20,000 back if a bank goes bust

A16 MY MONEY MY PAPER WEDNESDAY APRIL 16, 2008

DEPOSITORS who worry about
their life savings being wiped out
should a bank or finance company
here go bust can rest assured that a
portion of their hard-earned money will
be protected.
They will get back up to $20,000
from each full bank or finance company,
under a scheme by the Singapore Deposit
Insurance Corporation (SDIC) which
automatically insures savings accounts
in Singapore dollar as well as current
and fixed deposits with member banks
and financial institutions.
Deposits under the Central Provident
Fund investment scheme are insured
separately, also up to $20,000,
said SDIC, whose board reports to the
Finance Minister.
The ongoing global credit crunch has
resulted in customers of British bank
Northern Rock rushing to withdraw
their savings from the lender, amid concerns
over its near collapse, last year.
In Singapore, if a bank or finance
company goes bankrupt, the SDIC will
step in to provide compensation, with
payout capped at $20,000.
For example, if you have $10,000 in
fixed deposits with Bank A which has
folded, you will get back the $10,000.
But if you have $50,000 squirrelled
away in Bank B and it goes under, you
will get back $20,000.
Mr Ooi Sin Teik, the chief executive
officer of SDIC, told my paper: “The
amount was capped at $20,000 as this
sum will cover more than 80 per cent of
all depositors.”
Depending on the sum in their individual
accounts, affected depositors will
get their payout through cheques or
have it deposited directly to their accounts
in other financial institutions.
Payouts are drawn from SDIC’s Deposit
Insurance Fund, which member
banks and finance companies pay an annual
premium to.
Part-time bartender Daniel Ang, 21,
was pleasantly surprised to learn that
his “several thousand dollars worth of
savings” are automatically protected.
As for depositors with cash assets exceeding
$20,000, experts recommended
that they seek professional advice on
how to safeguard their savings through
other investment options.
For a full list of the 32 banks and finance
companies covered under the
scheme, visit www.sdic.org.sg
kohht@sph.com.sg
$20,000 back if a
bank goes bust
Insurance scheme here protects depositors
bTW
ON TOP MANAGEMENT REMUNERATION
Japan-Asean free trade pact
R SIVANITHY
SHOULD company bosses
whose shares have performed
worse than the
broad market have their pay
docked because of poor performance?
AGM season is upon us and
rather than attending these
meetings perfunctorily or simply
to savour the gastronomic
freebies on offer as is usually the
case, shareholders should consider
raising some of the issues
that govern top management
pay, especially since paying-
for-performance is widely
accepted as the best basis for remuneration
and so far this year,
there really hasn’t been much
performance – in terms of share
prices – to shout about.
Recall that at this time last
year, corporate chiefs were happily
patting themselves on their
collective backs for churning
out record profits that led to
record share prices, both of
which were used to justify
record salaries.
Nobody asked whether
record performance was simply
the result of a liquidity-driven
market – investors were kept
happy with rising stocks and dividends,
so no questions were
needed.
Conversely, if share prices
are sharply lower, possibly
along falling profits and dividends,
then surely executive pay
must follow suit.
Of course, it would only be
fair to expect such cuts if the performance
was worse than some
agreed-upon benchmark, just as
it is reasonable to pay top dollar
if performance exceeds expectations.
If we accept that senior executives
and company directors are
stewards of a firm’s assets and
that they perform a function
similar to fund managers who
look after clients’ money, why
not reward them the same way
fund managers are?
Money managers are paid according
to how well they beat a
benchmark on the upside as
well as downside, so why don’t
companies structure executive
pay along similar lines?
So if a company’s profit beats
expectations as expressed by
consensus analyst forecasts and
its share price outperforms a
benchmark such as the Straits
Times Index or perhaps one of
the FTSE ST sector indices,
then giving a hefty pay packet to
the firm’s bosses is probably justified.
But if a company’s shares
have lost significantly more
than the agreed-upon benchmark
over the period in question,
then executive salary
should also be lowered in the interests
of consistency.
It’s something certainly
worth thinking about and debated
on. Since managements
themselves can hardly be expected
to initiate such a discussion,
it is incumbent on shareholders
to at least make some attempt
to protect, what is after all, their
own interests at AGMs.
Unfortunately, one big problem
faced by shareholders who
wish to take up these issues is
poor transparency when it
comes to executive pay disclosures.
A leading financial institution
in its latest annual report
did not reveal the exact pay of
its top executives because “such
disclosure does not appear to be
standard industry practice currently,
given the highly competitive
industry conditions”.
You have to wonder at this
sort of faulty logic which dictates
practising transparency only
when conditions are non-competitive,
as if shareholders
would only want to know this information
when employment opportunities
for top bosses are
bad and don’t want to know
when the job market is good.
Whatever the case, companies
should not be allowed to
get away with this sort of opacity,
but until the authorities do
something about beefing up disclosures
in this area, it is left to
shareholders to ask the hard
questions at AGMs.
And while they’re at it, they
should also ask whether poor or
underperforming share prices
should lead to pay cuts for the
bosses.
myp@sph.com.sg