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MAS Protects Depositors with SG$20 Billion Funding Facility

The Monetary Authority of Singapore (MAS) has funded a liquidity facility of up to SG$20 billion to protect depositors in the city-state.

Based on the latest MAS report that the agency released on Wednesday, MAS has inked an agreement with the Singapore Deposit Insurance Corporation Limited (SDIC) to provide a liquidity facility for shortages on the part of the insurance member in the event that they have to pay the depositors.

MAS stated that there was no request for a drawdown of the facility for the end of the fiscal year on March 31, 2012.
Depositors are currently protected for SG$50,000 under the Deposit Insurance Scheme as stated in the SDIC official website.

MAS gained a net profit amounting to SG$2.77 billion this year, turning around the SG$10.9 billion it lost in 2011. This came as a result of interest gains and income from disposed assets, which was also compensated by the effect of foreign assets being translated into the more stable Singapore currency.

MAS Managing Director Ravi Menon enthused that while the central bank had incurred foreign investment gains of SG$12.1 billion, overall net profit finished at SG2.77 billion because of a stronger exchange rate.

MAS will not be returning the profits to the parliament nor paying the contribution to the consolidated fund as it boosts its reserves for the fiscal year.

Liquidity facilities are a safety net for both deposit insurance parties and insurance receivers when the former falls short of payments to grant the insurance buyer. It promotes financial stability in the banking sector but can otherwise bring it to a halt.

Singapore is constantly improving its insurance policies for depositors as the banking industry remains as one of the biggest clusters that drives economy growth. The industry has grown tremendously into a billion-dollar service industry in less than a decade, making Singapore one of the premier financial hubs in Asia for foreign investors.