Thai Bankers Association tells depositors not to rush to withdraw money: Rice pledging

[TallGuyJohninBKK]

The same is true of most Western countries also, these things are insurance policies that have rarely been tested, but that's no reason not to trust them otherwise we wouldn't invest anywhere, their very existence helps ensure that players remain balanced and inspire confidence.

I guess I'm contrasting Thailand's situation with the one in the U.S., where the government deposit insurance is now and is likely to remain at $250,000 per bank, per depositor.

People can take this as either a good or a bad thing, depending on their perspective. But during the U.S. financial breakdown of recent years, scores and scores of different banks and credit unions failed. And in every case, I believe without exception, either other banks bought out the failed institutions and assumed their deposits with financial backing from the government. Or, if no other bank buyer was found, the failed bank was liquidated and the U.S. FDIC paid off all insured deposits -- quickly and without exception -- and even some amounts beyond those insured.

Unfortunately, apparently Thailand has no such track record of prompt and efficient repayment of deposits in failed banks. I'm not saying I think the rice fiasco will lead in that direction. I'm just saying, Thailand doesn't have much of a "prompt payouts" record to stand on in terms of its deposit protection schemes.

[chiang mai]

You're guessing and you don't know, fair enough, I don't either and I can't be bothered to research the subject - that voids your last para.

[TallGuyJohninBKK]

No... I'm stating facts... I used the word "guess" in my opening sentence in a figurative, not literal, way. And it was unrelated to the subsequent facts I related.

The U.S. FDIC has a long and stable track record of promptly paying out for insured deposits when U.S. financial institutions have failed. Thailand's banking system has no such track record.

[chiang mai]

Two things:

One - I'd like to see proof of this:

"and even some amounts beyond those insured".

Two - I'd like to see proof that FDIC has actually paid customers as a result of a bank failure, versus, the failed bank being taken over by another bank and the associated losses being assumed and duly paid, I'm not certain such cases exist.

The point of the above being that the existence of FDIC and DPA is in itself a deterrent rather than a fall back.

[Soutpeel]

I don't like being " warned" not to withdraw my money . Almost implies some kind of associated threat !

Government must come up with a quick plan....whoever protects the banks from a run is capable of winning votes.

The government would be the last ones to come up with a plan, If there is a run on thai banks its because of the government

[chiang mai]

Some of "us" seem to think that expats are the only people to use banks, the fact is we expats are a very small percentage both in terms of number of accounts and asset value. It therefore follows that the "rules" are made not for us few but for the majority, the native population, it would be one thing to p*ss off a few thousand expats by stealing their bank accounts but it's something else entirely to p*ss off the entire population, think about it.

[personchester]

The Thai banking system is quite stable and there is absolutely no reason for anyone to do anything. Waste of time, waste of money.

Thai banks are financially stable and secure, and are generally in a better position than the Western banks who are still suffering from the financial disaster that began in the US in 2007.

The commercial administration will now begin to help the farmers, the rice will next week begin to be removed from the warehouses in order to start the sale, China and America, plus other countries will purchase the goods because Thai rice is a top quality.

Thai banks will have no financial problems about this, and depositors have no need to worry and stay put.

[Mike45]

Two things:

One - I'd like to see proof of this:

"and even some amounts beyond those insured".

Two - I'd like to see proof that FDIC has actually paid customers as a result of a bank failure, versus, the failed bank being taken over by another bank and the associated losses being assumed and duly paid, I'm not certain such cases exist.

The point of the above being that the existence of FDIC and DPA is in itself a deterrent rather than a fall back.

I believe it happened to my bank... IndyMac Bank.

"Federal regulators seize crippled IndyMac Bank

A run on the Pasadena thrift ends in one of the biggest financial failures ever. Doors will reopen Monday.

July 12, 2008|

The federal government took control of Pasadena-based IndyMac Bank on Friday in what regulators called the second-largest bank failure in U.S. history.

Citing a massive run on deposits, regulators shut its main branch three hours early, leaving customers stunned and upset. One woman leaned on the locked doors, pleading with an employee inside: "Please, please, I want to take out a portion." All she could do was read a two-page notice taped to the door.



