By Imelda Saad, Channel NewsAsia | Posted: 29 May 2008 1850 hrs
SINGAPORE: Banks and financial institutions here are gearing up to ensure speedy insurance payouts to depositors in the event of closure.
The Singapore Deposit Insurance Corporation (SDIC) has gazetted that all full banks and financial companies implement systems to facilitate the transfer of funds within three weeks.
The US sub-prime crisis got investors jittery about their deposits in financial institutions.
Even though there are no cases of banks going bust here, the Monetary Authority of Singapore (MAS) does not guarantee the soundness of individual financial institutions.
Under the law, all full banks and financial institutions must automatically insure customers’ deposits for up to S$20,000, and the insurance corporation is now moving to ensure faster payouts.
Customers can also apply for emergency payouts in the interim, if they need money urgently.
Ooi Sin Teik, CEO of Singapore Deposit Insurance Corporation, said: “The whole objective behind this three-week target is not only to assure depositors that their money is protected, but also to pay them as quickly as possible. Hopefully, this will give them greater confidence in the financial system.
“If this system is not in place, looking at jurisdictions around the world, it could take as long as four months before depositors get paid.”
The Singapore Deposit Insurance Corporation said although the new initiative has nothing to do with the US sub-prime crises, its implementation is timely.
To get financial institutions ready, the deposit insurance corporation will test out its new system over the next four months.
“Banks and finance companies have until October 1 of this year to get themselves operationally ready, so that at the time they are notified, they can provide SDIC with the information at a very short notice,” said Mr Ooi.
The compensation will be paid out of the Deposit Insurance Fund which, to date, stands at about S$42 million.