Malaysia, Singapore guarantee bank deposits

Bank Negara's guarantee will cover all ringgit and foreign currency deposits in banks, investment banks and financial firms

SINGAPORE/KUALA LUMPUR: Singapore and Malaysia yesterday pledged to guarantee all local and foreign currency bank deposits, joining governments across the world in shoring up confidence in the embattled banking system.

The neighbouring Southeast Asian countries announced within minutes of each other they will guarantee bank deposits until December 2010.

In the past week Hong Kong, Australia and New Zealand have provided blanket guarantees on all deposits amid a crisis of confidence in global financial markets.

Their actions, however, threatened to draw deposits from neighbouring Asian countries, leading other governments to follow suit with matching assurances.

Singapore’s finance ministry and central bank said in a joint statement the government will back all local and foreign currency deposits in banks, finance firms and investment banks in the country.

The guarantee will be backed by S$150 billion (US$101.4 billion) of government reserves.

“Although Singapore’s banking system continues to be sound and resilient, the government has decided to take precautionary action to avoid an erosion of banks’ deposit base and ensure a level international playing field for banks in Singapore,” the statement said.

Malaysia’s central bank said the government guarantee will cover all ringgit and foreign currency deposits in banks, investment banks and financial firms.

Bank Negara also said access to its liquidity facility will be extended to insurance firms and takaful operators that it supervises and regulates.

It added Malaysia’s banking system was sound and well capitalised, and “it is unlikely that these guarantees will be called upon”.

“These measures are pre-emptive and precautionary, since Malaysian financial institutions are well-capitalised with ample liquidity, and confidence of depositors remains intact,” it said.

Source: Business Times Online
Date: 17/10/2008