The bank's 33 branches will be closed over the weekend, but the Federal Deposit Insurance Corp. will reopen the bank on Monday as IndyMac Federal Bank, said the Office of Thrift Supervision in Washington. Customers will not be able to bank by phone or Internet over the weekend, regulators said, but can continue to use ATMs, debit cards and checks. Normal branch hours, online banking and phone banking services are to resume Monday."

Sent from my B1-A71 using Thaivisa Connect Thailand mobile app

[Dogmatix]

I remember all the assurances from the Bank of Thailand that the baht would not be devalued and that the financial institutions were all sound back in 1997 right up to the moment the baht hit the skids and numerous finance companies and some banks went bust.

[Prbkk]

I remember all the assurances from the Bank of Thailand that the baht would not be devalued and that the financial institutions were all sound back in 1997 right up to the moment the baht hit the skids and numerous finance companies and some banks went bust.

Correct but the circumstances were very different then and so was the response: there was a sense of unity, a lot of dialogue and planning, a national response to a crisis....in stark contrast to the brinkmanship of Suthep. It would be good to see the reasonable people in the democrats enter into discussions with the govt about a similar approach this time. The economic circumstances in 1997 were 10 times worse than today but a national unity govt ( with PTP leading but with significant representation from the other parties at ministerial level would be great). It can happen

[chiang mai]

Two things:

One - I'd like to see proof of this:

"and even some amounts beyond those insured".

Two - I'd like to see proof that FDIC has actually paid customers as a result of a bank failure, versus, the failed bank being taken over by another bank and the associated losses being assumed and duly paid, I'm not certain such cases exist.

The point of the above being that the existence of FDIC and DPA is in itself a deterrent rather than a fall back.

I believe it happened to my bank... IndyMac Bank.

"Federal regulators seize crippled IndyMac Bank

A run on the Pasadena thrift ends in one of the biggest financial failures ever. Doors will reopen Monday.

July 12, 2008|

The federal government took control of Pasadena-based IndyMac Bank on Friday in what regulators called the second-largest bank failure in U.S. history.

Citing a massive run on deposits, regulators shut its main branch three hours early, leaving customers stunned and upset. One woman leaned on the locked doors, pleading with an employee inside: "Please, please, I want to take out a portion." All she could do was read a two-page notice taped to the door.



The bank's 33 branches will be closed over the weekend, but the Federal Deposit Insurance Corp. will reopen the bank on Monday as IndyMac Federal Bank, said the Office of Thrift Supervision in Washington. Customers will not be able to bank by phone or Internet over the weekend, regulators said, but can continue to use ATMs, debit cards and checks. Normal branch hours, online banking and phone banking services are to resume Monday."

Sent from my B1-A71 using Thaivisa Connect Thailand mobile app

I asked for examples of where the FDIC or similar actually paid out rather than took control of a bank or arranged for a failing bank to be taken over by anotrher.

[speedtripler]

If only they'd just kept quiet . . . now that run is starting . . .

<snip> right-might be a good time to transfer funds to singapore banks

in case the thai banks go tits up .....

Edited February 6, 2014 by soundman
Excessive profanity.

[MAJIC]

The mere discussing the subject,is worrying,let's hope i'm wrong!

[leosuntime]

Lets take a few steps back and think about this.

If your bank manager tells every one not to withdraw your money, what do your think this means?

What have we been seeing on a yearly basis since 2008.

What in the world does it take to wake a person up?

I really think people are really like animals. They have to see tsunami before they start running.

[speedtripler]

is there any guarantee on funds in thailand if you have a few million in the bank and suddenly

they go broke ?

[Soutpeel]

If only they'd just kept quiet . . . now that run is starting . . .

<snip> right-might be a good time to transfer funds to singapore banks

in case the thai banks go tits up .....

Might be a good idea, one suspects the banks in Singapore are getting quite a few enquires about opening accounts right now from people in Thailand

[speedtripler]

If only they'd just kept quiet . . . now that run is starting . . .

<snip> right-might be a good time to transfer funds to singapore banks

in case the thai banks go tits up .....

Might be a good idea, one suspects the banks in Singapore are getting quite a few enquires about opening accounts right now from people in Thailand

if they accepted thb it would be convenient ,converting it to sg dollars and transferring it over and maybe back again to a thai bank in future

you get hammered on the conversion fees twice

if it gets any worse cash in a safe deposit box might be safer than currency in a savings account ....

