Deposit protection move not seen hitting confidence

Deposit protection move not seen hitting confidence

The lowering of deposit protection to a maximum of 1 million baht this month is unlikely to impact the confidence of the depositors on the financial institutions, said Krisada Chinavicharana, the Finance Ministry's permanent secretary.

According to the Deposit Protection Act, deposit protection will be lowered to a maximum of 1 million baht per account per financial institution from Aug 11 this year from the current maximum of 5 million baht.

The cabinet meeting on April 7 last year approved a one-year extension of deposit protection up to a maximum of 5 million baht until Aug 10 this year.

Earlier, Songpol Chevapanyaroj, president of the Deposit Protection Agency (DPA), said in a statement the maximum deposit protection of 1 million baht covers 82.07 million depositors, or 98.03% of total depositors, of 35 financial institutions under the Act.

Mr Krisada said that as the protection of 1-million-baht deposit means the protection still covers a large number of deposit bank accounts, this suggests that the majority of depositors will not be affected by the lowering of the protected amount.

Vitai Ratanakorn, president of Government Savings Bank (GSB), said he expects that as of today, some depositors of other banks might move a certain amount of funds to GSB as it is the only bank in Thailand that provides full protection for both deposit and interest.

However, he does not think there will be massive amount of such funds being moved to GSB. He said it remains to be seen how much would be moved to GSB.

Earlier Kasikorn Research Center (K-Research) said the change in the amount deposit protection would not impact a large number of depositors, while financial institutions still had solid financial foundations to ensure depositor confidence.

Local and foreign commercial banks registered with the Bank of Thailand (BoT) have a high average capital adequacy ratio at 20.21%, greater than its requirement of 12%. Their liquidity coverage ratio is also high at 195.14%, greater than BoT's requirement of 100%.

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