Bank deposit security

by **Ray.Charles** » January 13, 2012, 11:25 am

Are bank deposits in Thailand insured by the Thai Govt. in some ways similar to how the U.S. bank deposits are insured by Federal Deposit Insurance Corp. (FDIC)?

by **parrot** » January 13, 2012, 12:19 pm

Short answer, yes. Long answer at http://www.thailawforum.com/thai-deposi ... e-law.html

by **greatsnake** » January 13, 2012, 1:55 pm

If you are worried about bank insurance, I would highly recommend any Korean bank. In 1997, the ROK stated they would backstop all Korean banks (in the ROK or overseas) with the full faith and credit of the Korean government-- 100%, no matter how much you have in the bank.

by **JimboPSM** » January 13, 2012, 6:13 pm

I hadn’t realised how quickly time was passing by, I posted a warning back in 2008 about the Thai bank deposit guarantee reducing to only one million Baht in August this year.

I warned at the time that the measure may produce a credit crunch - it may just be a coincidence, but since the guarantee dropped from Bt 50 million to Bt 10 million last August the Baht has fallen about 7%.

As can be seen from the article that Parrot linked to, the large drop in the Deposit Guarantee drop has already made it difficult for large numbers of high net worth customers in Thailand to have their deposits in Thai banks guaranteed.

When it drops to a million in August this year it will no longer be just a worry for high net worth depositors in Thailand, anyone who has over a million in a Thai bank is at risk - and that will include quite a few westerners who need Bt 800,000 in an account for three months before their visa renewals :shock:

This is what I posted four years ago:

Thai Banks to Reduce Deposit Guarantee to Bt 1 million

JimboPSM wrote:In the short term this measure will probably not concern too many folk, however some may need to start thinking about the additional risk factor as the guarantee will be reduced to Bt 1 million per customer.

Unless the banking regulatory rules are changed it will also almost certainly result in a further credit crunch in Thailand as maintaining capital ratios in the banks will put credit under further pressure.

From The Nation:
New deposit rule likely to shift money to other instruments, says Kasikorn Bank unit
By Ekarin Bumroongpuk
The Nation
Published on July 25, 2008

More than Bt350 billion in deposits are expected to shift from bank accounts to other types of savings instruments over the next five years as the Deposit Protection Agency is established and starts operating next month.

According to the agency's rules, bank deposits would not be 100-per-cent guaranteed by the government anymore.

The level of guarantees will be gradually reduced over five years.

Due to the revision, depositors are expected to move their money out of banks to other channels of investment.

According to a survey on depositors conducted by Kasikorn Research Centre, about Bt355.19 billion in deposits are expected to leave bank accounts over the next five years, or Bt71.04 billion a year.

Some of the money is likely to move to property investments - by Bt93.29 billion in five years or about Bt18.67 billion a year after establishment of the Deposit Protection Agency, the research body said.

On August 11, the Deposit Protection Act will be implemented.

So far, deposits of commercial banks are 100-per-cent protected by the government in case a bank's business license is cancelled or if it goes bankrupt.

But after the new act takes effect, the protection on deposits will be gradually decreased from 100 per cent in the first year to only Bt100 million per person per bank in the second year, Bt50 million in the third year, and Bt10 million in the fourth year.

From the fifth year onwards, or after August 11, 2012, the deposit guarantee will be reduced to only Bt1 million per person per bank.

Therefore, depositors who have more than Bt1 million in a bank, will be affected and may have to think about diversifying their investments.

There are about 900,000 accounts that contain Bt1 million or more, representing 1.2 per cent of depositors. But this percentage of savers hold 73 per cent of the total amount of money saved, which is about Bt5.1 trillion.

Pisarn Manoleehagul, chairman of Kasikorn Research Center, said the survey tried to gauge the action depositors would take when they were shown the Deposit Protection Act.

The survey was conducted last March. It focused mainly on depositors who have between Bt1 million and Bt100 million in bank deposits.

"About 61 per cent of respondents are still unaware of the Deposit Protection Act, while 39 per cent said they were aware of it," said Pisarn

Pisarn said the investment proportion of deposit in a bank will fall from 27 per cent of total investment now to 9 per cent of total investment in five years after the act's implementation.

When asked about what alternative investments they would make, 26.3 per cent of respondents said they would invest in property.

If the decision was followed through, it could mean an average of Bt18.67 billion a year could be spent on real estate. Over five years that shift may amount to Bt93.29 billion.

The second most favoured product backed by 17.7 per cent of respondents was government bonds.

About Bt12.59 billion a year over the next five years are expected to go into these bonds.

Gold came in third, favoured by 12 per cent of respondents. About Bt42.71 billion over five years is expected to buy the precious metal.

The fourth vehicle is mutual funds. About 9.2 per cent of respondents said they would favour them. Some Bt32.60 billion could be parked in such funds in the next.

The fifth instrument is stocks. About 5.7 per cent of respondents said they would shift some of their cash into equity. About Bt20.23 billion from savers could pour into the bourse during this period.

