Introduction to Deposit Insurance

Singaporeans take for granted that their savings will be completely safe as the financial system here is widely seen to be well-regulated and well-managed.

Their faith in the system is understandable. But it does not take into account the changing global financial landscape.

While our banking system remains sound, things can go wrong in today's complex and globalised environment.

International experience has shown that banks can fail and depositors can lose their savings even in reputable and well-supervised jurisdictions.

Although Singapore has not had a bank failure, there is no guarantee that a bank failure will never occur.

In a bank failure, ordinary depositors may suffer the loss of their core savings. These are the funds they need to get on with their daily living — money to pay for groceries, school fees, utilities, phone bills et cetera, before the next pay cheque comes in.

Since April 1 2006, this risk has been mitigated with the introduction of deposit insurance ("DI"). The Scheme has been enhanced in 2011.

With effect from 1 May 2011, the DI Scheme protects non-bank depositors by insuring their deposits with a Scheme member, for up to $50,000 per depositor per Scheme member. Non-bank depositors mean individuals, charities, sole proprietorships, partnerships, companies and unincorporated entities. All full banks and finance companies in Singapore are required to be members of the DI scheme.

The deposits must be in Singapore dollars and held in standard savings, current or fixed deposit accounts.

It is also worth noting that deposits are not insured separately in each branch office of a bank or finance company.

This means that all your eligible accounts maintained with different branches of a full bank or finance company are aggregated and insured up to $50,000 with the same bank or finance company.

Monies placed under the CPF Minimum Sum Scheme and the CPF Investment Scheme with a DI Scheme member are separately insured up to $50,000.

The $50,000 is a figure based on studies that show that the amount will fully insure a large majority of non-bank depositors from losses on their insured accounts should their full bank or finance company fail.

Not all deposits or bank products are, however, covered by deposit insurance.

Foreign currency deposits, structured deposits, structured notes and investment products like shares, unit trusts are excluded. This is because these products carry higher risks and those who buy them should be prepared to assume the higher risks for the potentially higher rewards.

With banks and finance companies constantly creating new products, it can be hard to know which deposits are covered by deposit insurance and which are not.

An easy way to get such information is to go to their website or any of their branches and ask for their register of insured products.

Scheme members are also required to disclose in their deposit account statements, account opening forms and marketing materials if they are offering insured products.

The Singapore Deposit Insurance Corporation (SDIC) administers the DI scheme in Singapore.

More information on deposit insurance and the SDIC can be found at the SDIC website (www.sdic.org.sg ).

This information is provided by the SDIC and the Monetary Authority of Singapore as part of the MoneySENSE national financial education programme.