DPA: Don’t worry, NPL problem not as critical as during 1997 crisis

[webfact]

DPA: Don’t worry, NPL problem not as critical as during 1997 crisis

By THE NATION

 

 

“Bank customers need not worry that they will lose their money, as the DPA will help protect your deposits in case another crisis strikes,” director Songpol promised.

 

The current non-performing loan (NPL) problem will not be as serious as during the 1997 financial crisis due to the strong financial status of commercial banks that enable them to help borrowers with debt restructuring before they become NPLs, Deposit Protection Agency (DPA) director Songpol Cheewapanyaroj said.

 

“The DPA’s commercial bank reserve fund is also strong, with approximately Bt129 billion in reserve from contributions by commercial banks in the last 12 years at a rate of 0.01 per cent of their deposits,” he said.

 

“The DPA receives contributions of Bt1.4 billion on average annually, which we invest in bonds from the government and the Bank of Thailand. This has resulted in a return of Bt2 billion per year.”

 

Songpol said the DPA estimated the economic contraction caused by Covid-19 would not cause commercial banks to collapse, as they still have strong reserves that will act as a buffer to shield them from a financial crisis.

 

“Bank customers need not worry that they will lose their money, as the DPA will help protect your deposits in case another crisis strikes,” Songpol promised.

 

Currently, 80.82 million bank customers are protected under the DPA, with combined deposits of Bt14.67 trillion. Around 98 per cent of these are individual customers with less than Bt1 million in their accounts.

 

“The DPA is planning to expand protection to cover electronic money or e-wallets, which should start by the fourth quarter this year. E-money or e-wallets have relatively low risk compared to traditional money, since the Bank of Thailand does not allow businesses to use them in investments or loans,” Songpol added.

 

Meanwhile, TMB Analytics Centre executive director Naris Sathapholdecha said commercial banks nowadays are much stronger than in 1997, when they had only Bt460 billion in reserve.

 

“As of the second quarter of 2020, commercial bank reserves have been recorded at Bt2.9 trillion, which is enough to cover up to 21 per cent of NPLs,” he said.

 

“Even if customers are worried and withdraw their cash, banks could still continue operating as they have liquidity assets of Bt4.8 trillion, or 28 per cent of total assets. Commercial banks also have a liquidity coverage ratio of 183 per cent, making them much stronger than in the past,” Naris said.

 

“This year, commercial banks should record profit of around Bt100 billion, thanks to aggressive debt restructuring programmes to prevent a high volume of NPLs,” he added.

 

Source: https://www.nationthailand.com/news/30393458

 

-- © Copyright The Nation Thailand 2020-08-25

 

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[Misterwhisper]

1 hour ago, webfact said:

which is enough to cover up to 21 per cent of NPLs,

 

I am nor certain that is particularly reassuring, as 79% of NPLs apparently are NOT covered, right? Did I read that correctly?

[AbeNormal]

1 hour ago, webfact said:

“The DPA’s commercial bank reserve fund is also strong, with approximately Bt129 billion in reserve from contributions by commercial banks in the last 12 years at a rate of 0.01 per cent of their deposits,” he said.

 

 

Currently, 80.82 million bank customers are protected under the DPA, with combined deposits of Bt14.67 trillion. Around 98 per cent of these are individual customers with less than Bt1 million in their accounts.

so Bt14,67 trillion is protected with Bt129 billion 

[JusticeGB]

2 hours ago, webfact said:

Bank customers need not worry that they will lose their money, as the DPA will help protect your deposits in case another crisis strikes,” Songpol promised.

The promise is to "help protect" it is not a guarantee to protect deposits of say up to 100,000 baht. Most countries guarantee small depositors.

 

[Scot123]

All those juicy 800,000baht/400,000baht deposits of the ting tong's will be the first to vanish over night. 

[champers]

59 minutes ago, Scot123 said:

All those juicy 800,000baht/400,000baht deposits of the ting tong's will be the first to vanish over night. 

As one of the "ting tongs" you refer to; for the purpose of getting a retirement extension on my visa; how do you see this happening? I am not being flippant, it is a serious question.

Many expats here have to meet the legal requirement of keeping money on deposit in order to stay here. Your prognosis seems alarmist; convince me otherwise.

[hotchilli]

5 hours ago, AbeNormal said:

so Bt14,67 trillion is protected with Bt129 billion 

A bit like most Thai insurance scams... covers only a percentage.

[Cake Monster]

7 hours ago, webfact said:

“This year, commercial banks should record profit of around Bt100 billion, thanks to aggressive debt restructuring programmes to prevent a high volume of NPLs,” he added.

Aggressive debt restructuring programs to prevent high volumes of NPL.

In other words, the debts are still debts, and are in a section of debt management called "Special Interest Loans "

This is like the Junior School of Debts, which are monitored very closely, but still have a tendency to become Delinquent or full blown NPL.

This issue of high NPL, seems to be gaining momentum, and would  indicate to me that a lot of Financial Institutions are getting the wind up.

Maybe I am seeing it wrong

 

[madmitch]

8 hours ago, webfact said:

The DPA receives contributions of Bt1.4 billion on average annually, which we invest in bonds from the government and the Bank of Thailand. This has resulted in a return of Bt2 billion per year.”

Can someone let me know haw to invest in these bonds. A 140% yield?

 

Or is it a Ponzi scheme?

[DrTuner]

Debt restructuring? "Hey Somchai, how about you give us your brand new iphone for the Vigo payment? Oh it's on credit too? And pawned the gold? How about.. ah right the farm is also .. righto, well, we got this friendly Chinese loanshark fella.."

[DrTuner]

1 hour ago, champers said:

As one of the "ting tongs" you refer to; for the purpose of getting a retirement extension on my visa; how do you see this happening? I am not being flippant, it is a serious question.

Many expats here have to meet the legal requirement of keeping money on deposit in order to stay here. Your prognosis seems alarmist; convince me otherwise.

https://www.theatlantic.com/business/archive/2013/03/everything-you-need-to-know-about-the-cyprus-bank-disaster/274096/

 

Quote

Imagine you woke up one day to discover your bank account has been raided by another country's government. Just like that, $1 in every $16 of your supposedly safe money is gone. 

 

That's the spirit.