Bank deposit insurance reduction in 2016

[Tywais]

As many know, bank deposit insurance was reduced from 50 million to 25 million as of August 11 this year (DPA). On August 11th 2016 it will be reduced to only 1 million baht.

What are your plans, if any, to reduce or minimize your exposure to loss if a bank fails? Many are moving to bonds though of course that has it own set of risks. I believe government banks are not included in this and only commercial banks so that may be an option. Though maybe others can verify regarding government banks. An another option, splitting your funds across multiple banks so you are within the 1 million insurance limit at each bank.

[true blue]

most of my capital is is in uk,i only transfer money to los,once a year just,enough to keep me going for 12months or so,its usually well under a million.and then split my money in uk in to various banks to keep under the 85 thousand quid,safety umberella.

[Pib]

Yeap, was aware. Probably best for a person to spread his/her money among several Thai banks so you get multiple Bt1M coverage (i.e., 1M at each bank) when the coverage drops....and I don't mean another branch of the same bank...I mean another bank. For the wife and I, we bank with Bangkok Bank, Krungsri Bank, and KrungThai Bank.

Plus you are not tied to just one bank in case you get PO'ed one day with one of your banks and want to move your money immediately to your other bank(s). Without already having an account at another Thai bank you may not be able to move the money ASAP unless talking it home to stuff in your mattress. But I bet a person could "immediately" find a new friend at any bar or soi corner who would allow you to deposit your money in their account until you find a new bank. And from many, many ThaiVisa posts over the years we know it's not always easy to open an account even for long stay visa/extension folks....sometimes it just seems a branch just don't want to have any farang customers.

Don't keep all your eggs in one bank basket.

[meatboy]

surely this is not going to work,my wife has 4 different bank accs.but she is going to have to look for more,but what about those who have,say 10million in savings accs.all those pass books if interest is paid monthly that would be 20, then there is all the work at the tax office for those whose income is only from saving interest. and if its only 1million coverage what % are the banks goner offer.

CANT WORK.

[KhunBENQ]

Bangkok Bank, SCB, Krung Thai, Kasikorn:

if one of these big players would fail I doubt that the insurance will be able to pay.

So I will stick with three of the above and have only deposits that can be withdrawn anytime and hope to smell the .... in time.

Currently much dependent on Bangkok Bank.

Edited October 25, 2015 by KhunBENQ

[Orac]

Bangkok Bank, SCB, Krung Thai, Kasikorn:

if one of these big players would fail I doubt that the insurance will be able to pay.

So I will stick with three of the above and have only deposits that can be withdrawn anytime and hope to smell the .... in time.

Currently much dependent on Bangkok Bank.

Pretty similar to my thoughts. I think the deposit guarantee would be of limited use in its current form even without the reduction in cover since the circumstances that would lead to it being needed by one of the major banks would suggest bigger issues within Thailand that would preclude the government being able to deliver on the promise.

I have brought more funds over here over the last couple of years as I see my long term future as being here but have spread it over over different accounts/investments but leaving enough overseas to provide me with a plan b and a plan c should the need arise.

[fletchsmile]

I'll address it with a combination of reducing amounts at banks and spreading it around in different banks, which are stronger, in different family members names, as well as buying different financial instruments. Don't feel a need to stick strictly to the 1 million limit and am comfortable going over a bit.

See no need to move money out of Thailand

Would just add that it's not guaranteed that "On August 11th 2016 it will be reduced to only 1 million baht"., though people should plan ahead what they will do if it happens.

There's been precedents in the past for postponing the reductions. Plus there's been a lot of talk within the banking industry from banks themselves and industry bodies of THB 1 million being too low. Two alternative possible scenarios are:

a) postponing the reduction. This is relatively easy to do. They didn't bother so much about the reduction 50mn to 25mn as only something like 5% of holders ball park were affected

setting the limit at a higher amount. This is harder to do as it would require a change of law as the act already legislates the amounts. Postponing is easier than changing the amount.

So plan for it. But also plan for what you'd do if it doesn't go ahead.

Bear in mind also that it is relevant today if you take out fixed deposits/ time deposits as taking out a 1 year TD would take you past the scheduled date

Cheers

Fletch

[Tywais]

Would just add that it's not guaranteed that "On August 11th 2016 it will be reduced to only 1 million baht"., though people should plan ahead what they will do if it happens.

