Have you ever feared the thought of losing all your money if a financial crisis hits home? It’s a valid fear and it’s something we should consider carefully. However, don’t panic. You don’t need to go running to the bank and withdrawing all your money to store them under your pillow because bank deposits in Singapore are protected under a scheme that guarantees your savings.
There’s also a separate scheme that applies to insurance policies, like life insurance and home insurance.
Let’s find out more.
If a bank fails in Singapore, what happens?
The fall of the Lehman Brothers during the 2008 financial crisis shocked the world. Since then, 10 years have passed and hundreds more banks have failed. Yes, hundreds.
While most of these take place far from home, we can’t take the financial stability in Singapore for granted given the not-so-optimistic global economic outlook. Just recently, another 3 banks have shut their doors.
Singapore has yet to experience a failed bank so far, but we need to be prepared for the possibility. What if one of Singapore’s major banks get into trouble?
That’s when the Singapore Deposit Insurance Corporation (SDIC) comes in to save the day.
The SDIC was established in 2006 to protect the savings of depositors in the event of a failure of banks or finance companies. This includes deposits in savings, current and fixed deposit accounts.
The SDIC is in place to create a more stable banking environment. It does so by collecting premiums from banks and finance companies that are part of the scheme. Banks and finance companies that take higher risks will have to pay higher premiums. The amount of deposits held by a bank or finance company will affect the premium as well.
How does Deposit Insurance (DI) Scheme work?
In late March 2019, MAS announced that depositors will enjoy enhanced protection under the DI scheme up to $75,000 per bank or finance company; an increase from the $50,000 cap before.
This means that should a bank or finance company in Singapore fail, you will be paid up to a maximum amount of $75,000, depending on the amount of your deposit.
Payouts will be made automatically through cheques, casher’s orders or through electronic payment methods. There’s no need to file any claims.
How does the Policy Owners’ Protection (PPF) Scheme work?
The PPF scheme protects life insurance and certain general insurance (like personal motor or personal property insurance) policy owners in the event an insurer fails. It provides 100% protection for the guaranteed benefits of your insurance policies. For life insurance policies, caps will apply.
With the enhancement of the protection scheme, motor and property insurance policies are now covered too even if the car or property is used for commercial purposes.
Before, if one were to buy a property and turn it into an office, that property insurance bought would not be protected by the PPF scheme. Now, people who own home offices and private-hire drivers will benefit from the enhanced protection.
Which banks are covered under the Deposit Insurance Scheme?
All banks and finance companies in Singapore approved by the MAS are members of the DI Scheme. If you bank with any one of these Deposit Insurance Scheme members, your deposits are automatically protected.
Similarly, MAS-approved life or general insurers are covered in the scheme.
You can find the list of PPF scheme members on the SDIC website too.
How does the deposit insurance scheme cover joint accounts?
For joint accounts, the funds in the account will be split evenly unless otherwise specified. If you have another individual account under the same bank, your split deposit amount will be combined with your individual deposit amount. The total amount will then be covered up to $75,000.
For example, if you and your husband have a joint account of $50,000, and you have a separate account of $60,000, your total deposit amount will be $85,000. However, you will only be covered up to $75,000.
Any questions about the Deposit Insurance Scheme or the Policy Owners’ Protection Scheme? Put them in the comments below.