All full banks and finance companies are required by law to be members of the Deposit Insurance Scheme unless they are exempted by the MAS. Savings, fixed and current account are covered under the Scheme while deposits under the CPF Investment Scheme are separately covered.
Mr Ooi said the new rules on payout readiness require Scheme Members to be able to provide at short notice, relevant information so that SDIC can manage compensation payouts in an efficient and expeditious manner.
The data will also have to be in an encrypted format to protect the privacy of customers’ banking information. Scheme Members have up to 1 October 2008 to comply with the new rules.
Mr Ooi added: “Although Singapore has not experienced a bank failure, the Government has introduced deposit insurance to protect the savings of small depositors.
“These rules are to ensure that in the event of a failure of one of our Scheme Members, we can expedite payouts and minimise hardship, inconvenience or uncertainty to depositors.”
Depositors may be paid in two ways - by cheque or by credit to an account with another Scheme Member.
The compensation will be paid out of the Deposit Insurance Fund, which is being built up from premiums paid by Scheme Members. As at 31 March 2007, the Fund stood at $13.8 million.
Mr Ooi said: “We believe we have designed a system to make speedy payouts to depositors in a crisis situation without burdening our Scheme Members during normal times. “
From October 2008, SDIC will embark on simulation exercises to test the readiness of Scheme Members in providing the information needed for a “live” payout. At all times during such simulations, customer data will be masked so as not to compromise the confidentiality of the data.
