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Document Type

Case Study

Case Series

Account Guarantee Programs

JEL Codes

G01, G28

Abstract

On October 16, 2008, following the collapse of Lehman Brothers and regional expansions of deposit insurance, Malaysia announced its Government Deposit Guarantee (GDG), an unlimited guarantee of deposits held at eligible institutions. Given the “soundness and strong capitalization” of the banking sector, the preemptive program was meant “to maintain the stability of the Malaysian financial system.” Prior to the crisis, the Perbadanan Insurans Deposit Malaysia (PIDM), Malaysia’s deposit-insurance agency, guaranteed up to MYR 60,000 (USD 17,291) per depositor per insured institution. The PIDM was tasked with administering the GDG. Under the GDG, the PIDM insured all ringgit and foreign-currency deposits. All domestic and locally incorporated foreign banks were eligible for the GDG, including commercial, Islamic, and investment banks and deposit-taking development financial institutions. The GDG insured instruments that the PIDM had not previously covered, such as foreign-currency deposits, and insured previously uninsured institutions, such as investment banks. To fund the GDG, the PIDM acted on behalf of the government, levying fees on participating institutions that were then remitted to the government. The GDG ended as scheduled on December 31, 2010. Ultimately, no claims were made on the GDG. The Malaysian government passed legislation in 2010 to expand its precrisis deposit-insurance scheme, which framed how Malaysian officials planned to exit the GDG.

Date Revised

2022-07-15

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