[TallGuyJohninBKK]

is there any guarantee on funds in thailand if you have a few million in the bank and suddenly

they go broke ?

By Thai law, the current coverage is 50 million baht per bank, per depositor -- in other words, all the money you have in one bank company, regardless of how it's spread among accounts or different branches.

That is the government's insurance scheme against total bank financial failure only -- in other words, the bank going bankrupt or out of business -- not fraud or theft or other losses.

Under the DPA rules, the money is supposed to be restored to depositors, I believe, within a month or two. But since the DPA was only created in the aftermath of the Asian financial meltdown, there isn't much of a track record of just how, or how fast, they'd perform.

[Valentine]

The Thai banking system is quite stable and there is absolutely no reason for anyone to do anything. Waste of time, waste of money.

Thai banks are financially stable and secure, and are generally in a better position than the Western banks who are still suffering from the financial disaster that began in the US in 2007.

The commercial administration will now begin to help the farmers, the rice will next week begin to be removed from the warehouses in order to start the sale, China and America, plus other countries will purchase the goods because Thai rice is a top quality.

Thai banks will have no financial problems about this, and depositors have no need to worry and stay put.

Think back to the Bangkok Bank of Commerce which was the forerunner of the 1997 financial crisis. There were many things being hidden then just as there are today.

[TallGuyJohninBKK]

I asked for examples of where the FDIC or similar actually paid out rather than took control of a bank or arranged for a failing bank to be taken over by anotrher.

The normal occurrence with bank failures in the U.S., and this probably happens in more than 90% of the cases -- is that the FDIC arranges with another bank to take over the assets and deposits of the failed bank, and in the process, the FDIC covers losses for the assuming bank.

From the customer end of things, usually, it means the failed bank is usually closed and taken over on a Friday afternoon, and the new bank reopens on Monday morning with its existing branches under the control of the new bank company and often support staff from the FDIC during the transition.

Customers typically don't lose access to their funds except for perhaps the briefest period of time, if at all.

As I said above, only in rare cases, is the failed bank not taken over by another bank with FDIC financial support. In those case, the FDIC mails out checks to the depositors for their insured deposits. Unlike the Thai system, I don't believe U.S. folks have to file any claim with the agency. It just happens automatically, because the bank of course knows who it's depositors are and how much they have on deposit.

Each depositor insured to at least $250,000

The Federal Deposit Insurance Corporation is an independent federal agency created in 1933 to promote public confidence and stability in the nation's banking system.

Throughout its history, the FDIC has provided bank customers with prompt access to their insured deposits whenever an FDIC-insured bank or savings association has failed.

In the FDIC's history, no customer has ever lost a single penny of insured deposits.

----------------------------------------

The FDIC pays depositors within just a few days after an insured institution fails, usually the next business day. The FDIC protects depositors in one of two ways - by either:

• Facilitating a merger with another FDIC-insured institution, or
• Issuing a check to each depositor for the insured portion of their accounts at the closed institution.

http://www.fdic.gov/consumers/banking/confidence/symbol.html

As for the amount of the coverage, there are several ways to increase the amount of insured deposits under the U.S. system using different account ownership categories, such as joint accounts, trust accounts, payable on death accounts, etc. Each account type held at the bank will have its own separate $250,000 insured deposits cap.

Lastly, here's a consumer banking site that monitors bank failures, and describes the impact (or non-impact mostly) on accountholders during 2013. It also explains how most of the time -- except in cases of brokered deposits -- even amounts held over the FDIC limits end up being protected, because the FDIC-arranged assuming bank covers them.

Failed Banks That Weren't Acquired by Other Banks

Just like in previous years, the FDIC was able to find buyers for the vast majority of banks that failed. In those cases, the acquiring banks assumed all regular deposits including amounts over the FDIC limit. So for most people who had deposits over the FDIC limit at these failed banks, they were lucky. No uninsured deposits were lost. The only exception was brokered deposits. It was common that the acquiring banks did not assume some brokered deposits. The banks probably didn't see any benefit from assuming these types of deposits since there are no relationships with the depositors.