There's been precedents in the past for postponing the reductions. Plus there's been a lot of talk within the banking industry from banks themselves and industry bodies of THB 1 million being too low. Two alternative possible scenarios are:

Just for members reference, the change to reduce to 1M baht was to take place in August 2012 and the reduction to 25M before that. The reduction to 25M took place August 11 this year as per the schedule on the DPA (Deposit Protection Agency) website. http://www.dpa.or.th/ewt_news.php?nid=320&filename=index___EN

The odds are more for it coming into effect then not IMHO.

[chicowoodduck]

Never all my eggs in the one basket....spread the wealth and cut down on the amount in the worry account....and never all my money in any Thai bank......just asking for trouble if one does that..IMHO!!

[lopburi3]

Always the cash alternative.

[khrab]

What are your plans to mitigate losses in case of bank failure?

1. Transfer funds back to home or other country
2. Transfer to multiple banks to keep each bank under 1M
3. Move to other instruments such as stock or bonds
4. Transfer to a government bank with guarantee of full amount of deposit
5. Move to a larger, more stable and solvent Thai bank
6. Keep it in a mattress, that is no banks
7. Does not effect me
8. No change
9. Change your fiat money into real money.

I go with option number 9.

Allan Greenspan: "Only gold is money. Everything else is credit"

I say: "Fiat (money) is fraud"

Edited October 26, 2015 by khrab

[CMBob]

This rule (reduction in protection by the government) was first proposed to be in effect in 2012 and has been delayed/extended at least twice now. Given the protection of only 1 million baht is so low, one can expect that either the number will be changed or the rule will be simply delayed again. If the rule isn't changed/delayed by about mid-spring of next year, then perhaps people can burn up some brain cells figuring out what (if anything) to do about it.

Another possible protection is to keep deposits at one of the bigger/stronger/healthier banks and/or perhaps even keep in mind who the bank's shareholders are (e.g., about 25% of SCB shares are owned by the Crown Property Bureau).

[Jeffrey346]

I thought it is 1M per account, not per depositor. Is this not the case??

[TallGuyJohninBKK]

The limits are per depositor, per bank -- not per bank branch, and not per bank account.

For the purposes of the general investor, meaning any of us living in Thailand or holding funds in a financial institution here, the key item in the Act concerns the amount of protection per depositor and per bank.

......

Multiple branches of the same bank will count as one deposit and will be lumped together. Though married couples will receive protection on a per person and per account basis of up to 1 million, separately, in the event of their owning a joint account, protection will not be separated out for that account. In most cases, the money will be split and counted against the individual account of each spouse.

..............

• Manage assets within your family, since each person is counted separately for insurance purposes, assets can be put into banks under children's or spouses names, to stay under the one million baht ceiling for each person.

• Effect on expatriates and Thai foreign couples: Since the Act makes no distinction between nationality or place of residence in determining coverage; the same rules will apply to these investors. The protection threshold of one million baht per bank is maintained in either case.

http://www.thailawforum.com/thai-deposit-insurance-law.html

And, the list of banks covered by the government's DPA plan does NOT include the government banks like Government Savings Bank, Government Housing Bank and a few others. But, from a legal perspective, I'm not sure what that means in terms of how a depositor with them would be treated in the event of a insolvency problem with those banking entities.

List of DPA covered banks:

http://www.dpa.or.th/ewt_news.php?nid=34&filename=index___EN

Edited October 26, 2015 by TallGuyJohninBKK

[sometimewoodworker]

I thought it is 1M per account, not per depositor. Is this not the case??

Unless the law is very different from every other country. No

Per person, per bank

[Pib]

And just to reiterate don't confuse branch with bank. Say you have Bt1M in two different branches of the same bank (i.e., Bangkok Bank, K-Bank, whatever the bank's name), when the coverage drops next year to Bt1M that means only Bt1M of your Bt2M total spread among two branches will be covered.

Best to have your money with more than one bank to increase your coverage. Say you had your Bt2M total evenly split between Bangkok Bank and K-Bank (or whatever banks you prefer) then you would have a total of Bt2M in coverage....Bt1M at each bank.

