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Post by Fletchsmile on May 14, 2015 13:36:07 GMT 7
The Thai government protection on your THB deposits will likely reduce to THB 25mio per person per bank from 11 August 2015. The official schedule is on the Deposit Potection Agency Website www.dpa.or.th/ewt_news.php?nid=320&filename=index___ENIn the past some of the reductions have been delayed or postponed. I have it on reasonably good authority, it looks pretty certain (as much as anything is in Thai life  ) that the planned reduction to 25mio will actually go ahead in August 2015. In reality for most Big Mango Thailand expats a reduction from THB 50mio guaranteed by the government to THB 25mio will make little difference. What will be more interesting is whether they actually go through with the next step down to THB 1mio in August 2016, given Thai immigration requirements for retirees for example can take up 800k of that. So the reduction to THB 25mio is more important from the perspective it makes that 1mio step more likely. Just a heads up to keep it in mind if you're tempted by fixed deposits of 15 months and more if searching for special rates in a world where people are scratching for yield on savings and investments. Cheers Fletch |
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Morakot
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Post by Morakot on May 14, 2015 21:51:07 GMT 7
Thanks for posting this!
Extreme at both ends. The current fifty million THB that's incredible! Which other state* would offer this? Similarly one million THB is rather low in comparison to 85,000 GBP (about 4.4 mill THB) in the UK or 100,000 EUR for Euro zone countries.
Finding alternative places is not straightforward as these deposit schemes can have residency clauses. I'd be interested to find out what the situation is in Thailand for non-im visa holders. Would they be legally entitled to this deposit scheme?
Note: * RO Ireland "unlimited" deposit insurance
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Post by Fletchsmile on May 15, 2015 8:57:58 GMT 7
Morakot, There's some ironic history behind this. Thailand didn't have a DPA protection scheme until the Asian crisis hit in 1997. Then the powers that be stepped in and provided guarantees to shore things up, so depositors didn't lose out and maintain people's faith in Thailand, hence the role of institutions like the FIDF. Once things stabilised, they then wanted to move to a model where there wasn't complete guarantees - more like the west. So they agreed to phase it in. When those agreements were being hatched UK was only GBP30k and US and Europe also much less. Then ironically the GFC hit, and suddenly the west had crises. US, UK and Europe governments stepped in, and were backing everthing so the system didn't collapse. There were even some temporary complete guarantees. Once it died down higher limits were left in place eg GBP 80k now. On the other hand Thailand still wanted to reduce as it was in good shape, but with the GFC and aftermath around, they deemed it prudent not to do so and also from a competition/ attractiveness stance. So they put back timing on reductions. If GFC hadn't have happened and the west hadn't have messed up, they would probably now be at THB 1mio compared to say GBP 30k in UK. Many western banks are still in weaker shape than they need to be, whereas Thailand's learnt a lot from 1997 and put their houses in order, and are largely (with a couple of exceptions like SME bank and Islamic bank) in relatively good shape. For non-immig visa holders, I'm pretty certain they're covered. It's been a couple of years or so since I read the royal decree, but think there's an English translation on that website. While it covers foreign depositors, it doesn't cover foreign currencies. So only THB deposits are covered. Given the west still has issues, and given how BOT looks at things, I think they're more likely to look at regional models like Singapore and HK. That's also realistically their peers and competitors. Singapore has a SGD 50k limit, again only on SGD deposits, not foreign currencies. That's about THB 1.25mio. Their banks are generally stronger prudentially than Thailand, and their depositors on average wealtheir. So I reckon they're more likely to benchmark vs Asian peers than troubled western banks Cheers Fletch |
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Morakot
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Post by Morakot on May 15, 2015 9:13:59 GMT 7
Thanks Fletch for this informative explanation.
