Thailand cuts bank deposit protection

[reader]

From Pattaya Mail

From August 11, the maximum deposit protection in individual Thai bank accounts is reduced from 5 million to one million baht, or about 22,000 British pounds. Inevitably, this has set off a wave of social media frenzy with foreign retirees and others alarmed that their cash deposits might disappear overnight or even that the whole of the Thai banking system is in danger of disintegration. Best to calm down.

The Deposit Protection Act of 2008 was introduced in the wake of the world financial crisis of that era. The amounts protected have been regularly reduced over the years until they reached five million baht. Then, in April 2020, the Thai Cabinet announced the one million limit would come into force in August 2021. But this still covers 98.03 percent of total depositors investing in 35 financial institutions, according to Kasikorn Research Center.

Comparisons have to be made with other countries. There is no common pattern. Cambodia has no regulatory deposit protection yet in force, whereas the Philippines guarantees most accounts for 500,000 peso or about 7,000 pounds. The UK mainland has an upper limit of 85,000 pounds, which falls to 50,000 pounds in the Isle of Man and the Channel Isles where most British expats have been forced in recent years to lodge their accounts. The EU protection limit is 100,000 euros.

As usual, the devil is in the detail. Refunds are not automatic in every case. As the online Moneyfacts reports, the Halifax and the Bank of Scotland in UK are under the same banking licence, so investors’ protection is limited to one account and not two. In Thailand, foreign currency accounts are not covered. In almost all countries, temporary surges in funds (such as receiving an inheritance or a bonus) will not count in the deposit protection scheme.

Bloomberg, the international business and media company, says that the economic ramifications of Covid are far from clear. But its list of most likely banking failures internationally doesn’t even mention Thailand – but does list the USA! Kasikorn Research Center reports that the main intention of the forthcoming depositor reduction in Thailand is to encourage fiscal responsibility in businesses and consumers alike. Even so, there is no denying that Thai banks are overly dependent on unpaid loans and repossessed properties whose notional value may be much higher than reality. Money and risk can never be separated.

The best advice for foreigners in Thailand who maintain millions of baht in Thai banks, a very small number of expats, is to spread their cash around more than one financial institution or even to make use of banks in other Asean countries. In reality, in any country, the government is the security for investors. If one bank goes bust, the central authority can bail it out as the UK did in the case of Northern Rock in 2008 which was saved by nationalization. If all banks go bust, your currency will be worthless in any case. Hello the Weimar Republic.

https://www.pattayamail.com/latestnews/news/thailands-cut-in-bank-deposit-protection-doesnt-mean-a-collapse-is-imminent-367181

[spoon]

Just to add as comparison, malaysia's bank saving protection is rm250k or 42.7k pounds per bank, doubles that for insurance policy. Spreading money to other banks is one way. Overseas bank provide better diversity but through my little research, as most bank would require either residency or work permit to open. Another way is through investment but usually there is no gov guarantee for investment. 

[Guest]

19 minutes ago, spoon said:

Overseas bank provide better diversity but through my little research, as most bank would require either residency or work permit to open.

I've managed to open overseas bank savings accounts in Thailand & Singapore, without residency or work permits.   

In Thailand, the first Kasikorn branch said no and the second one said yes.   TIT

In Singpore, the first bank said yes, as long as I put in SGD XXX,XXX into one of their premium accounts.  No use, as I prefer to decide for myself when to move money.   The second bank allowed me to open an ordinary account.

[PeterRS]

Great for those using the 800,000/400,000 baht retirement option which has to remain unspent!

[spoon]

I guess ill have to try the next time im in thailand, whenever thatll be, to open one. Singapore also not a bad place to have a bank account.

[PeterRS]

The frenzy on social media is unsurprising since many Thais still remember the disasters of the 1997 Asian Economic crisis. During the boom years that preceded it, the government was determined to maintain the long-standing exchange rate of US$1 = 25 baht. To do so it had to keep increasing interest rates. But due to various economic pressures, it also decided to dismantle foreign exchange controls. This led to some banking institutions and several finance companies borrowing overseas at much lower interest rates and then relending in Thailand at much higher rates to make major profits. When the speculators arrived in force in 1997, they were successful at the third attempt after Thailand had spent almost its entire foreign exchange reserves attempting to defend the $/baht peg. Crony capitalism had taken a hard knock.

The crisis led to several major financial institutions and at least one bank going bust, including the country's largest Finance One. They all held non performing loans on their books amounting to over $3 billion. But many of the borrowers could not repay. The property market collapsed leaving many upstart companies also bankrupt. By December 1997, 56 finance companies had collapsed permanently. Another 58 required emergency funding of 660 billion baht. Bangkok Metropolitan Bank had gone bust but was eventually taken over by Siam City Bank.

So a reduction in the guarantee by such a large amount inevitably caused a great deal of concern. Does it mean the country is heading for another meltdown? Very unlikely, I believe. But some may not agree.

[10tazione]

On 8/10/2021 at 3:32 PM, z909 said:

I've managed to open overseas bank savings accounts in Thailand & Singapore, without residency or work permits.  

Do you need to fill in a Thai address? What if they send some important documents by post? Or does it work 100% online?