THE Government's backing of $150 billion in reserves to guarantee bank deposits is more than sufficient, as the likelihood of a bank going bust in Singapore is small, said Minister for Trade and Industry Lim Hng Kiang.
'The likelihood of a bank failure as a result of problems in Singapore is small, as our banking system is sound and closely supervised,' said Mr Lim in Parliament yesterday.
'Even if a bank were to fail here, it should still have substantial assets to meet its liabilities to depositors. The $150-billion backing is an amount that will be ample to meet any eventuality, except the most remote.'
The Government said last Thursday it would guarantee all Singapore-dollar and foreign- currency deposits of individual and non-bank customers of banks, finance companies and merchant banks, in a move to boost confidence in the country's financial institutions.
The deposits totalled $700 billion, said Mr Lim, who is also deputy chairman of the Monetary Authority of Singapore.
Before the guarantee, the Deposit Insurance Scheme insured the first $20,000 of all savings in full banks and finance companies in Singapore.
Yesterday, the minister also spoke about the outlook for Singapore's economy.
He said growth would remain weak in the next few quarters, and inflationary pressures would take time to ease.
He added that Singapore's exports and manufacturing activity have slowed on the back of the global financial crisis, and that the country's jobless rate for this year would be higher than the 2.1 per cent seen last year.
'We must be prepared for weaker growth in the next few quarters, and possibly longer.'
He said that while Singapore's inflation, which hit a 26-year high of 7.5 per cent in April, May and June, would continue to ease, it would take time for the decline in prices to be reflected in the consumer price index.
'I must caution that inflation will continue to be sticky for the next few months,' Mr Lim said, adding that the authorities were 'confident inflation will revert back to 2-3 per cent' next year.
Prime Minister Lee Hsien Loong said last Friday that Singapore had gone into recession and the outlook over the next 12 months was uncertain.
But, despite the problems in the United States, Singapore's three local banks - DBS, United Overseas Bank and Oversea-Chinese Banking Corp - are well capitalised and their asset quality remains strong, said Mr Lim.
On jobs, he said the number of retrenchments in Singapore has stayed at the same level as in previous quarters, but it may climb as the economy slows further.
'Moderation of employment growth is expected in the second half of 2008, and through to 2009,' he said.
