Were Deposits in Thailand Protected in the 90's Financial Crash

[steve654]

I read Thailand closed over 100 financial institutions during the Asia financial crash in the 90's. What happened to

all the depositors money when the institutions were closed.......did everyone get their money back? Just wondering

how Thailand works this out compared to other countries. Looks like Greece isn't doing a good job and I remember

someone telling me a long time ago that Thailand did a great job protecting everyone so I would like to know if that

is true or not?

[Pib]

Below is a quote from a document regarding what happened in Thailand during the 1997 finincial crisis. Depositors were basically protected from losses...the govt provided deposit protection on the fly.

In 2008 Thailand passed the Deposit Protection Act which an institutionalized a deposit protection program and provides depositor coverage up to X-amount...it's still at Bt50M through 10 Aug 15....then drops to Bt25M through 10 Aug 16, and then Bt1M 11 Aug 16 and onward. Now Bt1M may not sound like a lot to a westerner, but to the average/typical Thai considering the entire population it's more than they'll probably ever have in a bank account. You can read more about it at the Thailand Deposit Protection Agency website.

Deposit insurance history in Thailand

During the unprecedented Asian economic crisis that began in Thailand in 1997, the Thai

government’s Financial Institutions Development Fund (FIDF) announced that it would

fully protect all financial institutions deposits in case of bankruptcy or closure.

In the midst of a huge financial and economic crisis, the Government was forced to

implement such a guarantee to shore up confidence in a then-shattered banking

system. Throughout the crisis, investors maintained their financial institution cash

deposits and ultimately helped the economy recover quickly.

During the 1997 financial and economic crisis, the FIDF was forced to assume more than

Bt1.3 trillion of liabilities to bail out depositors and creditors of failed financial institutions

and banks.

[steve654]

That was just what I was looking for, thanks for the help

With G20 countries preparing bail in laws, which basically means using depositors monies to rescue the banks next time around, I was curious how other countries outside the G20 were going to go about it.

[asdecas]

You can bet that, if the scale of bad debts to banks anywhere in the World becomes great enough, the relevant government will in effect steal depositors' money from their accounts, as happened in Cyprus and will likely eventually happen in Greece (a so-called 'bail-in'), rather than allow the local banks to go bust and then face the knock-on effects on their economy.

[dotpoom]

You can bet that, if the scale of bad debts to banks anywhere in the World becomes great enough, the relevant government will in effect steal depositors' money from their accounts, as happened in Cyprus and will likely eventually happen in Greece (a so-called 'bail-in'), rather than allow the local banks to go bust and then face the knock-on effects on their economy.

I heard a news report that in Greece, your money would only have been protected up to 8.000 Euros if it came to what is being discussed here.

euro

[SOUTHERNSTAR]

That was just what I was looking for, thanks for the help

With G20 countries preparing bail in laws, which basically means using depositors monies to rescue the banks next time around, I was curious how other countries outside the G20 were going to go about it.

Don't know if you know but from next year 16 August 2016 the deposit guarantee in Thailand will drop to B 1 mil per person per bank.

The UK dropped their guarantee a week ago to GBP 75 000.

If you are scared of bailins be aware that unsecured bonds issued by banks are grabbed first. The theory is that these bonds and deposits over the guaranteed amount will be converted into shares of these banks. The problem is many investments are indirectly linked to these types of bonds. You could be invested in a money market account or pension fund thats invested their funds in unsecured bank bonds.

The scary one is the US where the deposit guarantee fund is about $ 53 bn strong but the total deposits are about $ 19 tn.

Be also aware that like in the case of Greece the banks was closed and people that stored money or gold in bank safe deposit boxes could not access them. Store valuables outside the banking system.

[falang07]

they do not have to steal your money but if they limit daily withdrawals to 60 EUR like currently in Greece, you will not get to your millions in your lifetime so they will effectively steal it anyway + if the currency depreciates to 10% in the meantime (which is very probably in case of serious issues), the protection would be useless anyway

[Suradit69]

You can bet that, if the scale of bad debts to banks anywhere in the World becomes great enough, the relevant government will in effect steal depositors' money from their accounts, as happened in Cyprus and will likely eventually happen in Greece (a so-called 'bail-in'), rather than allow the local banks to go bust and then face the knock-on effects on their economy.

"if the scale of bad debts to banks anywhere in the World becomes great enough"

Might be a bit of an overstatement. Those countries that issue their own currency will (or have already) just ramp up the printing presses ... an option not available to Greece as long as it used the Euro

That worked pretty well in "modern" Zimbabwe and some other countries.

[DGS1244]

Guaranteeing the money was one thing, guaranteeing the value was something else. Many of us that were working here at the time had almost weekly rises in salaries just to keep up our living standards. If you had a lot of money in the bank at the beginning it was almost valueless six months later.

