IF YOUR bank or finance company goes belly up, you can now expect to get your cash paid out within three weeks under a new compensation system.

The new 'quick-response' payout was set up by the Singapore Deposit Insurance Corporation (SDIC), formed two years ago to protect the core savings of small depositors.

SDIC chief executive Ooi Sin Teik told a briefing yesterday that the three-week timeframe was an internal target for the corporation based on international standards, but it was also intended to boost consumer confidence in the local banking system.

'Singapore has not experienced any banking failure so far, but the Monetary Authority of Singapore does not guarantee the soundness of individual financial institutions.

'SDIC manages the Deposit Insurance Scheme to give consumers the confidence that their money is protected.

'Now, we have set an internal target to assure people that they will be able to get their money back fast in the event of a bank failure.'

Mr Ooi pointed out that each bank failure would probably be unique in scale and complexity.

'But our goal is to complete a payout as quickly as possible once the central bank has determined that a payout to depositors is necessary.'

All full banks and finance companies are required to be members of the Deposit Insurance Scheme unless they are exempted by the central bank.

The scheme covers savings, fixed and current accounts.

The three-week payout deadline is facilitated by a new system implemented by SDIC that kicked off this week.

'It is a programme we developed in conjunction with our 33 members which enables them to send us critical customer information quickly in the event of a failure,' said Mr Ooi.

'The data will be encrypted to protect customers' privacy, and the system will help us to process payouts to depositors faster.'

Previously, there was no declared timeframe for payouts.

Depositors who need cash urgently can also apply for emergency payouts. These will not be for the full amount to be compensated; a portion will be paid out to help tide depositors over.

Mr Ooi said the amount to be processed in such emergencies would depend on individual circumstances.

SDIC will also begin simulation exercises with members in October to test the readiness of the new system.

'At all times, customer data will be masked so as not compromise confidentiality of the data,' Mr Ooi assured.

The Deposit Insurance Fund, from which SDIC will draw payouts, is estimated at nearly $42 million, built up from premiums paid by members.

Customers of members of the scheme with Singapore dollar deposit accounts are automatically insured for up to $20,000 of deposits, net of liabilities.

This article was first published in The Straits Times on May 30. 2008.