How Deposit Insurance as a Financial Safety Net is implemented in Malaysia:

Deposit Insurance as a Financial Safety Net is implemented in Malaysia through PIDM,

which is short for Perbadanan Insurans Deposit Malaysia. Internationally, they are also

known as the Malaysia Deposit Insurance Corporation (MDIC).

As an integral part of the system's financial safety net, statutory objectives for PIDM are to

administer two consumer protection systems, namely the Deposit Insurance System and

Takaful Benefits Protection System and Insurance. PIDM's mandate is to administer the

deposit insurance system. In addition, they provide insurance against the loss of part or all of

the deposits of each member institution. Next, provide incentives for sound risk management

in the financial system and promote or contribute to the stability of the financial system. In

carrying out the mandate, PIDM is required to minimise costs to the system.

All types of depositors, whether business or individual, are covered. The maximum limit of

coverage is RM250,000 per depositor, per bank member. This includes both the principal

amount of the deposit and interest, or return. With RM250,000, 97% of depositors are fully

covered. The Malaysian Deposit Insurance System provides separate coverage for

conventional and Islamic deposits. Deposits eligible for protection are savings accounts,

current accounts, fixed deposits, foreign currency deposits, Islamic deposit accounts, bank

drafts, checks, other payment instructions, or instruments made against deposit accounts.

There is also separate deposit insurance coverage of up to RM250,000 for depositors with

deposit accounts under each category. Among them are conventional and Islamic deposit

accounts. Next, joint accounts enjoy separate deposit insurance coverage provided the

member’s bank records disclose the name of the joint account holder. In addition, the trust

account, i.e., the beneficiary, will enjoy separate protection if the trustee discloses the

interest of each beneficiary and the amount owed to each beneficiary on the member’s bank

records. Each beneficiary of a trust account is covered up to RM250,000, separately from

other insured deposits held in their individual name. Finally, accounts are held by sole

proprietorships, partnerships, professional practices, and companies.

In conclusion, the establishment of a deposit insurance system in Malaysia strengthens

the consumer protection framework in Malaysia. Detailed attention has been given to

developing the deposit insurance system to complement the role and function of Bank

Negara Malaysia as the lead regulator in maintaining the security and soundness of the

financial system for the benefit of Malaysians.