[Suradit69]

Guaranteeing the money was one thing, guaranteeing the value was something else. Many of us that were working here at the time had almost weekly rises in salaries just to keep up our living standards. If you had a lot of money in the bank at the beginning it was almost valueless six months later.

Yes. I lived in an African country (not Zimbabwe) for nearly 25 years. When I first arrived I bought a VW Beetle for 1200 units of the local currency. By the time I left, it would have cost at least twice that to buy a daily newspaper or bottle of Coca Cola. Fortunately my inflation adjusted salary was paid in dollars in the US. There was a flourishing black market (no pun intended) in currency that worked to my advantage, but the economy was tanking in ways that were devastating to the local population.

I employed two people for house cleaning and looking after the garden. They got a raise every month as I kept their salaries equivalent to a set dollar amount. Savings accounts eventually paid well over 100% interest rates. That didn't even begin to keep pace with inflation.

[chiang mai]

That was just what I was looking for, thanks for the help

With G20 countries preparing bail in laws, which basically means using depositors monies to rescue the banks next time around, I was curious how other countries outside the G20 were going to go about it.

Don't know if you know but from next year 16 August 2016 the deposit guarantee in Thailand will drop to B 1 mil per person per bank.

The UK dropped their guarantee a week ago to GBP 75 000.

If you are scared of bailins be aware that unsecured bonds issued by banks are grabbed first. The theory is that these bonds and deposits over the guaranteed amount will be converted into shares of these banks. The problem is many investments are indirectly linked to these types of bonds. You could be invested in a money market account or pension fund thats invested their funds in unsecured bank bonds.

The scary one is the US where the deposit guarantee fund is about $ 53 bn strong but the total deposits are about $ 19 tn.

Be also aware that like in the case of Greece the banks was closed and people that stored money or gold in bank safe deposit boxes could not access them. Store valuables outside the banking system.

The UK dropped their deposit protection amount to 75k because that's what Brussels required, it's not just a UK thing.

[elgordo38]

You can bet that, if the scale of bad debts to banks anywhere in the World becomes great enough, the relevant government will in effect steal depositors' money from their accounts, as happened in Cyprus and will likely eventually happen in Greece (a so-called 'bail-in'), rather than allow the local banks to go bust and then face the knock-on effects on their economy.

Your bailing out someone who has played fast and loose with your money and with the governments blessing. The governments have totally abdicated their responsibility to protect your money. Money in the bank pays nothing and this bail in feature is all a big ponzi scheme. As in Thailand keep your deposits down to the $100,000 level or face a haircut. Everything today is rigged in the favor of big business. Its the new world order Fover the little guy.

[elgordo38]

That was just what I was looking for, thanks for the help

With G20 countries preparing bail in laws, which basically means using depositors monies to rescue the banks next time around, I was curious how other countries outside the G20 were going to go about it.

Don't know if you know but from next year 16 August 2016 the deposit guarantee in Thailand will drop to B 1 mil per person per bank.

The UK dropped their guarantee a week ago to GBP 75 000.

If you are scared of bailins be aware that unsecured bonds issued by banks are grabbed first. The theory is that these bonds and deposits over the guaranteed amount will be converted into shares of these banks. The problem is many investments are indirectly linked to these types of bonds. You could be invested in a money market account or pension fund thats invested their funds in unsecured bank bonds.

The scary one is the US where the deposit guarantee fund is about $ 53 bn strong but the total deposits are about $ 19 tn.

Be also aware that like in the case of Greece the banks was closed and people that stored money or gold in bank safe deposit boxes could not access them. Store valuables outside the banking system.

The UK dropped their deposit protection amount to 75k because that's what Brussels required, it's not just a UK thing.

Good old Brussels sticking it to the little guy and protecting big business.

[sammygood]

will they not soon change the 50 million baht limit to just 1 ?

[pchansmorn]

Does anyone know what would happen to peoples deposits in the US if the banks crashed. How much would be guaranteed, would you still be allowed to transfer money to Thailand every month. Also what is the safest place to put your retirement money? Are annunitys Safe? Thanks for your information. Patrick

[flyvnsky]

The EU protection was set at 100,000 Euros, which at the time it was introduced was £85k.

The Euro has dropped so much against Sterling that Euro 100k is now worth £75k.

See

http://www.telegraph.co.uk/finance/bank-of-england/11715807/Banks-to-cut-protection-on-deposits-to-75000-from-January.html

[flyvnsky]

Actually as the Euro continues to drop Euro 100k is now worth less than £70K!!!

[TallGuyJohninBKK]

US bank deposits are guaranteed by the federal government, via the FDIC, up to $250,000 U.S. per account.

The limit used to be $100K per account, but was increased a few years back. And unlike Thailand, I don't believe there's any move or plan in the U.S. to lower the current insurance cap.

