Understanding deposit insurance

What happens if a bank fails

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

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

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 lives — money for groceries, school fees, utilities, phone bills, etc. before the next pay cheque comes in.

Deposit insurance

The Deposit Insurance Scheme provides a basic level of protection to small depositors. The Singapore Deposit Insurance Corporation (SDIC) administers the scheme in Singapore.

Currently, the Deposit Insurance Scheme protects non-bank depositors (individuals, charities, sole proprietorships, partnerships, companies, and unincorporated entities) by covering their SGD monies placed with a Scheme member, for up to $100,000 per depositor per Scheme member.

All full banks and finance companiesin Singapore are required to be members of the Deposit Insurance Scheme.

What is covered

The Deposit Insurance Scheme covers deposits in SGD held in standard savings, current or fixed deposit accounts.

It also covers SGD monies placed with any scheme member under the Supplementary Retirement Scheme, CPF Retirement Sum Scheme and CPF Investment Scheme.

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 $100,000 with the same bank or finance company.

Monies placed under the CPF Retirement Sum Scheme and the CPF Investment Scheme with a Deposit Insurance Scheme member are aggregated and separately insured up to $100,000.

The $100,000 is a figure based on studies that show that the amount will fully insure a vast majority of non-bank depositors from losses on their insured accounts should their full bank or finance company fail.

What is not insured

Some deposits or bank products are not covered by deposit insurance. They include:

• Foreign currency deposits

• Structured deposits

• Structured notes

• Investment products like shares, unit trusts

These products carry higher risks and do not form part of the core savings or transaction accounts of small depositors. Those who buy them should be prepared to assume the higher risks for the potentially higher rewards.

Is your deposit insured?

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