Foreign currency deposits surge in Thailand

[webfact]

 

The past year has seen a significant upturn in foreign currency deposits (FCDs), spurred by appealing interest rates due to global rate hikes.

 

According to data from the Deposit Protection Agency (DPA), member financial institutions observed a surge in FCDs to a total value of 812 billion baht (US$22 billion) by November 2023, up from an earlier figure of 640 billion baht (US$17.89 billion).

 

This period also saw some large local banks reporting a remarkable 50% growth in FCDs per bank. The DPA’s president, Songpol Cheevapayaroj, attributed this growth to the attractive interest rates banks were offering, aligned with the global increase in rates.

 

The interest rates offered by large local banks for FCDs fixed over 12 months ranged from 0.4% to 0.6% per annum, as per the Bank of Thailand’s database. Smaller to mid-sized banks, on the other hand, offered interest rates between 3-5%, depending on the bank’s conditions.

 

FCDs, besides being an investment alternative, serve multiple purposes. They are used by importers and exporters to manage foreign exchange risk and by individuals for specific needs. For example, parents planning to send their children abroad for education or individuals preparing for overseas trips often save via FCD accounts to mitigate foreign exchange risk.

Despite their value, FCDs fall outside the protection of the DPA. FCDs lack DPA protection, but they don’t pose a significant risk to the financial system due to their relatively small proportion. Total deposits under DPA protection amount to 16 trillion baht (US$447 billion), representing a deposit coverage ratio of 98%, while FCDs stand at 812 billion baht, Songpol Cheevapayaroj explained.

Deposit awareness

 

In 2024, the DPA aims to enhance awareness of protected deposit types, including general deposits, digital savings, e-wallets and deposits from emerging virtual banks. Suwannee Jatsadasak, assistant governor for the supervision group, stated that the central bank has also been monitoring the positive growth of FCDs, driven primarily by attractive interest rate offerings.

 

Despite the increased value of FCDs, she stated that this does not indicate any systematic risks, given that FCDs account for less than 1% of total deposits in the banking sector. Business operators, especially importers and exporters, and individuals with foreign-currency-based income and expenses, often use FCD accounts to streamline foreign exchange management.

 

She added that FCD accounts are also viewed by some depositors as an alternative investment avenue for better returns. However, they need to be aware of the higher foreign exchange risk. According to Ms Suwannee, FCD depositors are often affluent investors with a higher risk appetite, reported Bangkok Post.

 

by Alex Morgan

Photo courtesy of iStock

 

Source: The Thaiger 2024-03-05

 

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[bob smith]

they hate foreigners but boy oh boy do they love that foreign money.

 

bob.

[Thailand]

Isn't it more likely that that there was a massive inflow of funds before the new tax laws on overseas funds  came in to effect?

[connda]

Yeah, right.  Foreign money is "flooding" into Thailand to take advantage of the sub-1% interest rate offered by Thai banks, which in the meanwhile charge usurious rates for loans to the commoners.

If a US citizen, leave your money in the US and buy T-bills.

[Mike Lister]

I have removed a post, per forum rule 17, please read the rules and adhere to them ,

 

https://aseannow.com/forum_rules/

[hotchilli]

Large deposits in Thailand, who'd of thought.

[john donson]

FCD, 5% interest for $, but not for ... farangs

[SHA 2 BKK]

I’m getting 6% back home in Australia.  I will only bring in pre January 1 savings into Thailand when needed.   

[Cabradelmar]

8 hours ago, webfact said:

spurred by appealing interest rates due to global rate hikes.

 

Nonsense. Rates are far better anywhere but Thailand. No, this is Hi-so money coming in ahead of the TRD announcement to Tax foreign source income earned after 1 Jan 2024

[Gknrd]

8 hours ago, connda said:

Yeah, right.  Foreign money is "flooding" into Thailand to take advantage of the sub-1% interest rate offered by Thai banks, which in the meanwhile charge usurious rates for loans to the commoners.

If a US citizen, leave your money in the US and buy T-bills.

You beat me to it, It's not dollars that are flooding into Thailand for sure. 

The pic on the article should have shown the Chinese Yuan.  The US is having the same thing happening. Capital flight from countries are greasing up the banks and Wall Street.

Smart Chinese are bringing it into the US, idiots are bringing it into Thailand.

 

 

[Mike Lister]

8 minutes ago, Gknrd said:

You beat me to it, It's not dollars that are flooding into Thailand for sure. 

The pic on the article should have shown the Chinese Yuan.  The US is having the same problem. Capital flight from countries are greasing up the banks and Wall Street. Here in the US money is flowing like water.. crazy.

Why would RMB buy THB at present value?

 

https://www.xe.com/currencycharts/?from=CNY&to=THB

[Gknrd]

3 minutes ago, Mike Lister said:

Why would RMB buy THB at present value?

 

https://www.xe.com/currencycharts/?from=CNY&to=THB

 

Desperate to get the money out.  

[StayinThailand2much]

9 hours ago, webfact said:

The past year has seen a significant upturn in foreign currency deposits (FCDs), spurred by appealing interest rates due to global rate hikes.

 

"Appealing interest rates" offered by Thai banks?? Is it April Fools' Day aiready?

[Gknrd]

China's stock market is in dire straights. The government is pumping in billions of dollars trying to prop it up. The sell off is of epic proportions. I have read that the Chines stock market could completely shut down eventually with Xi's guidance. If I were a Chinese citizen with a few bucks I would be doing the same thing.  The current thinking is anywhere is better than here.