Also, AFAIK, never in the FDIC's history has it failed to cover eligible deposits in any FDIC insured U.S. bank that failed, and there have been, and continue to be, various bank failures in the U.S. on a regular basis, mostly small institutions.

In contrast, in Thailand, the current DPA government insurance for bank deposits has never been tested in real life. DPA didn't exist back during the late 90s financial crisis, and was only created by the Thai government in its aftermath. Since that time, and all the bailout money that went to Thai banks, I don't believe there have been any further Thai bank failures requiring DPA reimbursement of deposits.

[bazza40]

Buy gold

[steve654]

Members of TV are much more astute than I was aware of Good to know most of you are aware of bail ins. As far as FDIC or any other institution guaranteeing all funds, I would say it is almost impossible. In Canada for instance, our federal insurance fund has less than half a percent of what is really needed to cover all deposits. They can get maybe 3% more to help in case of a huge financial collapse, but that's about it. That is why they love the idea of using our deposits to stabilize the banking system if needed. Banks have changed in ways I would have never thought in my lifetime. I love to be an optimist, but I think the next financial collapse is going to be scary for many Western countries and catch many hard working savers off guard in a big way.

[SOUTHERNSTAR]

That was just what I was looking for, thanks for the help

With G20 countries preparing bail in laws, which basically means using depositors monies to rescue the banks next time around, I was curious how other countries outside the G20 were going to go about it.

Don't know if you know but from next year 16 August 2016 the deposit guarantee in Thailand will drop to B 1 mil per person per bank.

The UK dropped their guarantee a week ago to GBP 75 000.

If you are scared of bailins be aware that unsecured bonds issued by banks are grabbed first. The theory is that these bonds and deposits over the guaranteed amount will be converted into shares of these banks. The problem is many investments are indirectly linked to these types of bonds. You could be invested in a money market account or pension fund thats invested their funds in unsecured bank bonds.

The scary one is the US where the deposit guarantee fund is about $ 53 bn strong but the total deposits are about $ 19 tn.

Be also aware that like in the case of Greece the banks was closed and people that stored money or gold in bank safe deposit boxes could not access them. Store valuables outside the banking system.

The UK dropped their deposit protection amount to 75k because that's what Brussels required, it's not just a UK thing.

Who ever required what is not the question, the statement I made was that the amount has been lowered. There are however a little tail to this, the guarantee also cover people that for example sold an house or received a lump sum payment up to GBP 1 mil for 1 year.

[chiang mai]

The UK dropped their deposit protection amount to 75k because that's what Brussels required, it's not just a UK thing.

Who ever required what is not the question, the statement I made was that the amount has been lowered. There are however a little tail to this, the guarantee also cover people that for example sold an house or received a lump sum payment up to GBP 1 mil for 1 year.

Regrettably it is the question, the change of secured deposits from 85K to 75K (and moving further soon) is dictated by exchange rates, the value of 1 EURO vs 1 GBP, koh jai mai!

[Pib]

will they not soon change the 50 million baht limit to just 1 ?

Refer back to post #2.

[Asiantravel]

US bank deposits are guaranteed by the federal government, via the FDIC, up to $250,000 U.S. per account.

The limit used to be $100K per account, but was increased a few years back. And unlike Thailand, I don't believe there's any move or plan in the U.S. to lower the current insurance cap.

Also, AFAIK, never in the FDIC's history has it failed to cover eligible deposits in any FDIC insured U.S. bank that failed, and there have been, and continue to be, various bank failures in the U.S. on a regular basis, mostly small institutions.

In contrast, in Thailand, the current DPA government insurance for bank deposits has never been tested in real life. DPA didn't exist back during the late 90s financial crisis, and was only created by the Thai government in its aftermath. Since that time, and all the bailout money that went to Thai banks, I don't believe there have been any further Thai bank failures requiring DPA reimbursement of deposits.

" Also, AFAIK, never in the FDIC's history has it failed to cover eligible deposits in any FDIC insured U.S. bank that failed "

but that means nothing? You can't feel assured just because it's never happened in the past. We are in totally uncharted waters with all the debt around the world and FDIC has never before had to work in an environment where the country is $18 trillion plus in debt.

[Acharn]

I think the 100 "financial institutions" referred to were small, shady "finance" companies. Some of them were little more than vehicles for confidence games, others were so badly undercapitalized they would have been in bankruptcy anyway. It's hard to imagine now, the exuberance of the new rich in those days. Million baht condos were being sold within days for two million and then four. I remember a small shopping mall visible from Sukhumvit near Jomtien that was empty and rotting for years afterward -- there never was any prospect that there would be customers for it, but the owner of the land persuaded himself he was going to go from rich to mega-rich. The banks never closed, although as more of their large loans to friends turned bad there was a lot of anxiety. Lots of people had fun at the roadside stalls set up to sell of stuff at the "markets of the formerly rich." For ordinary Thais it was hard as the economy lapsed into recession, but a lot of people (I mean thousands our of a population of around 70 million) fell from being rich to just being middle class.

