C10. Malaysia Deposit Insurance System

Question 1

what is the purpose of the PIDM Act?

Answer 1

a) To administer a deposit insurance system together with a takaful and insurance benefits protection system
b) To provide insurance against the loss of part or all deposits for which a member bank is liable and provide protection against the loss of part of or all of takaful or insurance benefits for which a member insurer is liable
c) To promote sound risk management in the financial system
d) To promote or contribute to the stability of the financial system

Question 2

what are the main functions of PIDM?

Answer 2

a) Administer the Deposit Insurance System (DIS) and e Takaful and Insurance Benefits Protection System (TIPS) in Malaysia.
b) Assess and collect premiums or levies from member institutions comprising banks, takaful operators and insurance companies on an annual basis. The annual premium is derived based on the sum of the total amount of deposits insured, and the prescribed premium rate under the Malaysia Deposit Insurance Corporation (Annual Premium and First Premium in Respect of Deposit-taking Members) Order 2011.
c) Manage six separate and distinct funds—two for deposit insurance and four for takaful and insurance benefits protection.
d) Undertake resolution of a non-viable member institution.
e) Reimburse depositors’ protected bank deposits should a member bank become bankrupt or make payments to takaful certificate and insurance policy owners for eligible protected benefits should a member insurer becomes bankrupt
f) Comply with Shariah principles in respect of Islamic deposits and takaful protection funds.
g) Implement public awareness and education initiatives to enhance understanding of the deposit insurance system as well as the role of PIDM.

Question 3

what are the benefits provided by the deposit insurance to depositors?

Answer 3

PIDM protects depositors’ bank deposits and will promptly reimburse him/her on his/her insured deposits should a member bank become bankrupt. This is a protection provided by PIDM automatically and no application is required. There is no charge to depositors for this protection.

Question 4

what is the role of PIDM in contributing to the stability of the financial system?

Answer 4

• promotes public confidence in Malaysia’s financial system by protecting depositors against the loss of their deposits.
• reinforces and complements the existing regulatory and supervisory framework by providing incentives for sound risk management in the financial system
• minimizes costs to the financial system by finding cost-effective solutions to address loss of deposits when member institutions become bankrupt
• contributes to the stability of the financial system by dealing with member institutions in financial distress expeditiously and reimbursing depositors as soon as possible.

Question 5

what are the types of depositors covered by PIDM?

Answer 5

All types of depositors are protected, whether businesses or individuals. PIDM provides separate coverage for conventional and Islamic deposits.

Question 6

what are the deposits eligible for protection?

Answer 6

(i) Savings accounts
(ii) Current accounts
(iii) Fixed deposits
(iv) Foreign currency deposits
(v) 100% principal-guaranteed conventional structured products
(vi) Islamic deposit accounts
(vii) Bank drafts, cheques, other payment instructions or instruments made against a
deposit account

Question 7

Deposits not eligible for protection are

Answer 7

(i) Conventional structured products that are not principal guaranteed
(ii) Deposits payable at Labuan banks
(iii) Deposits not payable in Malaysia
(iv) Interbank money market placements
(v) Negotiable Instruments of Deposits (NIDs) and other bearer deposits
(vi) Repurchase agreements
(vii) Unit trusts, stocks and shares
(viii) Gold-related investment products or accounts
(ix) Savings schemes of Skim Simpanan Pendidikan Nasional

Question 8

what is the maximum limit of coverage for deposits?

Answer 8

MYR 250,000 per depositor per member institution. This includes both the principal amount of a deposit and the interest or return. The limit also applies separately to Islamic and conventional deposits in the same member bank.

Question 9

what is the max coverage for TIPS?

Answer 9

For the TIPS, the maximum limit of coverage is MYR 500,000.

Question 10

Deposits not eligible for protection are?

Answer 10

(i) Conventional structured products that are not principal guaranteed
(ii) Deposits payable at Labuan banks
(iii) Deposits not payable in Malaysia
(iv) Interbank money market placements
(v) Negotiable Instruments of Deposits (NIDs) and other bearer deposits
(vi) Repurchase agreements
(vii) Unit trusts, stocks and shares
(viii) Gold-related investment products or accounts
(ix) Savings schemes of Skim Simpanan Pendidikan Nasional