State-owned banks are not covered by the Deposit Protection Agency (DPA) and the government must push through a law if it wishes them to be, says president Sorasit Soontornkes.
An executive decree is needed to include the Islamic Bank of Thailand under the umbrella of the Deposit Protection Agency, says DPA president Sorasit Soontornkes. PATTARACHAI PREECHAPANICH
"At present, our members are only private banks. However, the law allows the government to issue an executive decree that requires the agency to include state-owned banks as members. The government has yet to do that," he said.
However, Mr Sorasit said state-owned banks' depositors should be assured their money will be completely protected by the government.
He said the decision to transfer responsibility to the Bank of Thailand for 1.14 trillion baht in debt stemming from the 1997 economic crisis is unlikely to threaten the banking system's stability as long as the central bank performs well in supervising banks.
The DPA has liquidity totalling 104 billion baht under management and legal permission to borrow from the market and raise funds from local banks.
The government early last year decreased the ratio of banks' contribution to the DPA to 0.01% of deposits from 0.4% so that the same level of levies can be called by the Financial Institutions Development Fund.
The DPA has extended the time frame for reducing full coverage under the scheme from last year to the end of next year.
It will decrease the amount of deposit entitled to full coverage from 50 million baht per account per bank to 25 million in early 2015 and 1 million in early 2016.
Mr Sorasit said the new time frame should not affect depositors, as only 1% of 60 million depositors have more than 1 million baht in a bank account.
Meanwhile, the Bank of Thailand insists the overall financial position of two major state-owned banks - the Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives - is healthy but admits there are problems in some of the smaller state-owned banks.
The Finance Ministry legally designated the central bank to examine state-owned specialised financial institutions in the period following the 1997 crisis.
However, the power to regulate and resolve problems still rests with the ministry.
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Writer: Parista Yuthamanop and Wichit Chantanusornsiri