Thailand is basically a communist country (military run). Went full in with the Chinese hype. Personally if I were Chinese I would be hesitant to put my money in Thailand because of the close ties with China. 

[newnative]

11 hours ago, Thailand said:

Isn't it more likely that that there was a massive inflow of funds before the new tax laws on overseas funds  came in to effect?

Yes, including me.

[ExpatOilWorker]

7 hours ago, john donson said:

FCD, 5% interest for $, but not for ... farangs

Why not?

You can open a FCD account and get the same interest rate as everyone else, see attached.

4.2% for USD sure is better than the 2% yield on the local currency. 

Rate_FCD_no.1_01.03.2024_EN.pdf

[BenStark]

12 minutes ago, ExpatOilWorker said:

Why not?

You can open a FCD account and get the same interest rate as everyone else.

 

FCD pays no interest. There is a temporary promotion from a few banks, where they pay +5% on a time deposit in USD only, and as far as I'm aware available to Thai nationals only

 

This are the rates at Kasikorn

 

[ExpatOilWorker]

Looks like SCB is expecting a massive rate drop around June 2024, but offer a nice 5.1% until then.

 

fcd-rates-en.pdf

[ExpatOilWorker]

5 minutes ago, BenStark said:

 

FCD pays no interest. There is a temporary promotion from a few banks, where they pay +5% on a time deposit in USD only, and as far as I'm aware available to Thai nationals only

Did you have a look at the attachment?

It clearly state the same rate for residents and non-residents.

[BenStark]

13 minutes ago, ExpatOilWorker said:

Did you have a look at the attachment?

It clearly state the same rate for residents and non-residents.

 

Why not give it a try and report back?

 

From the SCB pdf, and CIMB one has a similar clause

 

[Poseidon]

5 hours ago, Mike Lister said:

Why would RMB buy THB at present value?

 

https://www.xe.com/currencycharts/?from=CNY&to=THB

To escape Chinese capital controls 

[Mike Lister]

24 minutes ago, Poseidon said:

To escape Chinese capital controls 

Of course that is what the effect is of moving the currency out of China, my question was however, why would RMB want to buy THB when it could buy lots of other alternatives with a higher rate of return.

[ExpatOilWorker]

4 hours ago, BenStark said:

 

Why not give it a try and report back?

 

From the SCB pdf, and CIMB one has a similar clause

 

An additional margin rate might be an extra 0.05% if you are a platinum customer with the bank. 

Other than that non-residents are treated equal to Thais.

 

[daveAustin]

Thai banks suck. Crapola interest rates for foreigners, excessive annual atm card charges, ridiculous out of province atm transaction charge, outlandish transaction charge for foreign cards, rubbish mortgage options, worthless insurance policies. Pretty much garbage all round… but the girls are cute!

[Mike Lister]

I think what has probably been seen, as others before me in the thread have said, is that much of the deposits will be RMB which is close to a long term low against USD. It's probably a combination of safe haven and positioning for when USD weakens and RMB recovers. That weakening of CNY matches with the US DI value pushing over 100 and strengthening.

https://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y

https://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y

 

 

 

 

[ExpatOilWorker]

Only a few banks are desperate for USD, among them the Chinese bank ICBC.

https://app.bot.or.th/FCDReports/FCDReportViewer.aspx?id=9

 

[BenStark]

38 minutes ago, ExpatOilWorker said:

Only a few banks are desperate for USD, among them the Chinese bank ICBC.

 

Begs the question, why they are desperate

[ExpatOilWorker]

3 hours ago, Mike Lister said:

I think what has probably been seen, as others before me in the thread have said, is that much of the deposits will be RMB which is close to a long term low against USD. It's probably a combination of safe haven and positioning for when USD weakens and RMB recovers. That weakening of CNY matches with the US DI value pushing over 100 and strengthening.

https://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y

https://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y

 

 

 

 

90% of FCD holdings are in USD and 95% are in corporate accounts, which kind of make sense for an export oriented manufacturing base like Thailand. CNY is only $512 million out of $21.2 billion.

However, this is only for Thai FCD accounts and there is a $3 billion gab from the November 2023 $22 billion in the OP to the BOT's numbers. This could be non-residents holdings, but I can find any solid data on this.

 

FM_CD_001.csv FM_CD_003.xlsx

[Mike Lister]

5 minutes ago, ExpatOilWorker said:

90% of FCD holdings are in USD and 95% are in corporate accounts, which kind of make sense for an export oriented manufacturing base like Thailand. CNY is only $512 million out of $21.2 billion.

However, this is only for Thai FCD accounts and there is a $3 billion gab from the November 2023 $22 billion in the OP to the BOT's numbers. This could be non-residents holdings, but I can find any solid data on this.

 

FM_CD_001.csv 1.27 kB · 0 downloads FM_CD_003.xlsx 4.26 kB · 0 downloads

Interesting. That's a disproportionate percentage held in USD, since less than 60% of trade bills are settled in USD.  Hoarding perhaps. Or perhaps Chinese holdings of USD in preference to CNY....dunno.

[Mike Lister]

18 minutes ago, BenStark said:

 

Begs the question, why they are desperate

The Chinese have to settle many of their trade bills in USD also and when your currency is so weak, that becomes expensive.