What should you do if your bank has collapsed overnight?

Banks around the world should probably check their feng shui, because things are not going well. Hot on the heels of a spectacular triple collapse featuring Silicon Valley Bank, Signature Bank and Silvergate Capital, the latest victim is none other than Credit Suisse.

Yup, you heard that right — Credit Suisse has fallen

On March 19, 2023, the Swiss bank was taken over by its rival, UBS Group. Credit Suisse had already been in trouble for years due to factors like big losses and juicy scandals involving spying and cocaine cash laundering.

Following an announcement from the bank that there were some problems with its reporting process for 2021 and 2022, one of their biggest shareholders, the Saudi National Bank, which holds almost 10per cent of their shares, announced that it would not be increasing its investing holdings. That sent other investors into a panic, and Credit Suisse’s share price plunged.

Why is this so scary? Credit Suisse is one of the world’s biggest banks and also has a strong presence in Singapore. Its collapse could spark off a global financial crisis.

Luckily, Credit Suisse has been taken over by UBS, but the bank’s shareholders are likely to suffer, and customers will soon feel the pinch as well, since changes in operations will affect products and services and branches are likely to close.

ALSO READ: What happened at Credit Suisse and how did it reach crisis point?

How do banks work?

Scared your own bank is going to collapse? Knowing how banks work can give you an idea of how you could potentially be affected.

If you have a savings account, you store your liquid cash there because you trust it will still be there tomorrow. You also want to be able to spend or withdraw the cash whenever you need it.

So, what happens if you wake up and discover that the bank has crumbled overnight? The good news is, if your bank branch is based in Singapore, you won’t lose your SGD—at least, not all of it.

That’s because the Singapore Deposit Insurance Corporation (SDIC) insures SGD deposits in member banks. This is covered in a later section, so scroll down if you want to find out more how much of your money is protected by SDIC.

If the bank is not rescued by a takeover, it will be liquidated. In other words, its assets will be sold off to pay those to whom the bank owes money.

Liquidation doesn’t happen overnight — we’re talking months or even years. In the meantime, the regulator will take control of the bank to ensure it runs with as little disruption as possible.

That said, as a customer, it’s not business as usual, and you will be inconvenienced. Your checks might bounce, bank branches might close down, and you might fail to receive deposits.

What do you do if you find out that your bank has collapsed?

If you thought those dreams about your teeth falling out were bad, there’s a new nightmare in town — your bank collapsing as you sleep.

While we certainly do not wish our readers any ill luck, the way the world is going now, you should not rule out the possibility of your bank collapsing someday, too.

In this doomsday scenario, what should you do? Here’s a quick and dirty survival guide.

Step 1: Don’t panic

A Singaporean’s worst nightmare is something happening to the cash we’ve slaved away to earn. Be that as it may, try your best to remain calm and, most importantly, do not make any hasty decisions.

You might be tempted to rush to withdraw all your cash and liquidate your investments, but you should make sure you’re making all decisions in an informed manner rather than as a knee-jerk reaction.

Step 2: Find out what happened from various sources

The earlier you get up to speed on what is really happening with your bank, the better. Sources to turn to include credible news outlets and your bank’s official website. Try to gather news from official and reliable sources — in other words, you should not be getting all your information on TikTok.

Your next step is to seek advice from your well-informed peers and/or financial advisor, who may be able to offer guidance on how to protect your money. Again, you want to be careful of unreliable sources — your parents’ mahjong kakis’ WhatsApp group, for instance, may not exactly be a wellspring of valuable advice.

Step 3: Contact your bank

If you haven’t received any communication from your bank, you should contact them asap to get as much information as you can on the situation. What’s going to happen to my money? What should I do next? That said, don’t take everything they say as the gospel truth, as it’s likely that employees will be instructed on what they can and cannot reveal.

Step 4: Check if your bank is protected under SDIC

If your money is an SDIC member bank, you’re in luck, as your SGD deposits will be insured. These deposits include cash in savings, fixed deposits, and current accounts.

A total of up to $75,000 of your deposits with each member bank is insured. That’s one reason you might want to avoid keeping more than $75,000 with a single bank. Even if you have multiple accounts with a particular bank, you only get a total of $75,000 worth of deposits insured across all your accounts with the bank.

In addition to the above, up to $75,000 (per member bank) of any money held via the CPF Investment Scheme, CPF Retirement Sum Scheme or Supplementary Retirement Scheme is separately insured.

Unfortunately, foreign currency deposits, structured deposits or investment products like shares and unit trusts are not insured.

