Bank Customers Have Nothing To Fear From Premium Hike: Thai FM Kittiratt

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BANK

Customers have nothing to fear from premium hike: Kittiratt

WICHIT CHAITRONG

THE NATION

BANGKOK: -- Savers and borrowers will not get hit by higher costs when banks start paying more deposit insurance premiums to retire the 1997 financial crisis debt, Finance Minister Kittiratt Na-Ranong said yesterday.

"I believe that banks will not pass the cost on to depositors or borrowers by dropping deposit rates or raising loan rates, because of the higher premiums," he said.

"But they may lower rates because of the central bank's recent policy rate cut," he said.

Kittiratt will meet today with Prasarn Trairatvorakul, the governor of the Bank of Thailand, to discuss further the premiums to be collected from commercial banks.

Kittiratt, who is also a deputy prime minister, indicated that commercial banks will be rewarded by being allowed to increase the level of deposit insurance protection for their customers.

He and Prasarn will also go over the implementation of emergency decrees concerning repayment of the Bt1.14 trillion debt and a soft-loan package worth Bt300 billion.

The central bank will provide 70 per cent of the soft loans for flood victims including households and businesses. The rest would come from state-run banks in the scheme.

"The central bank will decide when and in what amount loans will be offered at each stage," he said.

To pay off the debt owed by the Financial Institutions Development Fund (FIDF), the central bank will collect more premiums from commercial banks.

However, the government has eased their tax burden by slashing the corporate income tax rate from 30 per cent to 23 per cent this year, so their profits would not decrease by paying more premiums.

The government will also reduce significantly the premiums paid to the Deposit Protection Agency (DPA), currently 0.4 per cent of their deposit base, in order to divert money for debt payment.

Some of the central bank's profits would also be used to redeem the FIDF debt.

The premiums for debt payment would be collected from banks starting in July.

The government would increase deposit insurance coverage for commercial bank customers so that there would be a level playing field between commercial and state-run banks.

"It can be done easily without reducing the 100-per-cent guaranteed protection of state banks' depositors," he said in reference to the wide gap in deposit protection.

According to the DPA law, in August the insurance coverage would drop to only Bt1 million per depositor per commercial bank.

But according to laws governing state-run banks, state banks will still provide unlimited protection for its savers and they do not have to pay annual premiums to the DPA. This gives state banks an edge over commercial banks as state banks can offer higher deposit rates or lower loan rates.

Foreign insurers met with Prime Minister Yingluck Shinawatra and Kittiratt last week in Davos, Switzerland to discuss cooperation in providing flood insurance.

"They proposed to work with us after they learned that we will set up a Bt50-billion insurance pool," he said.

The Bt50 billion would be adequate to ensure flood protection for individuals and small and large firms, as the coverage would be as high as Bt1 trillion, or 20 times the size of the fund.

Foreign insurers have refused to take on flood risks from Thailand after the severe inundation last year, unless it involves demanding very high premiums, so the government had to establish the insurance fund to do the job.

The government can explain the executive decrees to the Constitution Court if the Democrat Party files a petition against them.

The decrees may be submitted to Parliament on Wednesday for voting.

Regarding the executive decree to borrow Bt350 billion to finance post-flood construction projects, the government may spend about Bt150 billion this year, mostly for flood-prevention projects, including water storage and drainage systems, in the Chao Phraya River basin.

The flood-prevention plan would cost Bt300 billion for the Chao Phraya basin alone, he added.

-- The Nation 2012-01-30

[Soutpeel]

"I believe that banks will not pass the cost on to depositors or borrowers by dropping deposit rates or raising loan rates, because of the higher premiums," he said.

Another delusional finance minister...of course banks will pass on the costs...

[jonclark]

"I believe that banks will not pass the cost on to depositors or borrowers by dropping deposit rates or raising loan rates, because of the higher premiums," he said.

Another delusional finance minister...of course banks will pass on the costs...

The key word here is 'believe' . My daughter beleives in Santa, but that belief doesn't make it true!!

[nong38]

What passing the costs onto the Government?

[thaimate]

When a Thai official tells you not to worry ,thats the time to start worrying.

[IMA_FARANG]

Yeah sure.

And, "Don't worry, honey (talking to wife), she's just a friend....and my intentions are entirely honorable".

My wife didn't believe it either.

[Pib]

"I believe that banks will not pass the cost on to depositors or borrowers by dropping deposit rates or raising loan rates, because of the higher premiums," he said.

Another delusional finance minister...of course banks will pass on the costs...

Polticians will say anything. But once this finance minister leaves govt and goes back to the private sector he probably be one of the voices saying that banks have to raises fees in order to cover the cost.

[sparebox2]

Consumers have no choice. AT ALL.

[Suradit69]

When a Thai official tells you not to worry ,thats the time to start worrying.

If only they could be as upfront and totally honest & believable as the Greek officials ... uh, wait , umm the Spaniards ... well no, ... maybe all of the EEC financial officials working in concert ... ah bad choice ... Cameron, Merkel & Sarkosy ??? ha,ha,ha ... no, what about the US Federal Reserve and bank regulators there ... or maybe ...

Thailand has a long way to go to catch up to the "developed world" in terms of blantant dishonesty and rampant incompetence on the part of government officials and financial institutions as well as the total lack of trust felt for those institutions by the people they allegedly serve.

[drdoom6996]

"I believe that banks will not pass the cost on to depositors or borrowers by dropping deposit rates or raising loan rates, because of the higher premiums," he said.

Another delusional finance minister...of course banks will pass on the costs...

"You got that right, sure, got that right"

[belg]

just a question, al those schemes with step-up ? 4 months 1,25%, 4 months 2,5%, till 4 or 5 percent after a year , is it possible the bank will try to cheat you by not paying the final higher percentages for the last 4 months with the lie that they have to cut down the rates ???

[thaimate]

When a Thai official tells you not to worry ,thats the time to start worrying.

If only they could be as upfront and totally honest & believable as the Greek officials ... uh, wait , umm the Spaniards ... well no, ... maybe all of the EEC financial officials working in concert ... ah bad choice ... Cameron, Merkel & Sarkosy ??? ha,ha,ha ... no, what about the US Federal Reserve and bank regulators there ... or maybe ...

Thailand has a long way to go to catch up to the "developed world" in terms of blantant dishonesty and rampant incompetence on the part of government officials and financial institutions as well as the total lack of trust felt for those institutions by the people they allegedly serve.

I dont know about a long way to go ,they are all as bad as each other,how do you know when a politician is lying ? his lips are moving.

[thaikahuna]

"I believe that banks will not pass the cost on to depositors or borrowers by dropping deposit rates or raising loan rates, because of the higher premiums," he said.

Another delusional finance minister...of course banks will pass on the costs...

Can I get some of what he's been smoking? I think the FM is actually capable of blowing smoke up his own...