New Bank Savings law ... effective today

[RayBan]

Just to make any of you rich Buriramites aware of the new bank savings law that became effective today. Below is a copy of an article in today's Bangkok Post pertaining to the law change. Basically over the next 5 years the bank guarantee on your deposit will be reduced from 100% guarantee on funds down to 50 million baht max in 3rd year, 10 million baht in 4th year and eventually to 1 million baht maximum in 5 years time.............be aware of this:- 




DEPOSIT DECREASE

Warning to bankers: Be aware of the risks
Investors encouraged to study monetary law

SOMRUEDI BANCHONGDUANG

 People with savings are now paying much more attention to bank credit risks after a decrease in state guarantees on deposits, starting today.

Enforced by the Deposit Protection Agency Act endorsed in February, the Deposit Protection Institution will be operational today to manage the decrease in guarantees.

Under the act, which covers baht deposits in both local and foreign financial institutions in Thailand, the guaranteed deposit amount will remain in full in the first year and be reduced to one million baht per account from the fifth year on.

That means people who deposit their money in any bank would no longer be given a full guarantee if the bank faces liquidity problems or bankruptcy.

As a result, people with savings should have a good understanding of the law and consider the strength of the financial institution they have deposited their savings with, said a bank executive.

A bank's track record, its management, and its reliance on good governance are areas savers should consider.

Still, banks with low credit ratings may offer higher interest rates to draw deposits. People wanting to deposit money should make careful decisions, the bank executive said.

Making deposits in several banks would be a good strategy to diversify risk, he added.

The new law has encouraged financial institutions to create various innovative financial products.

Sompong Boonpitak, 55, a business owner, said she was prepared to counter decrease in the deposit guarantees by relocating her assets.

She was planning to spread her deposits in several banks, particularly government banks.

Long-term mutual funds are another choice for her because of tax benefits.

Wanaporn Aopassathaporn, 37, a merchant, said she would break up her deposits and move them into several banks, focusing on the large ones.

Sethaput Suthiwart-narueput, the president of SCB Asset Management, said some bank deposits were expected to be transferred to mutual funds. Mutual fund products, such as fixed income and guaranteed funds, should receive a good response from depositors.

Short-term fixed deposits, government bonds and bills of exchange are also expected to gain some attention from investors.

[HappyinIsaan]

Looks like I've got at least 20 years before I stand to lose my measly 1000bt!

[TBWG]

Hi

50 million baht .. Wow some guarantee, in the UK you are only guaranteed £30K if your bank goes T*t's up! No problem for me the Boss lady spends it as fast as I get it!

Who has had a bank go recently .. The UK,  Northern Rock, in theory better off with your cash in Thailand for the next few years if you conveniently ignore interest rates.

TBWG

[dave the dude]

Its time like these when you notice the difference between a 'REAL' Bank and a building society.

Dave(Bank empoyee for 26 years BTW)

[TBWG]

Its time like these when you notice the difference between a 'REAL' Bank and a building society.

Dave(Bank employee for 26 years BTW)

Only 26 years ... Time off for good behavior?


TBWG

[RayBan]

Hi again guys,

Maybe it is because I am cynical towards Thailand banks...........but I see this as a "Get out of Jail Free" card that they are preparing for themselves with what is on the horizon.

Who would have thought a few years back that Banks in UK and Europe would have been threatened. Yet it is only a year ago this month that the European Central Bank stunned the world by injecting 75 billion pounds sterling into money markets in a desperate response to save wobbling big name banks. This was all down to a credit crunch after the lending and debt bubble burst.

Now one doesn't have to be an "Alan Greenspan" to see what is happening in Thailand with the mass construction, all being built on loans etc, but where are the prospective tourists, buyers, renters......just look at Pattaya properties.

I reckon there will be some big wobbles here in the future and the banks and financial institutions know what's coming ........ thus this change in policy ............ don't say I didn't tell y'all           

[Yellow Tree]

Seems simple enough; spit the money up in more than one bank. For the very rich it will mean investing in real capital (i.e. land) and less in liquid capital (cash) because there are only so many banks in Thailand. People that do not have cash in their pocket tend to not spend it and that will be bad for the economy because the rich tend to spend the big bucks.

 I wonder if this is a strategy by the Big Banks (i.e. Bangkok Bank) to push the smaller banks out? I will start watching the CD rates at the smaller banks. Thanks.