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AyG
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Post by AyG on May 28, 2015 10:44:02 GMT 7
I was skeptical that this would actually go ahead, but now the DPA is asking banks to promote the fall in protection to 1 million next year. www.bangkokpost.com/news/general/574987/dpa-spreads-the-word-on-guarantee-cutThe article says that government banks should be safe with the backing of the Finance Ministry. Not sure I believe this. Time to cut the amount of money I hold within Thailand, methinks. |
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Post by Fletchsmile on May 28, 2015 14:08:50 GMT 7
Skeptical of Fletch when he gives our esteemed members the heads up two weeks before the riff raff? and the media? August 2015 is a done deal. August 2016 is still a long way to go to next year, and a lot of things could happen. So think you're right to be sceptical, AYG, although it's looking more likely, and people should think and plan for it. In terms of financial strength the commercial banks are in much better shape than the government ones, which will further distort markets. That article also highlights out also that of the 0.47% banks pay to DPA for holding your depsoits, 0.46% is for paying debts and only 0.01% for insurance. "Not a lot of people know that" I'll continue to spread accounts over family members, and may widen my selection of banks a bit. I already have StanChart, TMB and BBL, but was thinking about adding UOB for a few reasons - unfortunaely I closed a few years back. Always worth remembering in Thailand that sometimes it makes life easier to keep open at least one unwanted account with each bank you already have and just keep minimum balance - just in case - as it saves all the account opening admin Will probably still have more than 1mio per account per name in some cases, but don't want too much more... |
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Post by Fletchsmile on May 28, 2015 14:14:50 GMT 7
There's always positive sides to everything:
If somebody does have more than 1 mio they know they're in the top 2% of depositors in Thailand. So 1) they're in Thailand 2) they're in the top 2%
Life could be a lot worse...
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AyG
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Post by AyG on May 28, 2015 15:07:35 GMT 7
There's always positive sides to everything: If somebody does have more than 1 mio they know they're in the top 2% of depositors in Thailand. So 1) they're in Thailand 2) they're in the top 2% Life could be a lot worse... I may be in the top 2%, but it most certainly doesn't feel like it. In other countries banks would be bending over backwards to offer me a credit card*. Not here they're not. (In fact, despite investing more than 1 million with three different banks, I've not had a single piece of correspondence from any of them for more than 5 years.) And there are plenty of products they won't sell me just because I'm not Thai. And on top of that, the banks with the highest interest rates won't even let me open an account because I'm foreign (L&H Bank, CIMBC I'm thinking of you). *I don't actually particularly need a credit card, but it really galls me going to restaurants where one can get x% off the bill simply for paying with a particular credit card. It just shows how many percent the restaurant is over-priced. |
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Post by Fletchsmile on May 28, 2015 15:24:20 GMT 7
Yes Thai banks can be difficult sometimes.
Type of visa can affect getting a CC, AyG. Business + Work permit is most useful, but banks will look at other long term non-imm, eg retirement, marriage, dependent
Also being a priority banking customer, e.g. at UOB, StanChart etc. helps.
We've talked quite a bit before about where to hold investment funds. That's one reason of many I hold some investments here in Thailand, as the investments count towards you getting you Priority Banking, increases chance of a CC, gets your own Relationship Manager etc.
My wife for example is a housewife, and has no salary. As a priority banking customer they offered her a platinum credit card. Yes, she's Thai which helps, but at the end of the day there are usually credit scorecards or scoring processes banks use. Non-imm visa + priority banking helps for foreigners.
L&H and CIMBC are difficult to deal with. Not necessarily the best rates always either, but usually competitive as L&H in particular is a weaker bank.
