18. Why is deposit insurance necessary? I thought Singapore’s banking system is very safe?

A: Yes, Singapore’s banking system is safe and well regulated. The MAS has rules to ensure that banks and finance companies are well managed, well capitalised and have enough liquidity to meet any unforeseen needs.

Deposit insurance is just another layer of protection for small depositors. These are hard-earned savings and while the going is good, it is better to build up an insurance fund than wait for a crisis to happen. Experience elsewhere has shown that if you have a mechanism in place to guarantee the safety of deposits, people are less likely to panic if and when things go wrong.

My comment:

The Singapore Deposite Insurance Corp is meant for "for small depositors". No wonder the amount is insured up to S$20,000 only! In the past I had always though that banks cannot default. However, does anyone know that many banks in the US had defaulted since 2000? Here are the list of US banks defaulted: http://www.fdic.gov/bank/individual/failed/banklist.html. I feel that cash deposits in banks should be insured in larger amount. It has been said that without a million dollar in retirement funding, it is not possible to retire. Sounds good in theory but what is the point if the risk of losing it all (save the first S$20,000) if the money which the bank is kept defaults? The government should increase the insured amount to a more sensible amount like S$100,000 - indexed to inflation of course.