On 11 September 2014, the Monetary Authority of Singapore (the “MAS”) issued a consultation paper entitled “Proposed Amendments to the Deposit Insurance and Policy Owners’ Protection Schemes Act” (the “Consultation Paper”). The consultation closes on 13 October 2014.
The Deposit Insurance Scheme (the “DI Scheme”) was introduced in 2006 in order to protect the core savings of small depositors. The DI Scheme is administered by the Singapore Deposit Insurance Corporation (“SDIC”). The primary legislation governing the DI Scheme is the Deposit Insurance and Policy Owners’ Protection Schemes Act (the “Act”).
The MAS proposes to make technical amendments to the Act and MAS Notice on Deposit Insurance Returns (“MAS Notice DIA-N01”) to enhance the clarity and operational efficiency of the DI Scheme. The Act was last amended in 2011.
The proposed amendments as set out in the Consultation Paper are set out briefly below:
- Protection of SDIC’s directors and employees: Section 70 of the Act currently protects SDIC’s directors and employees from liability for anything done in the exercise of their functions in good faith and with reasonable care. The MAS proposes to expand this protection by removing the requirement for “reasonable care”, in order to enable them to carry out their functions with greater assurance and timeliness and facilitate deposit insurance (“DI”) pay-out to depositors within a short timeframe. This proposal is aligned with the recommendation in the Core Principles for Effective Deposit Insurance Systems, developed by the Basel Committee on Banking Supervision and the International Association of Deposit Insurers. The requirement for SDIC’s directors and employees to act in good faith will be retained.
- Singapore dollar deposits exceeding S$50,000: Depositors are protected up to S$50,000 under the DI Scheme. The Consultation Paper proposes to amend the Act to expand the SDIC’s function to include the submission of a consolidated proof of debt on behalf of the depositors to the liquidator of the failed DI Scheme member, listing out depositors with Singapore dollar deposits in savings, current and time deposit accounts exceeding S$50,000 for each depositor. The liquidator could then take reference from this list, without depositors having to file separate proofs of debt. When a DI compensation is triggered, the SDIC intends to send a letter to each depositor informing him of the amount of DI compensation he will receive. Should any depositor disagree with the amount stated, he will be able to submit a supplementary claim to the liquidator. The MAS also proposes to amend the Act to allow the DI Fund to be used to enhance the SDIC’s system for the generation of the consolidated proof of debt, and such other ongoing costs as may be incurred.
- Expenses incurred in communicating with depositors: The MAS proposes amending the Act to clarify that the SDIC is entitled to recover expenses incurred in connection with its communications with depositors and the public in the event of a DI compensation payout, from the failed Scheme member’s assets.
- Information provided to MAS by Scheme members: Currently, where a Scheme member furnishes information to the MAS under the Act, the MAS treats such information as secret and may only disclose such information under specific circumstances as set out in the Act. The MAS proposes to introduce a provision to specifically enable the MAS to disclose information collected from Scheme members under the Act, where it is required to do so under any written law or by a Singapore court order.
- SDIC’s auditor: The MAS proposes to amend the Sixth and Seventh of the Act to state more generally that the accounts of the DI Fund, the PPF Life Fund, the PPF General Fund and the SDIC must be audited annually by an auditor. The requirement to consult the Auditor-General before appointing commercial auditors will also be removed.
- Sharing of data with SDIC: The MAS proposes to share the data received under MAS Notice DIA-N01 with the SDIC to enhance the SDIC’s operational efficiency. The data is information on every DI Scheme member’s insured deposit base and the number of insured depositors as at the close of business on 31 December of each year. SDIC will keep confidential the information, which may only be disclosed under certain circumstances.
- Triggers for DI compensation payout: The Act currently does not include voluntary winding up as a possible trigger for DI compensation payout. This means that in such a scenario, the MAS must make a separate determination. It would therefore be more expedient to rely on a Scheme member having been voluntarily wound up as one of the triggers to consider if DI compensation payout should be made.
- Date for quantifying insured deposits: The MAS seeks to amend the Act to further clarify the quantification for various scenarios that would trigger the DI compensation payout as set out in the Act, such as when a Scheme member is wound up by a court order in Singapore, where the DI Scheme member is wound up voluntarily in Singapore, and where the DI Scheme member is wound up under foreign law.