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Post by Fletchsmile on May 29, 2015 9:41:18 GMT 7
I was skeptical that this would actually go ahead, but now the DPA is asking banks to promote the fall in protection to 1 million next year. www.bangkokpost.com/news/general/574987/dpa-spreads-the-word-on-guarantee-cutThe article says that government banks should be safe with the backing of the Finance Ministry. Not sure I believe this. Time to cut the amount of money I hold within Thailand, methinks. AyG I gave a lot of thought to this particularly around 2008. Not just for Thailand, but also for other banks around the world. For me, it makes sense to spread my money globally as no government is 100% fool proof and risk free. I really wonder how close the US banking system came in 2008 for example Part of the solution may be also spreading your cash in different names/ relatives family in different banks In a Thai context another angle is why we keep THB cash in the first place. Part of it is for transactional use. Part of it for us is also to reduced foreign exchange risk, for the security of capital - doesn't fluctuate much, and part for the government guarantee reduced credit risk. Thai bonds are another potential source to address the FX risk and capital and credit risks. eg by buying a mutual fund of government bonds or even corporate bonds. I did in 2008 for that very reason. Obviously the capital fluctuates more than cash (not as much as equities), and you assume more interest rate risks, but it addresses some of the other factors / reasons. i.e if you can't have a government guaranteed deposit, a government bond portfolio (or even corporate) is an option for some of that money. Some of my THB cash will therefore likely end up in Thai bonds to address this concern you raise. Cheers Fletch |
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AyG
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Post by AyG on May 29, 2015 10:07:37 GMT 7
My first instinct was to move money into THB accounts outside Thailand. Not sure how practical that would be with the difficulty in many places opening accounts whilst resident elsewhere. Also, depositor protection schemes often only cover the country's currency deposits. (For example, in Thailand only THB deposits are protected, not other currencies.)
With buying bonds capital fluctuation isn't an issue if one buys and holds to maturity. I guess one could buy a ladder of bonds with different maturities. Seems a bit like hard work, though.
I suspect in the end I'll split my money between a few banks, keeping less than a million in each, and take on a bit more foreign exchange risk in the medium term.
(Investigating the number of bank failures in the occident over the past few years, I was surprised how many there have been. This came as a surprise. I now think the risk of a Thai bank failing is a very real one.)
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Post by Fletchsmile on May 29, 2015 10:51:39 GMT 7
For different countries, Thailand only protects THB deposits. Singapore only protects SGD deposits up to 50k per person per bank, and so on. So while the banks in Singapore for may be stronger, their baht accounts wouldn't be covered by them - don't think offshore Thai is that accessible to most people either. For some HNWI maybe.
On Thai banks, I spend a lot of time looking at that. The weakest banks are those owned by the government. The commercial banks are generally in good shape.
When you say large number of bank failures I assume we're talking US and other countries. They have a different philosophy and load of US banks go bankrupt each year. Can't think of a single Thai bank having gone bust in the last 15 years. Back in 2008 while working for a Thai subsidiary of a foreign bank here, I was very happy to have money in thai banks. I sat in on the senior management meetings where we'd discuss what was happening globally, and I felt much safer with some of my money - not all - here in Thailand.
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Post by Fletchsmile on Jun 29, 2015 19:58:49 GMT 7
Thai banks have been submitting their DPA plans to Bank of Thailand for 2015. Not likely to be much impact initially on a drop from 50mio to 25mio. The interesting stuff really will be next year, if it goes down to THB 1mio or not.
There's a fair bit of discussion in the industry as to whether it will proceed downwards and whether THB 1mio is appropriate. THB 10mio is one option.
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Post by Fletchsmile on Aug 11, 2015 11:18:05 GMT 7
Don't forget that your Thai banking deposit protection falls to "only" THB 25mio from today  What people may want to think a little bit more about though is that if you take out fixed deposits for over 12 months then the maturity will fall after the next scheduled reduction to THB 1mio (from August 2016). This scheduled reduction is not certain to happen in Thailand - few things are - but worth bearing in mind. Cheers Fletch |
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Post by Fletchsmile on Aug 20, 2015 15:16:45 GMT 7
As a quick update on DPA and current thinking in the Thai banking industry. Thai deposit protection is now at THB 25 mio, and scheduled to reduce to THB 1mio in 2016
The industry is looking at ways to maintain a higher level of deposit protection for their customers. The 2 main ways to do this are:
1) Push back the date when THB 1 mio would come into force. Postponing reduction dates is something that has been done in the past. eg make it 2017/8/9 etc when the 1mio comes in
2) Set the level at a higher amount than THB 1mio next year, eg THB 10 mio in 2016. Because of the way the legislation is written and the fact a law/Act has been passed, this would require a change in law to change the amount. As such it's more difficult to do than postponing which requires no significant law change
Out of the 2 options above there's a higher probability it would be postponed.
Reduction to THB 1mio is at the moment still scheduled, though, even though the industry is looking at solutions like the above two.
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) that the planned reduction to 25mio will actually go ahead in August 2015.
