PIDM’s journey as a financial consumer authority

In the wake of the Asian Financial Crisis of 1997/1998 and the spill-over effects on the broader economy that followed, Malaysia recognised the need for a robust financial protection system through amongst others, a deposit insurance system, to bolster public confidence and ensure financial stability. The crisis also taught us that depositors are often one of the most vulnerable stakeholders in financial failures and ensuring their protection is crucial for maintaining confidence in the financial system.

Recognising this, under Bank Negara Malaysia’s Financial Sector Masterplan 2001 – 2010, significant institutional reforms were proposed for Malaysia’s financial sector. One of the recommendations was to establish Perbadanan Insurans Deposit Malaysia (PIDM) to protect financial consumers, resolve failed financial institutions promptly and contribute to the stability of Malaysia’s financial system.

PIDM’s establishment and early journey

PIDM was established on 5 September 2005 under the PIDM Act to administer the Deposit Insurance System (DIS), a system established by the government to protect depositors against the loss of their insured deposits in the event of a member institution failure – in this context, when it goes bankrupt. The protection under the DIS extends to conventional and Islamic deposits, making PIDM an inclusive safety net for all eligible depositors in Malaysia.

Over the years, PIDM has continuously ensured the adequacy and relevance of its role as a financial safety net for financial consumers during critical times.

In 2011, PIDM extended its protection to include takaful and insurance benefits, offering policy owners added security in the event of an insurer member’s failure. The Takaful and Insurance Benefits Protection System (TIPS) was a significant enhancement that broadened the scope of PIDM’s protection and reinforced its commitment to financial consumer protection.

PIDM has also focused on public awareness and education, ensuring that depositors and policy owners are well-informed about the protection available to them. Through its flagship #SediaPayungKewangan financial literacy campaign, content featuring PIDM’s good financial management icon Chief BerUang and outreach programmes, PIDM has worked diligently to build the financial resilience of Malaysians while at the same time enhancing their understanding of PIDM’s role and its protection systems.

The importance of PIDM’s mandate

The importance of PIDM’s mandate cannot be overstated. Financial system stability is the backbone of a healthy economy, and PIDM’s role is critical in promoting this stability. By ensuring that depositors have continued access to their deposits, PIDM mitigates the risk of bank runs and panic, which can have devastating effects on the financial system, as was witnessed by the world during the Asian Financial Crisis and the more recent Global Financial Crisis of 2007-2008.

During times of financial uncertainty, the assurance provided by PIDM’s deposit insurance is invaluable. It reassures depositors that their savings are safe, fostering a sense of security and trust in the financial system.

Preserving public confidence

Much of PIDM’s work takes place behind the scenes so they may not be widely known to the general public. However, as a silent protector, we are committed to being ready to manage crises swiftly and effectively from the moment they arise.

This readiness begins in good times, with our active monitoring of member institutions and close collaboration with Bank Negara Malaysia to identify and address potential risks. And when a crisis does emerge, PIDM is equipped to manage it promptly to minimise disruption to the financial system.

What does this mean for financial consumers? It means peace of mind, knowing that PIDM is here to protect them. They can be rest assured that even if a member institution has failed and can no longer operate, they can still continue to access their bank deposits and insurance benefits. This fosters greater public confidence and contributes to the overall stability of the financial system.

Do you know how PIDM protects you? Visit www.pidm.gov.my or meet us at Karnival Celik Kewangan at Viva City Mall Kuching from 15 – 17 November and learn about our protection systems and their scope and coverage.