Published Date: 15 August 2005 Monetary Authority of Singapore
1 The Minister for Education and Deputy Chairman of the Monetary Authority of Singapore (MAS) today moved the Deposit Insurance Bill (DI Bill) for first reading in Parliament. The Bill will be read for a second time and discussed at the next available Parliamentary sitting.
BACKGROUND
2 MAS announced in June 2002 that it would introduce a deposit insurance scheme (DI scheme) to provide an explicit but limited guarantee to insured depositors in the event of a failure of a bank or finance company. The DI scheme compensates depositors through a fund built up from contributions by Scheme members. The targeted fund size, to be built up over 10 years from premium contributions, is equivalent to 0.3% of total insured deposits, estimated to be about $120m. The primary objectives of the DI scheme are to provide an adequate level of protection to depositors, and to dispel public misconception of an implicit government guarantee of deposits.
3 MAS has consulted the industry and the public on the key features of the DI scheme and has taken into account feedback received when finalising the scheme. The consultation papers and MAS' response to the public consultations are published on its website.
KEY MEASURES UNDER THE DI BILL
Deposit Insurance Scheme
4 The DI Bill (summary of key provisions in Annex A (24.2 KB) ) will establish a DI scheme in Singapore. The DI scheme will cover Singapore dollar deposits held by individuals and charities. Membership to the scheme is mandatory for all full banks and finance companies. MAS will have the power to require Scheme members to maintain sufficient eligible assets in Singapore to meet their insured deposit liabilities. The asset maintenance requirements in respect of Scheme members' insured deposit liabilities will be set out in Regulations at a later date.
Deposit Insurance Fund
5 A Deposit Insurance Fund (DI fund) will be established from premium contributions of Scheme members for compensation to insured depositors in the event of a failure of a Scheme member. The DI fund will be invested in safe and liquid assets such as Singapore Government Securities, deposits with MAS and other assets approved by the Minister.
Deposit Insurance Agency
6 A Deposit Insurance Agency (DI agency), separate from MAS, will be established to administer the DI scheme and manage the DI fund. The DI agency will be incorporated as a company limited by guarantee under the Companies Act. Amendments to the memorandum and articles of association of the DI agency shall not be made without the approval of the Minister. The board of directors of the DI agency will be accountable to the Minister for its acts and decisions.
7 The principal functions of the DI agency will be to collect premium contributions, manage and invest the DI fund, make compensation payout to insured depositors, claim from the failed Scheme member or liquidator for reimbursement of the amount of compensation paid to insured depositors and educate the public on the DI scheme.
8 The DI agency may issue and publish Rules for any matter relating to its functions under the DI Bill. These Rules shall bind the agency and the Scheme members to the same extent as if the Rules were contained in properly executed agreements between the Agency and each Scheme member, to observe and comply with all the Rules.
Premiums
9 Scheme members will pay annual premium contributions to the DI fund. The premiums levied on member institutions will be differentiated according to the risk they pose to the DI fund. Member institutions will be charged risk-based premiums as a percentage of the amount of insured deposits they hold subject to a minimum annual premium of $2,500. The DI agency may impose late payment fees on Scheme members. The premium rates and calculation of premium contributions payable by Scheme members will be set out in Regulations.
Compensation
10 Compensation may be paid out of the DI fund if a court order is made to wind up a scheme member, or MAS has determined that a Scheme member is unable or likely to become unable to meet its liabilities.
11 In line with the focus on small depositor protection for the DI scheme, only deposits held by individuals and charities in standard savings, current and fixed deposit accounts (including, for institutions that offer Islamic deposits, Islamic deposits that are principal-guaranteed) denominated in Singapore dollars will be covered by the scheme. An insured depositor's balances in all such accounts will be aggregated and insured up to $20,000. Moneys held under the CPF Investment Scheme will be insured up to $20,000, separately from the depositors other deposits. Structured deposits and deposits placed as collateral will not be insured.
Financial and Audit
12 The accounts of the DI agency and the DI fund will be audited. A copy of the audited financial statements and a copy of the auditor's report will be submitted to the Minister. The DI agency will be required to prepare and submit its annual report and estimates of income and expenditure of the DI fund and DI agency to the Minister.