THE United States Senate has just approved the amended bailout Bill. Among other things, it has raised the ceiling on federal insurance for bank deposits from US$100,000 (S$145,000) to US$250,000, a move to reassure savers their money is safe in banks and avoid mass withdrawals.
Ireland has also guaranteed full cover for bank deposits.
The Monetary Authority of Singapore (MAS) has said that Singapore dollar bank deposits are covered up to $20,000 per depositor per bank under the current deposit insurance scheme. It said 'our primary objective is to provide adequate protection for small depositors'.
MAS also said 'for protection for insurance policy owners, MAS requires all insurers to establish a separate fund for each class of business' and 'each fund's assets must, at all times, exceed its liabilities plus a safety margin imposed by MAS'.
There are two anomalies in these statements: Why are small depositors better protected than large ones? And why is the MAS requirement for protection for insurance policy owners not applicable to bank depositors who have put in their money in banks for safe keeping rather than investment and therefore deserve equal protection?
Grassroots organisations like the citizens' consultative committees throughout Singapore have set up welfare funds and are required to deposit tens of thousands of dollars in banks for safe keeping. So are charitable organisations which deposit millions of dollars. For them, $20,000 is far from adequate.
In the light of these developments, it is time to review and improve the current limit of $20,000, so all depositors are better and equally protected. They deserve this protection to have peace of mind that their hard-earned funds raised over time for community welfare and charity are not wiped out overnight by more than 90 per cent. Although this is most unlikely, they need this assurance all the same.
This article was first published in The Straits Times on October 4, 2008.
