Deposit Insurance In Singapore – Known Facts About SDIC

In the realm of financial security, few assurances offer as much peace of mind as a government-backed deposit insurance scheme. For Singaporean depositors, this comes in the form of the Singapore Deposit Insurance Corporation (SDIC). Established to safeguard the interests of small depositors, SDIC plays a vital role in enhancing trust in the nation’s banking system. Despite its importance, many remain unaware of how SDIC functions, what is covered, and what it truly means for the average consumer.

This article offers a deep dive into the intricacies of deposit insurance in Singapore, demystifying SDIC and its functions, highlighting its significance in the local financial landscape, and exploring how it protects consumers in times of banking uncertainty.

What Is the SDIC?

The Singapore Deposit Insurance Corporation (SDIC) is a government-owned entity established in 2006, mandated with administering two key schemes: the Deposit Insurance Scheme (DI Scheme) and the Policy Owners’ Protection Scheme (PPF Scheme).

Its core mission is simple but critical—to provide limited compensation to depositors and policyholders in the event a financial institution fails. The SDIC operates independently, though it is closely supervised by the Monetary Authority of Singapore (MAS). This independence ensures neutrality and transparency, while alignment with MAS helps ensure that the schemes are updated in tandem with broader financial regulatory developments.

The Deposit Insurance (DI) Scheme: A Closer Look

Under the DI Scheme, SDIC protects eligible deposits placed with full banks and finance companies in Singapore. In the event a bank or finance company fails, SDIC steps in to compensate depositors up to a defined limit, helping them recover their insured deposits.

Key Features:

• Automatic Coverage: No application is necessary. Once a deposit is placed in an eligible account, it is automatically covered.
• Coverage Limit: As of June 2024, the insurance coverage is up to S$100,000 per depositor per scheme member, for each institution.
• Types of Deposits Covered: Includes Singapore dollar-denominated deposits such as:
  • Savings accounts
  • Fixed deposits
  • Current accounts
  • CPF-related deposits (via CPF Investment Scheme)
• Exclusions: Foreign currency deposits, structured deposits, and investment products such as unit trusts or bonds are not insured.

This protection helps maintain confidence in the banking system, particularly for retail depositors who may lack the resources to monitor the financial health of their banks.

Who Pays for the Insurance?

It is important to note that SDIC is funded by member institutions, not by taxpayers or depositors. All full banks and finance companies licensed in Singapore are legally required to be members of the DI Scheme. These financial institutions contribute annual premiums, which are calculated based on their deposit base and a risk-based premium framework.

This funding model ensures that financial institutions take collective responsibility for the stability of the system, and incentivises prudent risk management.

When and How Is Compensation Paid?

The role of SDIC becomes active only in extreme cases—namely, when a member bank or finance company is declared insolvent and placed under liquidation. Should this occur, SDIC will:

1. Work with MAS and the liquidator to determine insured depositors.
2. Automatically pay out compensation to eligible depositors, typically within seven working days.
3. Use information held by the failed institution to facilitate direct and accurate payments without requiring depositors to file claims.

This rapid payout mechanism is a key feature that distinguishes SDIC from some international counterparts, where claim filing can delay compensation.

How Does the PPF Scheme Relate?

In addition to the DI Scheme, SDIC also administers the Policy Owners’ Protection (PPF) Scheme. This scheme protects individuals who hold life insurance policies or certain general insurance products with participating insurers in Singapore.

While not directly related to deposits, the PPF Scheme complements the DI Scheme by protecting long-term savings and healthcare-related insurance, ensuring a holistic protection framework for the average Singaporean’s financial portfolio.

Products covered include:

• Life insurance policies
• Personal accident and health insurance
• Disability income policies
• Some general insurance (e.g., personal motor insurance, travel insurance)

The coverage limit varies based on product type, but like the DI Scheme, coverage is automatic and funded by premiums from member insurers.

SDIC vs Other Global Deposit Insurance Schemes

In a global context, the SDIC stands out for its:

• Swift payout period of seven working days
• Automatic coverage without requiring enrolment
• Full government ownership, which bolsters public confidence

For comparison:

• The United States’ FDIC insures deposits up to USD $250,000.
• The UK’s Financial Services Compensation Scheme (FSCS) covers up to GBP £85,000.
• Malaysia’s PIDM offers protection up to RM250,000.

Singapore’s limit of S$100,000 may seem modest by global standards, but given the city-state’s relatively smaller population and robust financial regulations, this level of protection has proven effective.

Public Awareness and Trust

Despite its extensive coverage, awareness of SDIC remains moderate among the general public. Many depositors are unaware of whether their deposits are covered, especially when it comes to newer digital banks or investment-linked accounts.

To address this, SDIC has undertaken a range of public education initiatives, such as:

• Collaborating with banks to include SDIC logos on deposit-related documentation
• Running social media campaigns to educate consumers
• Providing transparent, multilingual resources on its website

Greater public knowledge can prevent panic in times of financial stress and help consumers make informed decisions about where they place their savings.

Common Misconceptions About Deposit Insurance

1. “All my money in the bank is covered.”

Not necessarily. Only up to S$100,000 per depositor per institution is insured. If you hold S$300,000 in one bank, only a third is covered.

2. “Foreign currency accounts are included.”

False. Only Singapore dollar-denominated deposits qualify under the DI Scheme.

3. “Investment products from banks are protected.”

Again, no. Structured products, stocks, bonds, and unit trusts—even if sold by a bank—are not insured by SDIC.

4. “I need to register for coverage.”

Untrue. Coverage is automatic and free for all eligible deposits.

How Should Savers Manage Their Risk?

Given the S$100,000 cap per institution, depositors with higher balances may wish to consider:

• Spreading deposits across multiple banks
• Using CPF or SRS accounts, which come with separate protections
• Staying informed on which financial institutions are SDIC members (a full list is available on SDIC’s website)

This strategy ensures optimal protection while still enjoying competitive interest rates across the market.

Final Thoughts

The Singapore Deposit Insurance Corporation plays an often-underappreciated yet crucial role in maintaining public trust in the nation’s financial system. Its proactive, well-structured schemes ensure that in the unlikely event of a bank failure, the average depositor is not left in financial ruin.

By automatically covering up to S$100,000 per depositor per institution, SDIC provides a valuable safety net that underpins the stability of Singapore’s highly regarded banking sector. Nevertheless, personal awareness and prudent financial behaviour remain key. Knowing what is insured—and what isn’t—can make all the difference in uncertain times.

For Singaporeans and residents alike, the assurance that your hard-earned savings are protected offers more than just peace of mind—it reinforces the robust, resilient nature of the nation’s financial ecosystem.