“REMEMBER PIDM. Remember Protection.” Many would have recalled this tagline and by now would be familiar with it. But who, why and how exactly does PIDM (Perbadanan Insurans Deposit Malaysia) protect?
For one, PIDM is the government statutory body established in 2005 with a mandate to protect financial consumers in Malaysia. That’s you, if you have deposits in commercial banks or have takaful and insurance benefits in your policies. PIDM also plays an important role as a resolution authority for its member institutions (commercial banks and takaful and insurance companies).
Why should you care? Because in the event any PIDM member institution fails or goes bankrupt, PIDM has got you covered. PIDM protects up to RM250,000 per depositor per member bank as well as up to RM500,000 for takaful and insurance benefits. For health-related insurance, PIDM protects 100% of your healthcare benefits.
So, how does PIDM protect financial consumers? Several ways:
1. Protecting deposits and takaful and insurance benefits
This is achieved through two protection systems it administers – the Deposit Insurance System (DIS) and the Takaful and Insurance Benefits Protection System (TIPS). These protection systems ensure that depositors and takaful and insurance policy owners will be protected in the event of a PIDM member institution failure. PIDM, together with Bank Negara Malaysia and the Ministry of Finance, form a comprehensive financial system safety net in Malaysia.
Under DIS, PIDM protects up to RM250,000 per depositor per member bank. Under TIPS, PIDM protects 100% healthcare benefits and up to RM500,000 on other takaful and insurance benefits in the event a member institution fails. It’s automatic, no sign-ups required.
2. Ensuring member institutions can be resolved effectively
As the resolution authority for its member institutions, PIDM will ensure prompt and effective resolution that minimises cost to the financial system. PIDM has a wide range of resolution powers to intervene and resolve any troubled or failed member institutions. These include powers to take over the members’ operations and functions to stabilise and ensure business continuity, powers to restructure the members’ assets, liabilities and operations, and to sell or transfer the member to another financial institution or any other approved parties. As part of its initiative to enhance resolution effectiveness, PIDM has also embarked on resolution planning as part of the wider Recovery and Resolution Planning (RRP) initiative together with Bank Negara Malaysia.
PIDM also continuously puts its crisis readiness capabilities to the test via a series of simulations, carried out internally and with other safety net players, to ensure smooth and effective coordination during a crisis.
3. Providing incentives for member institutions to remain safe and sound
PIDM also complements Bank Negara Malaysia’s role in assessing and monitoring member institutions’ risk. The incentives to promote sound risk management practices come in the form of the annual premiums and levies assessed on the member institutions. In essence, member institutions with better risk ratings pay less premiums or levies and vice versa, and this in turn incentivises member institutions to manage and continuously improve their risk management practices.
Peace of mind for your deposits
PIDM’s protection is automatic – no sign-ups and fees required. This is the most basic information you must walk away with upon opening a new deposit account with any PIDM member bank. This includes saving, current, fixed deposit, foreign currency deposit and Islamic deposit accounts.
PIDM also provides separate protection for individual, joint, trust, sole proprietorship, partnership and company accounts.
How does this separate protection work in practice? Let’s use the example of Mr. Chong, a high-net-worth individual who banks with Bank A. Like most people, Mr. Chong has an individual savings account. He also has a joint account with his wife, a trust account for his two children, and a sole proprietorship account for his business.
This table illustrates how the protection is calculated:
While financial consumers in Malaysia can rest assured in the strength of our financial system and financial safety net, it never hurts to be prepared for any eventuality. So, what can you do in good times? You can:
1. Keep your bank customer details up-to-date
2. Sign up for online banking services
3. Sign up for DuitNow with identification card (ID) proxy
4. Understand PIDM protection to better manage your deposits
For more information, visit www.pidm.gov.my and follow us on Facebook and LinkedIn for more tips to keep you financially resilient. – December 20, 2024
In collaboration with PIDM
