Singapore U-turn, guarantees all bank deposits

Gotcha, just what I wrote in my previous post right after midnight last night! Hong Kong fully guaranteed bank deposits two days ago. Can Singapore not follow suit? I asked. Of course, not!

But I am surprised that Singapore caved in so quickly. This is a complete U-turn at warp speed!

It is a total reversal of Singapore’s earlier policy, which was:

• Singapore dollar bank deposits were insured for up to $20,000
• And if a bank failed, the depositors were to receive the sum insured not from the government but from the premiums paid by banks as members of the Deposit Insurance Scheme.

Now reports Channel NewsAsia:

Singapore government said it would guarantee all Singdollar and foreign currency deposits of individual and non-bank customers in licensed banks, finance companies and merchant banks…

The guarantee will be backed by S$150 billion ($101.5 billion) of the reserves of the Singapore government.

Hmm, the reserves pledged are still less than the portfolios of the two Singapore sovereign wealth funds, Temasek Holdings and Government of Singapore Investment Corporation (GIC).

And please note, the government is guaranteeing foreign currency deposits as well!

The Finance Ministry and MAS made the reason behind the decision pretty clear in a joint statement today. Translated into plain English, it means the Singapore financial system remains stable; but the government decided to prevent any outflow of money into countries which have already guaranteed bank deposits.

Hong Kong’s Financial Secretary John Tsang Chun-wah used almost the same words to explain why Hong Kong decided to fully guarantee bank deposits.

Bank depositors will no doubt welcome such competition!

The only possible complaint: Why so slow, Singapore? Usually, so ahead of the curve, Singapore was for once playing catch-up with Hong Kong. America, Britain, Germany, Ireland, Greece, Spain, Denmark, Australia, New Zealand and other countries where bank deposits are already fully guaranteed by the government.

But one shouldn’t look a gift horse in the mouth.

Thank you, Singapore!

Comments

[Panzer]

I think it's more a case of Singapore Inc worried about losing depositors and high net worth individuals moving their bank accounts over to HK our regional competitor if the Govt didn't guarantee deposits. The coverage to include foreign currency deposit IMHO strongly suggests that policy intent. Remember, anything that helps boost GDP boosts Ministerial Salaries and Bonuses. Let's have more good years for Singapore Inc!

[gerry]

the govt might as well have kept quiet.. the only reson they have for guaranteeing the deposits is to protect foreign money.. so that there won't be an exodus.. again singaporeans take a no. and queue at the back of the line.. this govt. is useless in protecting the welfare of its people.. in this case . the protection is a secondary by-product of the process of protecting others(foreign).. I can almost believe that if the govt could put a clause to exclude locals from the guarantee.. they would.. coz.. the technocrats know best.. the importance of foreign money must be of greater priorty than the well-being of locals and their families... some agency must be benefitting from ALL this.. maybe the govt. will come around by saying that to protect the natives the invaders have to be helped..(harsh words but they are used only as an analogy).. NB..analogy