Deposit insurance is a system established by the Government to protect depositors against the loss of their insured deposits placed with member institutions in the event the member institution fails. Commercial and Islamic banks that are member institutions of PIDM are also referred to as ‘member banks’.
As an integral component of an effective financial safety net, a deposit insurance system enhances consumer protection by providing explicit protection to depositors. Depositors will know when, how much and how their deposits are insured in the event that a member institution fails or is unable to make payment to depositors.
In Malaysia, the deposit insurance system was brought into effect in September 2005 and is administerd by Perbadanan Insurans Deposit Malaysia (PIDM).
Benefits to depositors
- PIDM protects your bank deposits and will promptly reimburse you on your insured deposits should a member bank fail
- The protection is provided by PIDM automatically and no application is required
- There is no charge to depositors for this protection
Benefits to the financial system
Deposit insurance is recognised internationally as an important form of consumer protection and has been implemented in over 100 countries around the world, with the earliest system dating back to 1930s.
- PIDM promotes public confidence in Malaysia’s financial system by protecting depositors against the loss of their deposits
- PIDM reinforces and complements the existing regulatory and supervisory framework by providing incentives for sound risk management in the financial system
- PIDM minimises costs to the financial system by finding least cost solutions to resolve failing member institutions
- PIDM contributes to the stability of the financial system by dealing with member institution failures expeditiously and reimbursing depositors as soon as possible