Government Backing Of Bank Deposits To End...

[ding]

attribution;

http://www.nationmultimedia.com/2008/07/25...ss_30078918.php

New deposit rule likely to shift money to other instruments, says Kasikorn Bank unit

By Ekarin Bumroongpuk

The Nation

Published on July 25, 2008

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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...

[cloudhopper]

Wonder why the government will no longer be willing to guarantee 73% of current bank deposits? Seems like a recipe for disaster to me.

[ding]

Wonder why the government will no longer be willing to guarantee 73% of current bank deposits? Seems like a recipe for disaster to me.

I imagine it might break the treasury if a Thai version of an economic house of cards were to collapse.

[AFKAFSinLOS]

Wonder why the government will no longer be willing to guarantee 73% of current bank deposits? Seems like a recipe for disaster to me.

Wonder why the government will no longer be willing to guarantee 73% of current bank deposits? Seems like a recipe for disaster to me.

I imagine it might break the treasury if a Thai version of an economic house of cards were to collapse.

This is just similar to what many developed countries do. Thailand is simply moving from an almost unlimited guarantee on all deposits to something more realistic and over a sensible 5 year time frame. There is also a cost to that guarantee which is currently funded by a levy on banks, which ultimately pass that on to customers...

The end point after 5 years will be a guarantee of THB1mio per person per bank. In the UK the equivalent is currently about THB2mio per person per bank.

Most Thai peoples savings are in either cash or property/land and are not that well diversified. This will help move them to more diversified savings eg bonds, mutual funds, commodities. It will also be better for the economy having more money actually working for the country than just sat in bank accounts. Additionally it will force banks to adopt better risk management and best practices. Otherwise savers will vote with their feet and go somewhere with lower risk/better security. At the moment savers don't care which is a good bank or not. They currently just choose based on convenience, loyalty or price.

BTW The UK and the US would both have similar problems to Thailand if they suddenly had to bail out every depositor in every bank. The moves are effectively making Thailand's business practices more like those in the west...

BTW2 If you ask the question: why would the majority of people want more than THB5mio in cash in Thai banks, you also have a lot of the answers. Safer to have that THB5mio split over a few banks...

Edited August 4, 2008 by AFKAFSinLOS

[jfchandler]

Does anyone know...both in theory and in practice...do the current protections and those planned under the coming law apply equally to foreign bank depositers.... and not just Thai citizens????

[Pakboong]

sounds like they are preparing for some tough times ahead.