Singapore’s finance minister is sitting on the fence and singing two different tunes. First, he says the Singapore banking system is not in trouble and it’s not necessary to follow other Asian countries in providing guarantees for local lenders. But he adds:.“That is something we are studying carefully and I am not making a statement at this point.”
And the reason he’s carefully studying something that is unnecessary? Hong Kong.
Hong Kong yesterday introduced unlimited coverage for bank deposits and set up a facility to provide additional capital to banks if necessary, reports the Hong Kong Standard. Can arch-rival Singapore not follow suit?
Singapore’s Finance Minister Tharman Shanmugaratnam is only prepared to say, according to Channel NewsAsia:
“There is no lack of confidence in our system, and that is something that the market acknowledges. But we are studying the implications of Hong Kong and a few other countries having moved this way.”
Policy to prevent money flowing out
Hong Kong will use the Exchange Fund to guarantee payment of the HK$6 trillion in bank deposits, says the Standard. Money from the fund will also be pumped into the local banks on request. This is to safeguard Hong Kong's banking system and prevent money flowing out of the territory, said Hong Kong’s Financial Secretary John Tsang Chun-wah, who stressed there are no serious banking problems.
Meanwhile, bank deposits in Singapore remain insured up to 20,000 Singapore dollars (about $13,200) with no government guarantees for local lenders.
But the policy may change if Singapore banks become uncompetitive internationally, which probably means if money flows out. The Monetary Authority of Singapore said as much yesterday.
One can appreciate the delicate position Singapore’s finance minister is in — and his prudence. He has to keep an eye not only on the Singapore economy but look over his shoulders at competitors like Hong Kong. He can't let others get ahead in the race for money and business.
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I thought if they are so confident that our banks are well financed than guranteeing deposits wouldn’t cost a dime because they are not gonna need it. Just a confidence booster.
I think they have followed suit