[RayBan]

Yo everyone, just received an update on this particular thread subject matter, I have indicated in red a paragraph particularly interesting:-


Protecting bank deposits in Thailand

by

Stephen Frost, Bangkok International Associates


Background In the aftermath of the Thai financial crisis of 1997, the Financial Institutions Development (FIDF), part of the Bank of Thailand, issued an unlimited guarantee of all deposits of money with financial institutions. This was done largely to encourage investor and depositor confidence in the financial system. Since then, confidence in the system has recovered, but the unlimited guarantee remains in place.

The Deposit Protection Act was passed on 6 February 2008 and came into force on 13 August 2008. The provisions of the Act replace the current existing open-ended deposit guarantee with a guarantee that will be far more limited in scope. This article discusses the scope of the new protection scheme for depositors.

What financial institutions are subject to the Act? The Act will apply to commercial banks, finance and securities companies and credit foncier companies.

Meaning of deposits The Act defines deposits as monies that financial institutions receive from any person with an obligation to repay. 

Regulatory authority The Deposit Protection Office is established as a regulatory authority with duties to safeguard monies deposited in financial institutions, and to reinforce the security and stability of the financial institution system. A Deposit Protection Office Committee will issue regulations under the Act, and implement the purposes of the Act.

Deposit Protection Fund A Deposit Protection Fund will be established under the Act. The main purpose of the Fund is to make payments to depositors, as permitted/required under the Act.

Deposits that are protected Protected deposits are deposits and interest held by financial institutions, provided that they are in Baht, held in an account in Thailand, and excluding deposits in Baht of depositors who reside outside Thailand.

Applying for the return of money When the license of a financial institution has been revoked, all its money and property must be handed over to its liquidator within seven days from the date of license revocation. Depositors will then be notified of their right to apply for return of deposits within 14 days from the date of license revocation. Depositors must apply and present evidence to support the return of deposits within 90 days of being notified to do so. The Minister of Finance may extend this period on not more than two occasions, and for not more than 90 days on each occasion.

Failure to apply for return of deposit Where a depositor fails to apply for return of money within the time stipulated, the right to reclaim is lost except in the case of force majeure, where a depositor may apply within a period of 90 days from the date the force majeure event ceases to apply. They may still apply as a creditor in any liquidation proceedings.

When payments are made and maximum payment amount The Office will pay each depositor who has applied for payment within 30 days from the date of application. A depositor is entitled to receive all monies shown in every account, subject to a maximum payment of 1 million Baht.

Where the depositor owes money to the financial institution, then that will be set off and deducted from the total monies in all accounts.

Who may claim payment The Office will pay monies due to the depositor who is the owner of the account, or his heir. In the case of a joint account, payment will be made to each depositor according to his legal entitlement to money in the account, as recorded by the financial institution. If the amount of monies deposited by each depositor is not known, it will be deemed that each depositor has an equal share in the account.

Regulations may be issued prescribing a higher maximum payment amount, or the amount to be paid for different types of account.

Subrogation and insolvency Depositors’ rights will be subrogated to the Office’s rights in an amount equivalent to that which has been paid out, and the Office may claim that amount from the official receiver or liquidator in liquidation proceedings. The Office has a preferential right in priority to ordinary creditors of the financial institution.

Breach of duties imposed The Act contains a list of the fines and prison terms that apply to breaches of duties imposed under the Act.

Transitional provisions When the Deposit Protection Office has been established, the previous FIDF guarantee will be abolished. During the first four years of operation of the Act, payments to depositors will be made in compliance with the rules above, provided that the maximum amount of monies protected will be as follows:

•   Year 1    - the full amount as shown in the account.
•   Year 2    - 100 million Baht.
•   Year 3    - 50 million Baht.
•   Year 4    - 10 million Baht

The amounts above may be varied under regulations.

Comment The replacement of the open ended FIDF guarantee with a more limited form of deposit protection has been expected for some time. In general, the Thai financial system and the reliability and creditworthiness of Thai financial institutions is far better now than it was in the dark days after the 1997 crisis. It is to be hoped that there will never be a recurrence of the crisis that affected so many Thai financial institutions at that time, and that the rights granted under this Act will seldom need to be invoked.

©       Stephen Frost, Bangkok International Associates 2008

__________________________

Bangkok International Associates is a general corporate and commercial law firm. For further information, please contact Stephen Frost by email at sfrost@bia.co.th or telephone (66) 2 231 6201 or 6455.
   

[TBWG]

HI

Deposits that are protected Protected deposits are deposits and interest held by financial institutions, provided that they are in Baht, held in an account in Thailand, and excluding deposits in Baht of depositors who reside outside Thailand.

That's east to get around .. just put all your money in the wifes account


TBWG