Deposit Insurance Scheme

Singapore has a sound banking system.  Banks and finance companies licensed in Singapore are supervised by the Monetary Authority of Singapore (MAS) and MAS requires these banks and finance companies to have sound risk management systems, adequate internal controls, well capitalization and sufficient liquidity to meet any unforeseen needs.

However, MAS does not guarantee the soundness of individual banks and finance companies.  As there is no 100% safe business in the world, therefore, a Deposit Insurance Scheme (DIS) has been set up to protect the core savings of small depositors in Singapore in the event that a full bank or finance company collapses. 

This is a safety net provided to the depositors that their Singapore dollar denominated deposits, including those in CPF Investment Scheme and Supplementary Retirement Scheme placed with a DIS member bank or finance company, are insured up to a maximum of S$50,000.   Foreign currency deposits, dual currency investments, structured deposits and other investment products such as shares and unit trusts are not insured because these investments require the investor to assume higher risks for higher returns and therefore these products do not form part of the core savings of small depositors.

Singapore Deposit Insurance Corporation Limited (SDIC) administers the Deposit Insurance Scheme and Insurance Policy Owners' Protection Scheme in Singapore.  SDIC is a company limited by guarantee under the Companies Act.  The board of directors is accountable to the Minister in charge of the Monetary Authority of Singapore (MAS).

In the event a DIS member fails, the MAS will request the SDIC to step in.  The SDIC will put its crisis plan into action.  Arrangements will be made for depositors to be paid either by cheque or through accounts opened for them in another financial institution.

As we have a mechanism in place to guarantee the safety of deposits, people are less likely to panic if and when things go wrong.  This could prevent such incidents like disastrous bank runs.  An example is the recent banking crisis in Cyprus.

As the insured amount is S$50,000 per bank, therefore, it is against our own interest to have too much money in a single bank.  The old saying "do not leave all eggs in one basket" is also applicable here.

Previously I had a priority banking account with a certain bank, but the bank relationship manager was more interested that I invested money on their structured products.  As I have purchased structured product with them in the past, I became a "priority" customer as the bank profiled me as one able to taking higher risk and easier parting with my money.

As I seldom go to the bank now as many transactions can be done through internet banking, I see no point in maintaining the status of priority customer.  Taking full advantage and coverage of the DIS, I downgraded myself to normal banking account holder.