(Delivered in Parliament on 9 July 2018)
Mr Deputy Speaker sir, the Singapore Deposit Insurance Corporation (SDIC) is the administrator and manager of the Deposit Insurance Fund and Policy Owners Protection Fund that aim to ensure prompt compensation to depositors and policy owners in the event of a member bank or insurer failing.
The aim of this Bill is largely to clarify technical issues and enhance the operational efficiency of the two schemes administered by the SDIC. It also raises the DI coverage from $50,000 to $75,000 which would achieve 91% coverage of fully insured depositors.
I do not oppose these changes, which are a step in the right direction. However I will pose some questions relating to the Bill’s provisions and the nature of these two schemes.
At this point I declare my interest as the CEO of a market research and business consulting firm that works with various commercial and governmental entities in the financial services sector locally and globally.
Firstly, the winding up process should a member bank or insurer become insolvent can be time-consuming. How prompt would be the compensation to depositors and policy owners?
Of course this would vary on a case by case basis depending on the complexity of the case. But does the SDIC aim for a specific time frame within which the compensation should be paid, such as for example 1 month, 3 months or 6 months? The longer the process takes, the higher the potential loss of interest income and hence the opportunity cost to depositors and policy owners.
Secondly, how does the SDIC manage the DI Fund and PPF Fund monies?
For the DI Fund it is stated on the SDIC’s website that “The DI Fund will be invested in safe and liquid assets such as securities issued by the Singapore Government or MAS, deposits with MAS, any debenture or debt security issued by Singapore Sukuk Pte. Ltd., and other assets approved by the Minister.” For the POP Fund it is stated that “The PPF Life Fund and PPF General Fund will be invested in safe and liquid assets such as securities issued by the Singapore Government or MAS, deposits with MAS, any debenture or debt security issued by Singapore Sukuk Pte. Ltd. and other assets approved by the Minister.”
Does SDIC outsource the management of the funds to Asset Management institutions to manage and if so, what is the mandate for these Asset Management institutions, given that the Minister can approve investment in other assets than Singapore government instruments? Are there prescribed limits to the kinds of asset classes and asset characteristics that investment can be extended to – for example rated fixed income products with a specific high rating from independent credit rating agencies?
Thirdly, is the ability of the DI and POP Fund to meet their obligations in respect of the coverage limits regularly reviewed and stress-tested by MAS, or required to be self-reviewed and stress-tested? In an insolvency case involving a large bank or insurer, or several of these, this ability could be put to the test.
Fourthly, on the change whereby the accounts of the SDIC need not be audited by the AGO or an agency appointed in consultation with the AGO, I would like to ask why the AGO need no longer play a role with respect to the external audit for these funds.
Lastly, on the website of the SDIC, it is stated that the MAS may exempt life or general insurers from being members of the PPF Scheme. May we know how many insurers are so exempted and what measures are in place to protect policy holders in these cases.