SHOULD a bank here fail, depositors will get back up to $20,000 of their savings within three weeks, the Singapore Deposit Insurance Corp (SDIC) said yesterday.

Depositors who need money urgently can apply for emergency payouts, SDIC chief executive Ooi Sin Teik told a news briefing.

Under new rules, banks and finance company members of the deposit insurance scheme will provide information at 24 hours' notice so SDIC can manage payouts promptly in the event of a collapse. As an example, this contrasts sharply with the European Union, where payment can take more than three months.

'While we recognise that every failure is unique in its scale and complexity, our goal is to complete a payout as quickly as possible once the Monetary Authority of Singapore (MAS) has determined that a payout to depositors by SDIC is necessary,' Mr Ooi said.

Payouts will be from a deposit insurance fund being built up with premiums paid by members. At present, the fund has an estimated $42 million.

The premiums, collected over a 10-year period, cover about $47 billion of deposits or 11 per cent of the industry's $330 billion of deposits from non-bank customers.

Although Singapore has a sound banking system, MAS does not guarantee the soundness of individual financial institutions.

SDIC was set up two years ago to administer the deposit insurance scheme.

'Payment of up to $20,000 is net of liabilities,' said Mr Ooi. That means payment is after deducting loans outstanding at the failed bank. According to Mr Ooi, the right of set-off is provided under Singapore's insolvency laws.

In the United States, deposit insurance covers up to US$100,000.

Mr Ooi said the maximum payout amount of $20,000 here would cover 80 per cent of all deposits.

The insurance deposit scheme only covers individuals and charities.

If the fund does not have enough to cover payouts, SDIC can raise funds from the financial markets or go to MAS for temporary liquidity to tide the situation over until the assets of the failed bank are sold, Mr Ooi said.

This article was first published in The Business Times on May 29, 2008.