Out of the 24 failures, I counted only one bank that was not acquired. That was The Community's Bank of Bridgeport, CT which had $26 million in assets and $26 million in deposits. The bank was closed on September 13th.

http://www.depositaccounts.com/blog/2013/12/review-of-the-2013-bank-failures-and-their-effects-on-depositors.html

So according to this source, there was one bank in all of the U.S. during 2013 where the FDIC had to make direct payouts to depositors as mentioned just above. The same source has a tally of 6 such banks total in the U.S. during 2011 and 2012 combined.

Out of the 51 failures [during 2012], I counted only four banks that were not acquired. In 2011 there were two banks that were not acquired. Below is the list of these four banks:

1. Home Savings of America, Little Falls, MN - 4 branches, $434.1 million in assets and $432.2 million in deposits (closed on Feb 24)
2. New City Bank, Chicago, IL - 1 branch, $71.2 million in assets and $72.4 million in deposits (closed on Mar 9)
3. Bank of the Eastern Shore, Cambridge, MD - 2 branches, $166.7 million in assets and $154.5 million in deposits (closed on Apr 27)
4. NOVA Bank, Berwyn, PA - 13 branches, $483.0 million in assets and $432.2 million in deposits (closed on Oct 26)

http://www.depositaccounts.com/blog/2012/12/review-of-the-2012-bank-failures-and-their-effects-on-depositors.html

I guess I should also be clear: In all the other cases where an assuming bank is involved, the FDIC is still paying out -- just not directly to depositors. As part of the new bank stepping in, the FDIC's insurance fund covers the losses incurred by the failed bank. It's not the new bank that's picking up those losses. But that all occurs behind the scenes, as it has no direct impact on depositors.

Edited February 7, 2014 by TallGuyJohninBKK

[promatrix]

Time to pull out old biscuit tin

[chiang mai]

You guys are driving me crazy with this one, you're claiming that the FDIC is a proven entity that pays out within a couple of days of a bank failure yet there's not a single example of where the FDIC has actually paid out, in every case they act as an intermediary to find another bank to take over the troubled bank. Because of all that you think the FDIC is more reliable than the DPA in Thailand, nonsense I say,.

One more time: organizations such as FDIC and DPA are deterrents against failure, they improve customer security, confidence and peace of mind, that's all. The real mechanism that manages a bank failure is the other banks who absorb/merge/buy the troubled bank, that's true in the US, the UK and also here in Thailand. If say FOR EXAMPLE ONLY Bangkok Bank were to fail, does anyone here not think that BAY, SCB or similar would jump at the chance to take it over, banking dreams are made of such things. And since the balance sheets of most banks in Thailand are in much better shape than many of their western counterparts, why ever would a person want to take funds out of a Bangkok Bank or similar and deposit them into a Lehmans Northern Rock Wachovia Western Mutual HBOS, RBOS, Bradford & Bingley Barclays Bank, you really haven't thought it all through!

http://www.fdic.gov/bank/individual/failed/banklist.html

http://en.wikipedia.org/wiki/List_of_banks_acquired_or_bankrupted_during_the_Great_Recession

[TallGuyJohninBKK]

CM, you're obviously having trouble reading and/or understanding.

IIn my prior post #170 above, I listed for you -- because you asked for them -- more than a half dozen

different banks that failed in the U.S. over the past couple years and assuming banks were NOT found,

meaning the FDIC had to pay out directly to depositors in those cases.

The good part for depositors is, those are a small minority of the bank failure cases in the U.S., so

customers accounts and deposits continue intact under the new bank, without having to re-do everything

just because their prior bank failed.

And, as I also noted above, in the majority of other cases where an assuming/buying bank is involved, the

FDIC is still paying out -- but doing so by covering the losses of the failed bank.

But the more important aspect of the U.S. coverage is -- and unlike Thailand -- in the U.S. failures,

customers do not lose access to their funds -- either at all, or at worst, for a very brief period of time. That's

the aspect that most customers are going to be concerned about -- not what name is on the door.

Under the Thai system as spelled out by the DPA, in the event of a bank failure, it looks like account

holders would be out of their funds for two months or more. The DPA under its rules has up to 40 days after

a bank fails to announce a claim filing period. Then after that, depositors have to file their claim, and then

are supposed to be paid within a month of their claim being filed.

http://www.dpa.or.th/ewt_news.php?nid=372&filename=index___EN

Under the U.S. system, payment is automatic, no claim filing is required, and repayment in the rare cases of

no assuming/acquiring bank certainly doesn't take that long.