Some 3.2 per cent of respondents said they would buy debentures. That could mean Bt11.24 billion would flow into such paper.

About 2.8 per cent of respondents said they would buy assurance, meaning Bt10.12 billion could be headed for this sector.

The rest, some 23 per cent (Bt82 billion), may go to other forms of investments.

by **Ray.Charles** » January 13, 2012, 6:16 pm

Thanks, John; that is the info I was looking for. Now, all I have to is find a Korean bank in Udon Thani.

by **BobHelm** » January 14, 2012, 12:31 pm

It would appear that your request for information as been heard at the highest levels, Ray...

Deposits will be protected, says finance minister

http://www.nationmultimedia.com/busines ... 73725.html

Although the reading of the piece didn't quite make the security feeling that the headline does...

by **JimboPSM** » January 14, 2012, 7:41 pm

BobHelm wrote:It would appear that your request for information as been heard at the highest levels, Ray...
Deposits will be protected, says finance minister

http://www.nationmultimedia.com/busines ... 73725.html

Although the reading of the piece didn't quite make the security feeling that the headline does...

I think you may have been speed reading the article Bob (although I may also be misinterpreting it) :-k

I believe the article is actually about the Finance Ministry having been caught trying to do a “Maxwell” on the existing deposit guarantee fund to use it to help pay off some of the Bt 1.14-trillion debt of the Financial Institutions Development Fund (FIDF) left over since the 1997 financial crisis.

Unaccustomed as I am to defending banks, they are in this case rightfully annoyed as the premiums they have been paying for years to the Deposit Protection Agency (DPA) in order to guarantee bank deposits are effectively being "stolen" from the fund and used for another purpose.

The banks are now being expected to pay an increased premium rate going forward in order to pay for the monies the Finance Ministry is “stealing” from it to help reduce some of the 1997 hangover - which almost certainly means that increased charges will get passed on to the customer (i.e. us) by the banks

The talk about the deposit guarantee is a rather poor attempt at a smokescreen, remember that the bank deposit guarantee has shrunk considerably as follows:

by **BobHelm** » January 14, 2012, 7:48 pm

JimboPSM wrote:I think you may have been speed reading the article Bob (although I may also be misinterpreting it)

Your interpretation of the article was the same as mine Jimbo...sorry that I did not make myself clear...

The headline sounds like good news....the actual article reads, I thought, exactly as you suggested & that for even the diminished guarantee that the Government will offer in the future will result in extra customer charges as the existing Government holdings will be used for other things..

by **JimboPSM** » January 25, 2012, 12:12 pm

JimboPSM wrote:.... I believe the article is actually about the Finance Ministry having been caught trying to do a “Maxwell” on the existing deposit guarantee fund to use it to help pay off some of the Bt 1.14-trillion debt of the Financial Institutions Development Fund (FIDF) left over since the 1997 financial crisis.

There was an “opinion” article at The Nation published at the end of last year (which I missed :oops:

) that helps to explain why the Government is so keen to do a Maxwell with the FIDF

Now we know why the Yingluck government has brought in Dr Virabongsa Ramangkura.

The former finance minister is heading a committee to rehabilitate Thai industry and infrastructure in the aftermath of the worst floods in 50 years. To reconstruct the economy, the government needs money. But, due to all the populist spending pledges, it is broke. Virabongsa's task is to help the government find the money - at least Bt350 billion for the time being.

The easy target is the Bank of Thailand, to which the government could pass on the burden of an old debt so that it can create a new debt for fresh spending.

The government needs a personality of Virabongsa's stature to battle against the central bank, whose governor, Dr Prasarn Trairatvorakul, is drawing up a strong defensive line. The battle now looks ugly, centring on the debt of the Financial Institution Development Fund (FIDF), an arm of the central bank.

The ghost of the FIDF will not be laid to rest easily. Every time a new government steps in, it wants to find a way not to service the debt of the FIDF, which used taxpayers' money to bail out the financial institutions in the 1997 Asian financial crisis to the tune of Bt1.4 trillion. The FIDF debt now stands at about Bt1.1 trillion.

The Yingluck government does not want to service the annual interest payment of Bt45 billion for the FIDF. It wants the central bank to assume all the Bt1.1 trillion of FIDF debt so that it has room to create new debt.

Thailand's public debt has exceeded Bt4 trillion, equivalent to 40 per cent of the gross domestic product. If the FIDF debt of Bt1.1 trillion is deducted from the overall public debt, the governmentwould be in a position to create new debt for massive spending.....

The BOT's foreign exchange reserves are not totally secure. Foreign investors could withdraw their money out of the country any time in the event of financial shocks. If they were to flee the country (by converting the baht for the dollar before taking the money out) like they did in 1997, Thailand could lose its reserves in a hurry.....

If the BOT were to totally monetise the Bt1.1 trillion FIDF debt, it would increase its negative net worth to Bt1.5 trillion. In this case, confidence in the baht would wobble. That is the road Zimbabwe has taken.....

Full article: http://www.nationmultimedia.com/opinion ... 72896.html

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