Singapore Government to Guarantee All SingDollar and Foreign Deposits

The Singapore government has announced decision to guarantee all Sing dollar and foreign currencies deposits in a recent press release. All along, the Singapore government has emphasized unnecessary of a full guarantee because the local banking and finance industry is sound and robust. Their decision as announced today is indeed shocking to me.

I quote an excerpt of the press release from the Monetary Authority of Singapore (MAS) site and highlighted some of my interest.

4. In the last week, several jurisdictions have taken extraordinary measures to stabilise financial markets and restart the flow of credit. In particular, recent plans by the European and US Governments to recapitalise their banking systems and guarantee bank borrowings in the wholesale markets have improved confidence.

5. Singapore has not had to undertake similar extraordinary measures, in view of the continuing stability and orderly functioning of the Singapore banking system. However, the announcement by a few jurisdictions in the region of Government guarantees for bank deposits has set off a dynamic that puts pressure on other jurisdictions to respond or else risk disadvantaging and potentially weakening their own financial institutions and financial sectors. This is why 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.

Ministry of Finance (MOF) and Monetary Authority of Singapore (MAS) Joint Press Statement [via]