In March of this year, the sudden collapse of Silicon Valley Bank (SVB) due to a run on deposits raised concerns about the safety of deposits in American small and medium-sized banks. The US government quickly stepped in to provide guarantees for all deposits.
This raises concerns for those in Singapore, who may wonder whether their bank deposits are safe and how much they can recover in the event of a bank failure.
Under the Singapore Deposit Insurance and Policy Owners’ Protection Schemes Act 2005, the Singapore Deposit Insurance Corporation (SDIC) is responsible for the management of the deposit insurance scheme in Singapore.
All banks and financial institutions operating in Singapore are required to be members of the SDIC, unless they have been granted special exemption by the Monetary Authority of Singapore. At present, there are 39 member institutions of the SDIC, and the deposit insurance coverage limit was raised from SGD 50,000 to SGD 75,000 in 2019.
How much can you recover in the event of a bank failure in Singapore?
Each financial institution that participates in the deposit insurance scheme in Singapore is required to provide deposit insurance coverage of up to SGD 75,000 per depositor. If a financial institution fails, each depositor can recover up to SGD 75,000 of their deposit. If you have deposits in multiple institutions, you can receive up to SGD 75,000 in coverage from each institution.
The deposit insurance coverage limit in Singapore is lower than the $250,000 deposit insurance limit in the United States. However, according to the Monetary Authority of Singapore, the primary objective of the Singapore deposit insurance scheme is to provide protection for the core deposits of small depositors, rather than high net worth individuals, who often have more channels to allocate their assets to manage financial risks. In Singapore, the SGD 75,000 limit provides coverage for almost 90% of all depositors’ total deposits.
How much can you recover in the event of a bank failure in Singapore?
As of March last year, the size of the Singapore deposit insurance fund was SGD 510 million, and its target fund size is SGD 690 million. At the target fund size, the deposit insurance fund can fully pay out deposit insurance claims with 99.9% probability.
Considering that depositors have a limit on the amount of deposits that can be insured by each bank, it may be prudent to spread funds across multiple banks if the deposit exceeds SGD 75,000. Additionally, it may be worthwhile to allocate some funds to low-risk, relatively secure investments or wealth management products to diversify risk, while also considering investments that offer returns higher than those provided by bank deposits.