Are fixed deposits in foreign banks in Singapore safe?

If you shop around websites such as Money section in hardwarezone forums, there are discussions about how you can get the best rates for your fixed deposits. In many of these discussions and research done by many contributors, many have come to realise that our local banks generally DO NOT give good interest rates for fixed deposits.

In fact, the more competitive rates tend to be offered by the malaysian banks, Indian banks and other non-Singaporean banks. Why is this so and are these safe?

Foreign banks
Foreign banks licenced by the Monetary Authority of Singapore can borrow funds from the public through fixed deposits but they are generally unable to tap on the savings and current accounts as their banking licences do not allow them to do so. Only Qualifying Full Banks are able to tap on the retail market to obtain funds from such sources. Hence, in order for these banks to compete against the big local banks for a share of the singapore dollars with less reliance on the inter-bank market is to offer competitive rates against them for the fixed (time) deposit dollar.

Are fixed deposits denominated in Singapore dollars placed foreign banks safe?
These are generally safe as these foreign banks are regulated by the MAS and have to maintain minimum capital and liquidity requirement as well as statutory deposits with the Monetary Authority of Singapore. In addition, these banks allowed to operate in Singapore typically are the local branches of large banks in their home country e.g. Maybank Singapore is part of the large Maybank group in Malaysia.

So if you are considering better and relatively safe returns for their excess funds, you may want to consider such banks. You can find a list of them on the MAS website.