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Did you know your bank only insures your cash up to $75,000?

Eric Dadoun

CEO at Dezy
Published on 08.04.2022
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"Trust is one of the most crucial aspects of the entire financial system."

Yet trust is also elusively difficult to quantify.

In Singapore, the government has made concrete attempts to put in place measures and policies that give cash depositors and policy purchasers an additional layer of assurance in Singapore’s banking sector.

One such measure is the Singapore Deposit Insurance Corporation (SDIC). Here are some important facts about this company, its activities related to your savings, and part of the role they play in safeguarding Singapore’s financial system.

There is a common misconception that if your money is in the bank, it’s 100% safe. This is true up to $75,000. Things are going to get technical but you can’t feel safe or secure if you don’t understand the nuances of how your money flows. 

Let’s start with what the SDIC does, and how it does it.

The first scheme SDIC administers is the Deposit Insurance (DI) Scheme. Under this programme, Singapore Dollar (SGD) denominated deposits held by DI scheme member banks or financial institutions are insured for up to $75,000 per client. 

Money placed with a DI Scheme member bank under the CPF Investment Scheme (CPFIS), CPF Retirement Sum Scheme (CPFRS) and Supplementary Retirement Scheme (SRS) are also aggregated and separately insured for up to $75,000 as well.

In the event a DI Scheme member bank or financial institution fails, clients are eligible for compensation on the aggregate total of all their deposits with the DI Scheme member, up to $75,000.

Think $75,000 of your money in the bank covered is enough?

We’ll leave that for you to decide but it was $50,000 until recently. 

The good news is that all full banks and finance companies operating in Singapore are part of the scheme, unless they have been specifically exempted by the Monetary Authority of Singapore (MAS). As of April 2022, there are 39 members enrolled in the DI scheme.

Who pays for this $75,000 peace of mind goodness? 

Responsibility for payment of premiums for protection under both the DI and PPF schemes falls on the respective banks, financial companies and insurers. Coverage is automatic and no action is required on the part of customers. 

So, we’re covered up to a maximum of $75,000 per financial institution... Financial institutions take care of the coverage. Awesome! 

So I get paid automatically right? Wrong.

Not so fast. There is a process we need to go through first.

An SDIC member institution is deemed to fail and trigger SDIC payouts where:
A) a court order has been made to wind up an SDIC scheme member
B) MAS has determined that the member institution is insolvent, unable or likely to become unable to meet its obligations, or about to suspend payments.

In such situations, no action is needed on the part of customers. SDIC will compute payouts due based on the records provided by the failed member company, and any compensation due will be made to customers

We can all sleep easy knowing that we are covered under such situations. What happens though when financial institutions make questionable decisions or find themselves in tricky situations? Things are less clear in these cases and although Singapore is working towards imposing more stringent safeguards for these cases, it is not as clear as the guidelines governing SDIC. 

So there are cases where SDIC won’t kick in?

Although the intent is for SDIC to safeguard the most vulnerable within Singapore’s banking and insurance sector, there are gaps in the otherwise comprehensive schemes.

Most notably, deposits not denominated in SGD are not covered. This means that money in the increasingly popular multi-currency accounts will not be protected. Structured deposits are also explicitly excluded from SDIC coverage as well.

Furthermore, while funds placed in CPFIS, CPFRS and SRS accounts are protected by SDIC, subsequent investments made using this money (such as unit trusts, stocks, or other securities) are not protected.

OK, that was technical. TL;DR please?

Since its establishment in 2005, there have been no known payouts under SDIC, which is a good thing. This means that the respective contingency funds administered by SDIC continued to grow without drawdowns.

Depositors today are undoubtedly the biggest beneficiaries of this, since they enjoy the fruits of higher premiums paid by customers (by way of banks and insurers) in the earlier years to build up the funds.

These premiums would undoubtedly have been cost-in by these customers by way of higher admin fees and/or lower guaranteed returns on products.

What can we summarise so far?

  • Consumer protection is paramount 
  • Service providers should be responsible for offering insurance coverage 
  • SDIC will cover you up to $75,000 per institution (read: portfolio diversification is wise)
  • SDIC will cover you only in the event of the failure (read: collapse/bankruptcy) of a financial institution
  • SDIC is not a bulletproof solution governing every instance of financial loss
  • Insurance is not a magic bullet in the traditional system

Why are we talking about SDIC? 

At Dezy we are excited to announce full cover insurance on all funds deposited within our service. Learn more about our partnership with InsurAce and how we’re going one step further to protect your funds. 

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    Dezy Pte Ltd UEN: 202116623N, 80 Robinson Road, #08-01, Singapore 068898
    1. Decentralised finance is an emerging field with fluid regulations and not without risk.
    2. Dezy is not licensed by the Monetary Authority of Singapore.
    3. Learn more about how we mitigate risk for consumer protection with insurance, diversification, and technical security measures.
    4. Dezy insurance coverage applies only to certain assets / protocols where insurance is applicable. Learn more about insurance.
    Dezy Pte Ltd UEN: 202116623N, 80 Robinson Road, #08-01, Singapore 068898