THE Monetary Authority of Singapore (MAS) is proposing that the deposit insurance (DI) coverage per depositor be raised to S$100,000 from S$75,000.

In a press statement on Tuesday (Jun 27), the regulator said that it published a public consultation paper on the proposals to increase the insurance coverage, and to improve the clarity and operational efficiency of the DI scheme.

“The proposed increase will ensure that the vast majority of smaller depositors continue to be fully covered, keeping pace with the growth in average deposit balances,” MAS said, adding that this level of DI coverage strikes a balance between achieving a high degree of coverage for depositors and managing the cost of coverage.

It added that the proposed change would result in 91 per cent of depositors being fully covered by deposit insurance, ensuring that the scheme continues to fulfil its objective of protecting small depositors when a bank fails.

Furthermore, MAS is proposing that the DI scheme give the regulator powers to state a specific time when deposit balances are taken as final. The proposal aims to enhance clarity on how DI compensation is computed.

The regulator is also proposing a time limit for DI compensation claims to keep administration costs low, as claims become less likely over time.

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The DI limit was last reviewed in 2019, when it was raised from S$50,000 to S$75,000. It covered 91 per cent of depositors at the time. Since then, MAS said the percentage of fully insured depositors has fallen slightly to 89 per cent in the first quarter of 2022. MAS deputy managing director of financial supervision Ho Hern Shin said that the proposals are not a response to stresses faced by certain overseas banks this year.

“The key to ensuring a safe and resilient banking system is through pre-emptive safeguards, meaning sound regulation and rigorous supervision by MAS, and effective governance and risk management by banks themselves,” she said, adding that there is “no substitute to sound risk management and effective supervision”.

In the US, Silicon Valley Bank (SVB) collapsed into Federal Deposit Insurance Corp receivership on Mar 10 after it faced a run on deposits. Signature Bank and First Republic Bank also failed subsequently in March and May, respectively.

The Business Times in March called for a raise in the insurance coverage threshold in a Hock Lock Siew column, following a bank run of SVB in the US.

Meanwhile, UBS completed the takeover of embattled rival Credit Suisse under a rescue deal engineered by Swiss authorities in March this year.