Though the international financial system is still under significant stress, Singapore's markets remain stable and its banks face no funding difficulties in the interbank market, parliament was told Monday, reported dpa.
Nevertheless, the government decided last week to provide a guarantee of 150 billion Singapore dollars (101.62 billion US dollars) for deposits of individuals and non-bank customers in Singapore-based banks.
"If Singapore had not introduced a similar guarantee, there was a real risk that depositors would have shifted some of their deposits out of Singapore banks, to banks in other jurisdictions which guarantee deposits," Trade and Industry Minister Lim Hng Kiang said.
He said the government took the precautionary step to bolster confidence and avert any capital flight.
Financial services are an important pillar of Singapore's economy, accounting for 12 per cent of the gross domestic product and 5 per cent of its employment.
Deposits of individuals and non-bank customers total 700 billion Singapore dollars.
Lim explained that the likelihood of a bank failure as a result of problems in Singapore is small as the banking system is sound and closely supervised, even though it is possible that problems elsewhere will affect a bank's operations in Singapore.
But if a bank were to fail in Singapore, it should still have substantial assets to meet its liabilities to depositors, he said.
"We are in a strong fiscal position, having accumulated surpluses during good times for exigencies like this. We are using our reserves to back this guarantee," Lim said.