Edited February 7, 2014 by TallGuyJohninBKK

[chiang mai]

CM, you're obviously having trouble reading and/or understanding.

IIn my prior post above, I listed for you more than a half dozen different banks that failed in the U.S. over the past couple years and assuming banks were NOT found, meaning the FDIC had to pay out directly to depositors in those cases.

The good part for depositors is, those are a small minority of the bank failure cases, so customers accounts and deposits continue intact, without having to re-do everything just because their prior bank failed.

And, as I also noted above, in the majority of other cases where an assuming/buying bank is involved, the FDIC is still paying out -- but doing so by covering the losses of the failed bank.

What's making it difficult to understand is your vebiage, presumably you are using the word "assuming" instead of the word "acquiring" and you're are not trying to say that you are guessing?

[TallGuyJohninBKK]

The new bank assumes the assets of the failed bank, or you can say "acquires" if you choose. But the meaning and result in the same.

[chiang mai]

OK, now I understand what you've said, I was reading it as you were guessing and that you were assuming that to be the case.

Regardless, I still don't buy the notion that DPA is not fit for purpose, during the 1997 crash the duties and role of DPA were undertaken by the BOT, subsequently a stand alone DPA was created. Today, that DPA has the backing of BOT in the same way that FDIC is backed by the Fed. And the issue of bank viability remains, judging from the long list of bank failures around the world, in the US and elsewhere, the FDIC's of this world are fairly active, not so the BOT or DPA in Thailand over a similar period.

[TallGuyJohninBKK]

One more time: organizations such as FDIC and DPA are deterrents against failure, they improve customer security, confidence and peace of mind, that's all. The real mechanism that manages a bank failure is the other banks who absorb/merge/buy the troubled bank, that's true in the US, the UK and also here in Thailand.

CM...you're just spouting nonsense.... The ONLY reason that other banks get involved in the U.S. in assuming/acquiring the assets of the failed bank is because the FDIC covers/absorbs/pays for the losses. It's not like the incoming bank is doing it out of charity. If the FDIC wasn't covering the losses with its own funds, there wouldn't be any new bank.

Here's a good example, one among many:

Colonial Bank was closed today, and the FDIC arranged for BB&T to take over the branches and deposits. It's the largest bank failure this year, and the sixth largest bank failure in US history. It's not the most expensive closure this year. Colonial Bank's failure is estimated to cost the Deposit Insurance Fund $2.8 billion which is much smaller than the cost of BankUnited's failure in Florida. BankUnited cost the DIF an estimated $4.9 billion.

Colonial Banks depositors don't have to worry about losing any money. All deposits even those above the FDIC limit have been transferred to BB&T.

http://www.depositaccounts.com/blog/2009/08/colonial-bank-closed-by-regulators.html

The FDIC pays big time in all these bank failures. It's more often in covering the losses of the failed bank, so depositors are mostly not affected. It's sometimes also in paying out funds directly to reimburse depositors.

Edited February 7, 2014 by TallGuyJohninBKK

[Briggsy]

Pre-announcement of a bank run. Sell your baht now. It will be worthless next week.

[TallGuyJohninBKK]

One thing about the U.S. system of getting acquiring/assuming banks involved immediately to take over the failed bank (with FDIC funds) is that it preserves continuity and access of funds for the depositors.

Under the Thai DPA system, it appears to only envision deposits being refunded by the government -- after perhaps a two month waiting period. In the event of a Thai bank failure, like the many that occurred in the Asian meltdown, I wouldn't want to be waiting two months.

And I certainly wouldn't want to be waiting THREE YEARS like the member who posted above about his experience in the Asian Meltdown prior to the creation of the DPA under the old Thai system.

It's not clear to me at all whether the Thai DPA system even envisions any kind of government-financed acquiring/assuming bank scenario as a way to minimize the direct impact on accountholders.

[chiang mai]

Of course the FDIC/DPA pay for some of the losses of the failed bank, that's the purpose of the fee that every bank pays in order to fund such institutions, that doesn't detract from the fact that a white knight is still needed to take over the failed bank and those knights exist here in spades! So what's the issue, that DPA couldn't/wouldn't fund a failed bank or that a white knight couldn't be found here, either one is not realistic.