[BobTH]

Although slightly off topic, please forgive me. I would like to ask if anyone has been able to open a personal account at any of the government banks or financial institutions in Bangkok, or other parts of Thailand also for that matter. For instance such as the Government Housing Bank, and the Government Savings Bank. Actually the Finance Ministry is the major shareholder of these banks, and it is my understanding they would be liable to provide a blanket guarantee against bankruptcy, were it to happen. I would like to also have a few eggs in that basket also provided I am eligible to open an account. Unless things have changed I do not believe the funds in the bank deposit insurance program is funded enough to cover a major financial crisis here and pay everyone their full amounts if that were to happen. Just my opinion for what it is worth.

[KittenKong]

most of my capital is is in uk,i only transfer money to los,once a year just,enough to keep me going for 12months or so,its usually well under a million.and then split my money in uk in to various banks to keep under the 85 thousand quid,safety umberella.

Yes, I'm almost exactly the same. I do keep a couple of MB here, currently mostly with one bank. When those TDs expire next spring I will look at moving the funds around a little to spread the load.

As with the UK, I wont panic if some of my accounts are 10-20% over the deposit protection cap.

[bazza40]

I keep the bulk of my savings in Australia. I also buy gold here. A bit above the 1M on deposit here. Bangkok Bank, I would think if that goes bust the whole of Thailand is as well.

Raises another question, however. If you have 800,000 baht on deposit for the retirement visa, what happens if that's frozen in the event of a bust?

[akentryan]

I have savings and fixed accounts at Krung Thai, UOB, Bangkok Bank, Siam Commercial Bank and Kasikorn Thai. I had 32 accounts at one time and it was just too damned much to handle. I am now down to about a dozen accounts. The Government Savings Bank has some attractive deals on occasion but the one I wanted "wasn't available to foreigners". Anybody have any experienxce with other government banks - Housing bank, etc.? Renewed a fixed deposit this morning and got a whopping 1.75% for 8 months. I do have some older fixed deposits at 4% that run into 2017 so it isn't all bad.

[Tywais]

However, the original proposals got delayed by a government decree in 2012. In 2014, the amount covered by insurance still amounts to 50,000,000 baht. Deposit guarantee will be decreased to 25 million baht mid 2015, and to the tiny amount of 1 million baht (per bank) in 2016. An analysis by TMB Analytics estimates that 80% of deposit will become unprotected in 2016.

To be on the safe side, customers will need to open bank accounts with different banks, if they want to have all or at least a substantial amount of their deposits covered. This creates redundancy and inefficiency, inconvenience to customers, and larger overheads for banks (probably passed on to customers). A reduction in bank deposit insurance coverage also creates less trust in the banking system overall.

The law in its present form assumes that customers can make the right decisions, only depositing their money with banks that are solvent and reliable. However, this is a fallacy, since even well educated economists and experts in the field (as judged by the 2008 financial crisis) are not capable of adequately judging the solvency or good management of banks.

Figures provided by TMB Bank in March 2012 indicated that more money was flowing into the government banks. The Finance Ministry is the major shareholder of these banks, and would be liable to provide a blanket guarantee agains bankruptcy. Government include banks such as the Government Housing Bank, and the Government Savings Bank. Branches are few and between, but can be found in Bangkok and around Thailand. These bank do not offer all the services provided by commercial banks. Your money though should be safer with them.

So our advice is : deposit the bulk of your assets with government banks, and have a current account or savings account with a commercial bank for daily expenses.

More here - http://www.thaiwebsites.com/deposits-insurance.asp

[Tywais]

Raises another question, however. If you have 800,000 baht on deposit for the retirement visa, what happens if that's frozen in the event of a bust?

As it is under 1M then it will be covered by the DPA. It's not clear how long that will take though for the insurance to come through. Anything over 1M will have to wait for bank liquidation which can take a long time and probably not recover the full amount.

[Krataiboy]

Most of the world's major banks are technically insolvent and forced to rely on digital funny money created by the Fed and the rest of the crooked, privately owned central banks simply to stay afloat. A small increase in the interest rates - which cannot remain at their historic lows for ever - will spark another 2008 credit crunch of even greater proportions.

