On June 27, the Monetary Authority of Singapore (MAS) released a document for public comment that included a proposal to raise the amount of deposit insurance (DI) coverage per depositor to $100,000 as well as to enhance the DI Scheme’s operational effectiveness and clarity.

The DI coverage per depositor per plan member is now $75,000 per person. With the planned increase, the vast majority of smaller depositors will continue to have their full coverage, keeping up with the rise in average bank balances.

The proposed adjustment will ensure that DI continues to achieve its main goal of safeguarding small depositors in the event of a bank failure and result in 91% of depositors being fully covered by deposit insurance.

This level of deposit insurance strikes the right balance between providing a high level of protection for depositors and controlling the cost of the insurance, which, if it is too expensive, will ultimately be passed on to consumers.

In order to improve transparency on how DI compensation is calculated, further proposals include giving the MAS the authority to specify a precise period when deposit balances are taken as final; and enacting a time limit for filing claims for DI compensation in order to save administrative costs.

Ho Hern Shin, the deputy managing director for financial supervision at MAS, explains that the central bank‘s suggestions are not a reaction to the pressures that some banks overseas experienced earlier this year.

“Pre-emptive safeguards, which include sound regulation and strict supervision by MAS and effective governance and risk management by banks themselves, are the key to ensuring a safe and resilient banking system,” she continues.