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We did not really know about it, but apparently since the economic crisis of 1997, bank deposits at Thai banks were fully insured.
For some reason, a so-called
extraordinary House panel of the National Legislative Assembly, has proposed to offer only limited government insurance for deposits at Thai banks. As the proposals stand at present,
the government will give a blanket guarantee of deposits in the first year, Bt100 million per person per bank in the second year, Bt50 million in the third, Bt20 million in the fourth and Bt1 million in the fifth.
A problem starts to arise with the beginning of the fifth year (after the bill is passed). There will obviously be only limited deposit insurance coverage at that time. One million baht is about 30,000 US dollar at present, and we must assume that quite a few residents in Thailand will have a larger nest egg, when retiring or planning a long-term stay in the country.
To be on the safe side, customers will need to open bank accounts with different banks, if they want to have all of their funds and deposits covered. This creates redundancy and inefficiency, inconvenience to customers, and larger overheads for banks (probably passed on to customers). A reduction in bank deposit insurance coverage also created less trust in the banking system overall.
Possibly the proposed law assumes that customers make the right decisions, only depositing their money with banks that are solvent and reliable. Unfortunately, there is a major flaw in this reasoning. Average customers (and many well educated economists and experts in the field) do not have the knowledge or the data to judge the solvency or good management of their bank.
We suggest that customers at banks should not be treated as proposed. At most, a system with limited liability, is acceptable. For example, all deposits at banks should be covered for at least 90%, leaving a much smaller risk for the customers to carry. Theoretically, with the new law in place, one could loose the bulk of one's savings overnight with any unexpected crisis.
There is an important exception to the new rules mentioned above. Government banks do not fall under the new law (as far as we could assess). Government banks include the Government Savings Bank, and the Government Housing Bank. These bank do not offer all the services provided by commercial banks. For example, we know that Government Housing Bank does not issue ATM cards. On the other hand, your money should be safer with them. They often give better interest returns on your deposits (although at present with low rates, that is not an important issue). So our advice is : deposit the bulk of your assets with government banks, and have a current account or savings account with a commercial bank for your daily use.
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