Let's face it, Thai banks have never been among the most reliable in the world. Now they are facing rising defaults on houses and cars from a Thai population rashly been encouraged by successive elected and non-elected administrations to live beyond its means (A population of debt slaves is, of course, easier to control and manipulate than one which is financially independent)..

Add to this the current leadership's stated intention to rely more in future on the growth of the domestic economy and less on exports, and it is not hard to see why the likes of the Bangkok Bank and Kasikornbank are busy greasing the bolts of their escape hatches.

Poor saps seeking a safer haven than the mattress for their spare cash is having to choose between the devils we know as the banks or the deep blue sea of the artificially inflated stock market, with its painful cycles of boom and bust.

On top of all this, only historically viable alternative to paper money, gold, is subject to cynical market manipulation clearly designed to give Joe Public the jitters and keep the price down.

Bucking the trend, Germany has been demanding its gold reserves back from the Fed vaults (excuse me while I roll round the floor laughing) and China and India are buying up as much of the precious metal as they can get their grubby hands on..

Maybe they know something we don't.

[fletchsmile]

However, the original proposals got delayed by a government decree in 2012. In 2014, the amount covered by insurance still amounts to 50,000,000 baht. Deposit guarantee will be decreased to 25 million baht mid 2015, and to the tiny amount of 1 million baht (per bank) in 2016. An analysis by TMB Analytics estimates that 80% of deposit will become unprotected in 2016.

To be on the safe side, customers will need to open bank accounts with different banks, if they want to have all or at least a substantial amount of their deposits covered. This creates redundancy and inefficiency, inconvenience to customers, and larger overheads for banks (probably passed on to customers). A reduction in bank deposit insurance coverage also creates less trust in the banking system overall.

The law in its present form assumes that customers can make the right decisions, only depositing their money with banks that are solvent and reliable. However, this is a fallacy, since even well educated economists and experts in the field (as judged by the 2008 financial crisis) are not capable of adequately judging the solvency or good management of banks.

Figures provided by TMB Bank in March 2012 indicated that more money was flowing into the government banks. The Finance Ministry is the major shareholder of these banks, and would be liable to provide a blanket guarantee agains bankruptcy. Government include banks such as the Government Housing Bank, and the Government Savings Bank. Branches are few and between, but can be found in Bangkok and around Thailand. These bank do not offer all the services provided by commercial banks. Your money though should be safer with them.

So our advice is : deposit the bulk of your assets with government banks, and have a current account or savings account with a commercial bank for daily expenses.

More here - http://www.thaiwebsites.com/deposits-insurance.asp

People need to be careful with using these statistics. The 80% mentioned above is by value.

In reality ball park 95%+ of customers (i.e by number of customers not by value) are less than THB 1 mn so will be unaffected.

The advice above is from Thaiwebsites.com, and their source is mainly "reports in the Thai media especially Bangkok Post" so worth bearing in mind who's writing it

[TallGuyJohninBKK]

When it comes to the Thai government banks, I'm not sure what to think about them as regards their situation vs. the commercial banks covered by DPA.

One of the advantages of DPA, at least on paper under its regulations, is that any customer deposits of an insolvent bank are supposed to be restored, within whatever limit applies at the time, within relatively short order, perhaps up to a couple months under their procedures.

Now, those procedures are DPA procedures. Whether the Thai government (whichever one might happen to be in place at the time in the event of financial failure) would follow those same procedures/timelines as regards to any of the government banks I think is an open question. As is, equally I think, whether the Thai government would ever let one of its government-owned banks get to the point of being insolvent and unable to honor its deposits.

For me, I like the seeming somewhat certitude of an actual Thai law that covers the commercial bank deposits and has a specific procedure and timeline for restoring deposits.

On the other hand, the longer I stay here, I'm less inclined to be trusting of the policy whims and left-right zigzagging of government officials and departments who seem to make things up as they go along when they're not tied down by specific legal requirements.

As for the main government banks, AFAIK, they don't have any prohibition against opening new accounts for farangs. Probably easier for those who possess a work permit, just as it is with the commercial banks. For those without a work permit, I suspect the government banks might be even more difficult to open new accounts than their commercial brethren.

