When the economic climate becomes uncertain – perhaps due to a pandemic, rising bank failures, or fear of an upcoming recession – it's natural to wonder if your money is safe in the bank. The good news is that your funds are protected, offering peace of mind and removing any need to withdraw for security. This security is a result of the system that insures your deposits.

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We all know that banks and finance companies licensed in Singapore are under the supervision of MAS. However, did you know that this alone does not guarantee the safety of your deposits? Your money is protected by a Deposit Insurance scheme provided by SDIC, protecting your cash in the unlikely event of bank failure.

Almost all banks in Singapore are covered by SDIC, including:

CIMB | Citibank | DBS | HSBC | Maybank | OCBC | Standard Chartered | UOB

As long as you are holding deposits in SGD with any of the covered banks, whether that is in a savings account, fixed deposit scheme, or CPF Investment Scheme, you can enjoy peace of mind that your holdings are insured. This means that SDIC will reimburse you in the case of bank failure. Keep in mind that structured deposits, deposits held in foreign currencies, as well as investment products are not insured under SDIC.

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Given the economic ups and downs of recent times – from a global pandemic to the imposition of trade tariffs – it's natural to wonder about the safety of your money in banks. Rest assured, your money is completely safe as long as it is held by SDIC-insured banks and your balances remain within the insurance limits.

Banks offer a dependable haven for your money, shielding it from theft, loss, and other unforeseen events. In fact, stashing cash at home offers far less security against burglars or the devastation of a fire.

A bank failure occurs when a bank can no longer meet its obligations to its depositors. Imagine a scenario where many customers fear their bank is running out of money. This fear can trigger a mass withdrawal of funds, known as a bank run. 

Bank runs pose a significant danger because these rapid withdrawals can quickly drain a bank's readily available cash. Simultaneously, the bank's remaining assets may not be easily converted into cash, creating a self-fulfilling prophecy of failure.

Take MoneyOwl as an example. Started in 2018, the financial planning platform had ceased all operations by 31 December 2023. Clients were transferred to iFAST, where they could continue utilising the same services at the same fees. As iFAST was the custodian entity of client-held deposits by MoneyOwl, client funds were unaffected by this sudden closure. 

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In the event that a financial company closes down, its first course of action is to find another company to acquire it, ensuring a seamless transition for customers and allowing them to continue managing their accounts as usual. If that isn't feasible, the SDIC steps in to directly compensate depositors for their insured deposits, up to the SDIC's coverage limits, typically within a few days of the bank's closure.

Going back to the example of MoneyOwl, where client funds were unaffected by their sudden closure, it’s important to understand who really holds your funds. For instance, when you purchase insurance through a third-party financial advisor, your policies are held by the insurance provider, not the advisor. In the event that your advisor goes out of business, your funds are unaffected as they are held by the insurer. That is exactly what happened with MoneyOwl and iFAST.

Let’s take a look at another example: Smartly. The robo-advisor closed down in the midst of the pandemic in 2020, and clients were compelled to liquidate their investments in a period of high volatility. 

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While it’s highly unlikely that your bank will collapse, there has been precedence for it. A British merchant bank with more than 200 years of trading – Barings Bank – collapsed in 1995 following the unauthorised trades made by banker Nick Leeson in its Singapore branch. With the loss amounting to more than a billion dollars, Barings Bank was declared insolvent. 

Following the collapse of Signature Bank and Silicon Valley Bank in 2024, MAS has issued a statement declaring that banks in Singapore retain strong liquidity and are well capitalised, which will allow them to weather any storms caused by global economic factors. 

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The most sensible approach is to withdraw money from the bank only when you need cash. Within the secure environment of a bank, your funds are significantly less susceptible to theft, loss, and unforeseen disasters such as fires. Moreover, depending on the type of bank account you hold, your money could be actively earning interest, a benefit you would entirely forgo by storing cash at home. 

Consider this: if you maintain a balance of $10,000 in a high-yield savings account (HYSA) with an annual percentage yield (APY) of 4% for a year, you would accrue approximately $400 in interest. This stands in stark contrast to the $0 return you would realise by keeping the same amount of cash at home!

» MORE: Choosing between fixed deposits and HYSAs

Although your money enjoys a high degree of safety in a bank, vigilance against scams and fraud remains crucial. Proactive measures and sound habits can significantly bolster the protection of your funds. These include:

• Exercising caution with digital communications: Avoid clicking on links embedded in emails or text messages that claim to originate from your financial institution. Instead, access your account directly by typing the bank's official website address into your browser or by calling their verified phone number.

• Guarding your sensitive information: Never disclose passwords or personal details to individuals contacting you under the guise of representatives from your bank, utility provider, or telco. Instead, independently reach out to the respective institution via their official channels to verify any requests if necessary.

• Resist pressure and urgency: Never engage in financial transactions when prompted by unfamiliar sources who employ high-pressure tactics. This applies both to individuals you don't know and those whose identity you cannot definitively confirm.

» MORE: How to avoid getting scammed

Despite the uncertainty that shifting financial trends and current events can cause, robust systems are in place to safeguard your bank account funds and maintain efficient money management.