MAS to raise deposit insurance cap to S$100,000 from April 2024
THE Monetary Authority of Singapore (MAS) will raise the maximum deposit insurance (DI) coverage per depositor to S$100,000 from S$75,000, from Apr 1, 2024.
This is in response to feedback received on a consultation paper issued on Jun 27 this year.
On Friday (Sep 22), MAS also issued the first part of its response to the consultation feedback, which focused on the proposed increase of the DI coverage cap, to give the industry more time to implement the changes.
The second part of the consultation response, covering the remaining topics and the draft of corresponding legislative changes, will be published later.
MAS noted that while respondents supported the proposed increase in DI cap to S$100,000, a minority of them suggested that it go higher than S$100,000. They also called for a broader scope of DI coverage to include foreign currency deposits.
It responded that each increase in the DI coverage threshold has to be carefully considered, as raising the coverage increases the cost for banks and, ultimately, for bank customers.
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“As 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.
“At S$100,000, it already fully covers the vast majority, or 91 per cent, of insured depositors.”
The decision to exclude foreign currency deposits aligns with the aim of protecting the core savings of small depositors, as the proportion of foreign currency deposits held by these depositors is currently insignificant.
“Nonetheless, we will continue to monitor the level of foreign currency deposits and review the DI scheme periodically,” MAS said.
Silicon Valley Bank’s collapse earlier this year, which sparked global concerns over bank runs, highlighted the importance of DI. It also fuelled discussion over the adequacy of Singapore’s DI ceiling.
While a blanket protection for all savings is unlikely, given the prohibitive insurance costs and moral hazard issues, raising the coverage is still necessary as depositors’ incomes, and subsequently, savings, rise as the economy progresses over time.
When the threshold was raised in 2011 to S$50,000 from S$20,000, more than 90 per cent of depositors were fully covered.
The coverage provided by the S$50,000 cap had dropped to 87 per cent when it was reviewed in 2018.
The DI limit was then raised to S$75,000 in 2019, which then covered about 90 per cent of depositors.
Since then, the percentage of fully insured depositors has fallen slightly to 89 per cent in 2022, bringing the latest raise to the table.
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