[fletchsmile]

When it comes to the Thai government banks, I'm not sure what to think about them as regards their situation vs. the commercial banks covered by DPA.

One of the advantages of DPA, at least on paper under its regulations, is that any customer deposits of an insolvent bank are supposed to be restored, within whatever limit applies at the time, within relatively short order, perhaps up to a couple months under their procedures.

Now, those procedures are DPA procedures. Whether the Thai government (whichever one might happen to be in place at the time in the event of financial failure) would follow those same procedures/timelines as regards to any of the government banks I think is an open question. As is, equally I think, whether the Thai government would ever let one of its government-owned banks get to the point of being insolvent and unable to honor its deposits.

For me, I like the seeming somewhat certitude of an actual Thai law that covers the commercial bank deposits and has a specific procedure and timeline for restoring deposits.

On the other hand, the longer I stay here, I'm less inclined to be trusting of the policy whims and left-right zigzagging of government officials and departments who seem to make things up as they go along when they're not tied down by specific legal requirements.

As for the main government banks, AFAIK, they don't have any prohibition against opening new accounts for farangs. Probably easier for those who possess a work permit, just as it is with the commercial banks. For those without a work permit, I suspect the government banks might be even more difficult to open new accounts than their commercial brethren.

Some decent issues above.

The government banks aren't covered by DPA. They are backed directly by the government. Some of these issues above are why I think the recommendation by that website above of sticking all your money in government banks is flawed and a bit simplistic.

Some of the government banks like Islamic bank or SME bank are in poor shape financially. Islamic bank's level of NPLs is terrible. So if there was a run on the bank and/or something happened to the Thai sovereign finances there are risks there. Could be just the admin process of recovering your money while the government has more money printed or could be more serious if the country as a whole had a major crisis.

The points being as raised, the risks are different but not non-existant. So sticking all / most of your money into a government owned bank isn't necessarily a fool proof answer.

Foreign commercial banks bring some different benefits/risks and perspectives. Such as moral and/or legal support from the parent.

Some of the Thai banks like TMB are also part owned by government entities, eg around a quarter by MOF and a quarter by ING

So the solution is really spread your money around. Look for the stronger banks first with less chance of something going wrong, then secondly at the support from various places if something does go wrong, that includes DPA as well as government backing, strong foreign parents etc

Also worth remembering that a lot of the money that might no longer be covered will be from the wholesale/company side rather than simply retail investors. That opens up quite a lot of other dimensions when you think about it.

eg who has influence is one angle

eg if you're in business do you understand where and how your customers and suppliers bank?

Cheers

Fletch

Edited October 26, 2015 by fletchsmile

[inzman]

If you have more than a million in cash, you would be a fool to keep it in Thailand. There are no protections for your money in a bank here. Keep your nest egg in your own country. This will keep it safe and away from prying eyes. Bring it here and it will be gone.

[bazza40]

If you have more than a million in cash, you would be a fool to keep it in Thailand. There are no protections for your money in a bank here. Keep your nest egg in your own country. This will keep it safe and away from prying eyes. Bring it here and it will be gone.

Most retirees have the 800,000 baht on deposit for the retirement visa. Presumably there are a number who also have more than an extra 200,000 baht to rely on for living expenses each year. Drawing living expenses from your "own" country periodically is expensive in terms of fees, both here and at your "own" country. If you are a retiree and following your own advice, I'm wondering who the fool is.

[luckyman]

I've always have divided over several bank accounts, because they told me many years ago already right after the banking crisis in Europe in 2008 at my local Krungsri, that the insurance is 1 M per account, not per bank.

[lopburi3]

If you have more than a million in cash, you would be a fool to keep it in Thailand. There are no protections for your money in a bank here. Keep your nest egg in your own country. This will keep it safe and away from prying eyes. Bring it here and it will be gone.

Most retirees have the 800,000 baht on deposit for the retirement visa. Presumably there are a number who also have more than an extra 200,000 baht to rely on for living expenses each year. Drawing living expenses from your "own" country periodically is expensive in terms of fees, both here and at your "own" country. If you are a retiree and following your own advice, I'm wondering who the fool is.

Well the fee here is between 200-500 baht (.25%) and for USA fee there would be $10 for a transfer over 2k$ if using Bangkok Bank ACH method.