Most banks operating in Singapore are SDIC member banks. Here’s a full list.

• Bangkok Bank Public Company Limited

• Bank Of America, National Association

• Bank Of China Limited

• Bank Of India

• Bank Of Singapore Limited

• BNP Paribas

• China Construction Bank Corporation

• CIMB Bank Berhad

• Citibank Na

• Citibank Singapore Limited

• Credit Agricole Corporate & Investment Bank

• DBS Bank Ltd

• GXS Bank Pte. Ltd.

• HL Bank

• Hong Leong Finance Limited

• HSBC Bank (Singapore) Limited

• ICICI Bank Limited

• Indian Bank

• Indian Overseas Bank

• Industrial And Commercial Bank of China Limited

• JPMorgan Chase Bank, Na

• Malayan Banking Bhd

• Maribank Singapore Private Limited

• Maybank Singapore Limited

• Mizuho Bank, Ltd

• MUFG Bank, Ltd

• Oversea-Chinese Banking Corpn Ltd

• PT Bank Negara Indonesia (Persero) Tbk

• RHB Bank Berhad

• Sing Investments & Finance Limited

• Singapura Finance Ltd

• Standard Chartered Bank (Singapore) Limited

• State Bank of India

• Sumitomo Mitsui Banking Corporation

• The Bank of East Asia Ltd

• The Hongkong and Shanghai Banking Corporation Limited

• Trust Bank Singapore Limited

• UCO Bank

• United Overseas Bank Ltd

Next steps if your bank is an SDIC member

If your bank collapses and it is an SDIC member bank, you do not need to file any claims. SDIC will calculate your payouts based on the banks’ records.

SDIC will then send you the money through a cheque or cashier’s order to the mailing address you registered with the bank. MAS will activate the payout once the bank collapses, and it will be sent out within 7 days thereafter.

What if you have more than $75,000 with the bank? SDIC will compensate you for the $75,000, and then file a claim on your behalf to the bank’s liquidator for the remaining amount. This doesn’t guarantee you’ll get the rest of your cash back, but it at least saves you from having to do the administrative work of trying to claw your money back when the bank is being liquidated.

Although SDIC does most of the dirty work for you, you should still check their website the minute your bank collapses as they will publish information for customers of the collapsed bank. You will also be able to check your bank balance as well as the amount of compensation you are due to receive through SDIC’s Insured Depositors’ login portal.

Next steps if your bank is not an SDIC member

Just because your bank isn’t an SDIC member doesn’t mean you’ve lost all your money. But it might be harder to get it back.

Call up your bank to ask how and when they will pay back the money they owe you. The bad news is, this could take months or years, and there is no guarantee you’ll get everything back. In the short term, there is a good chance that the bank will still function as usual, and you’ll still have access to your cash via ATM.

Should you withdraw all your cash? Technically, doing so is detrimental to other customers. If everybody rushes to withdraw their cash at the same time, it becomes much harder for the liquidator to wind up the bank and ensure everyone gets paid. But admittedly, if you manage to safely withdraw all your cash, your sleepless nights will be at an end.

ALSO READ: Bank panic raises spectre of 2008 financial crisis, may bring lasting change

What should you do if you feel like your bank might be in trouble?

Withdrawing all your cash is the knee jerk reaction that most customers resort to, but if everyone withdraws their cash at the same time, this could usher in the bank’s demise.

Suspect your bank might be breathing its last breaths? Then the first thing you should do is to check your balance and find out whether you’re using an SDIC member bank (you probably are). If your bank is an SDIC member and you’ve got $75,000 or less across all your deposits, it’s better to avoid withdrawing the cash so you don’t hasten the bank’s collapse. For balance amounts over $75,000, you can withdraw at your own risk, but with the knowledge that withdrawing too much at the same time as hordes of other customers could cause the bank to fall.

Lastly, keep yourself in the loop by subscribing to various news sources. The only thing scarier than a bank run is a silent bank run. This is where depositors withdraw funds electronically in large volumes without physically entering the bank. So instead of heading down to a bank physically, queuing, and talking to a teller, we can now digitally retrieve our assets with a click of a button in a matter of seconds. Well, we have our cashless digital society to thank for that.

If it offers a peace of mind, MAS has assured that “Singapore’s banking system remains sound and resilient” and that “banks in Singapore are well-capitalised and conduct regular stress tests against credit and other risks. Their liquidity positions are healthy, underpinned by a stable and diversified funding base.”

Phew, I guess.

This article was first published in MoneySmart.