Return to deposit insurance limit on the cards: THE STAR

THE global economy is expected to stabilise by the end of next year and Malaysia is likely to return to the previous deposit insurance limit from the current blanket guarantee on all deposits.
“The government guarantee is until the end of 2010, which means that over this period of time, depositors are fully protected. The blanket guarantee is a pre-emptive move. Part of our corporate plan this year and next will be transitioning from this blanket guarantee back to the limited protection by PIDM’’ said PIDM CEO Jean Pierre Sabourin, reports The Star (April 6, 2009).
Currently, that is limited to RM60,000 per depositor per bank, which is likely to be reviewed, depending on the circumstances.
That transition will be easier for Malaysia as it has maintained the RM60,000 guarantee by PIDM. Above that is guaranteed by the Government but administered by PIDM.
Hong Kong, Malaysia and Singapore have announced a blanket guarantee of two years. However, PIDM reviews the situation on an ongoing basis and will make its recommendation to the Government, the report added.
As part of a deposit insurance tsunami, countries had substantially raised the protection for depositors following the worst banking crisis that the world had not witnessed for a long time. The US raised its deposit insurance from US$100,000 to US$250,000 and Europe from 20,000 euros to 50,000 euros, then 100,000 euros. Australia, which never had deposit insurance, put in a blanket guarantee and was followed the next day by New Zealand and subsequently by Hong Kong, it added.
On Oct 16 last year, the report said Malaysia and Singapore announced a blanket guarantee on all deposits. Taiwan did the same thing and Indonesia’s protection for depositors went from US$8,500 to US$250,000.
“Once put in place, it will be difficult to remove,’’ said Sabourin. PIDM will maintain the RM60,000 and administer the government guarantee above this amount. Essentially, PIDM is responsible for the entire amount of deposits.
The report goes on to say:PIDM will soon charge a guaranteed fee to all its member commercial and Islamic banks for deposits above RM60,000 per depositor and for products not insured, for example, foreign currency deposits.
Apart from member banks, PIDM also charges the guaranteed fee on investment banks, international Islamic banks and deposit taking development financial institutions (DFIs).
“We will take that fee and pay it to the Government which is giving us the guarantee,’’ said Sabourin.
The task of building confidence is a serious matter at PIDM. It involves setting up public awareness campaigns, training at branches, meeting bank officers together with officers from Bank Negara, the Financial Mediation Bureau (FMB), credit counselling and management agency (AKPK) and meeting the public on how the entire system works.
Its brochures, annual reports and website come in several languages. For the call centre, toll free lines are available in four languages and main dialects. “This is what the Government should do ... (explain to people) as slowly as they require and in the language they understand.’’
“I feel confident (that we can deal with any crisis), with all the infrastructure in place and the vision in this country,’’ said Sabourin.
Together with deposit insurance, the system is backed by the AKPK, FMB, Islamic banking system, government stimulus package, guarantees and lately, the Corporate Debt Restructuring Committee (CDRC).
“It seems to me they have put in the whole package,’’ he said. “Everyone is working together. Banks are also working with their clients on any potential financial problems. “They invite customers to talk to them. In some other countries, people don’t even know who to call if they are losing their homes,’’ he said.
Globally, the response to the crisis has been two-pronged. Governments in Europe, Britain and the United States have been putting in a lot of liquidity and capital. The other approach, adopted by countries like Malaysia, is to put in place mechanisms to promote stability and public confidence.