[Acharn]

" Also, AFAIK, never in the FDIC's history has it failed to cover eligible deposits in any FDIC insured U.S. bank that failed "

but that means nothing? You can't feel assured just because it's never happened in the past. We are in totally uncharted waters with all the debt around the world and FDIC has never before had to work in an environment where the country is $18 trillion plus in debt.

Oooooh, what big numbers. Soooo scary.

[Asiantravel]

" Also, AFAIK, never in the FDIC's history has it failed to cover eligible deposits in any FDIC insured U.S. bank that failed "

but that means nothing? You can't feel assured just because it's never happened in the past. We are in totally uncharted waters with all the debt around the world and FDIC has never before had to work in an environment where the country is $18 trillion plus in debt.

Oooooh, what big numbers. Soooo scary.

it looks much scarier on the clock which now says more than $20 Trillion

http://www.theusdebtclock.com/

[Time Traveller]

Guaranteeing the money was one thing, guaranteeing the value was something else. Many of us that were working here at the time had almost weekly rises in salaries just to keep up our living standards. If you had a lot of money in the bank at the beginning it was almost valueless six months later.

BS and BS.

The Thai Baht went from the fixed level of 25 to the dollar to it's weakest level (very briefly) of around 56 within 6 months of the float. So it lost about 55% of it's value (at worst).

It then traded back to around 40 between the years 1998 to 2000. So effectively 37.5% weaker than before the float.

That's not exactly "valueless". In fact the Australia Dollar has almost weakened by the same amount in % terms over the last 2 years.

http://thailandmusings.thaivisa.com/wp-content/uploads/2013/04/Thai-Baht-1997-2013.jpg

[timendres]

Does anyone know what would happen to peoples deposits in the US if the banks crashed. How much would be guaranteed, would you still be allowed to transfer money to Thailand every month. Also what is the safest place to put your retirement money? Are annunitys Safe? Thanks for your information. Patrick

From their website: The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress...

And further on: The statute provided a federal government guarantee of deposits

Thus, you have a Federal guarantee. The FDIC's deposits (provided by participating banks and institutions) covers "normal" bank failures. However, a crash is a different animal, as their deposits would never cover the losses.

Before that occurred, the Federal Reserve will do it's best to prevent the crash, as they did in 2008. If they were unable to prevent the crash, then the Congress would step in to fill the void to make good on the FDIC promise.

All in all, you are likely to be able to access your funds and not lose your money up to the limit on the coverage. Unlike the EU, the US has the advantage of being able to borrow a virtually unlimited amount of money to deal with such a crisis. The problem is pushed down the road for future generations to deal with.

Transfers to Thailand are unlikely to be affected on the US side. More likely the Thai side. In fact, the recent FATCA act is more likely to make it difficult for you to get a bank account here, and hence transfer money, although so far it appears to be being accepted by the Thai banks.

Safest place for your retirement money? There is no such thing. You need to diversify for safety. Of course, Money Markets and US Treasuries are the most secure place for a dollar, if your concern is getting those dollars returned to you. Annuities? They run the gamut from shady to solid like any other investment.

If you plan to live here indefinitely, here is what I have done: I have my home in the US, I have some of my money in the stock market, I have some of my money in bonds, I have cash in three different US banks (2 credit unions and one traditional bank), I have a small amount (4% of my wealth) in gold and silver with physical possession, I have three bank accounts here in Thailand with nominal funds in each (under the limit that requires reporting to the US Treasury [$8k]), I have a safe deposit box in Bangkok with cash baht, and a safe in my room with baht cash. The baht cash is sufficient funds for me to live here for two years (albeit on a much tighter budget than I normally spend).

[kokesaat]

Guaranteeing the money was one thing, guaranteeing the value was something else. Many of us that were working here at the time had almost weekly rises in salaries just to keep up our living standards. If you had a lot of money in the bank at the beginning it was almost valueless six months later.

My wife and I were here in 1996 and through Thaitanic. Here's the way we saw things:

Let's say we had 100,000 baht in the bank before the crisis.....at 25 Baht/dollar.

At the height of the crisis (and only for a very short time), the exchange rate was 50+ Baht/dollar. We still had 100,000 in the bank. Our 25 Baht bowl of soup (then) still cost us 25 Baht. Our 6000 Baht a month rent still cost us 6000 Baht. In fact, according to my records, there was very very little change in prices for the first 9 months of so of the crisis. And only after that time, did prices begin to go up.......but even then, marginally.

So, if you started the crisis at 100k, the 100k didn't lose value. It's a matter of perspective.