Banking Deposits Insurance - The Deposit Insurance Bill

About Thai Banking Deposits Insurance

Apparently after the Asian economic crisis of 1997, bank deposits at Thai banks were fully insured.

A Deposit Protection Act was passed in early 2008 and implemented towards the end of that year. From then on only limited government insurance for deposits at Thai (private) banks is in effect.

Now the original proposal was as follows and initially was still quite generous :
A blanket guarantee of deposits in the starting 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, which was supposed to start somewhere in the middle of 2012.
However, the original proposals got amended a few years later. We will forego these changes, but below are the latest data as decided by the Thai goverment in April 2016 :

Up to 10 August 2016 deposits were protected up to 25 million baht.
Thereafter, protection will be in place for 15 million baht in deposits between Aug 11, 2016 and Aug 10, 2018; for 10 million between Aug 11, 2018 and Aug 10, 2019; for 5 million between Aug 11, 2019 and Aug 10, 2020; and for 1 million by Aug 11, 2020.

LATEST : In April 2020, an official of the Deposit Protection Agency announced that the period of coverage for 5 million Thai Baht, was EXTENDED TO 10 AUGUST 2021 (an additional year). It was announced indeed b the Deposit Protection Agency on 4 August 2021, that from 11 August 2021 onwards only sums up to 1 million Thai Baht (per bank) will enjoy deposit insurance protection.

(a report by TMB Analytics in 2012 indicated that 80% of deposits would become unprotected at a max protection level of 1 million baht ; likely this still holds true at the moment)

To be on the safe side, customers will need to open bank accounts with different banks, if they want to have all or at least a substantial amount of their deposits covered. As from 11 August 2021, anything above 1 million Thai Baht (per bank) is not covered. So having more than that amount in a particular bank, will put the customer at risk.

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 creates less trust in the banking system overall.

The law in its present form assumes that customers can make the right decisions, only depositing their money with banks that are solvent and reliable. However, this is a fallacy, since even well educated economists and experts in the field (as judged by the 2008 financial crisis) are not capable of adequately judging the solvency or good management of banks.

Figures provided by TMB Bank in March 2012 indicated that more money was flowing into the government banks. The Finance Ministry is the major shareholder of these banks, and would be liable to provide a blanket guarantee against bankruptcy. This ncludes banks such as the Government Housing Bank, and the Government Savings Bank. Branches are few and between, but can be found in Bangkok and around Thailand. These banks do not offer all the services provided by commercial banks. An exception may be Krung Thai Bank, which also has a subsidiary of the Bank of Thailand as its main shareholder (majority owner), is a large bank with many branches, and provides most common bank activities. Your money could be safer with any of the banks mentioned.

So one recommendation could be : deposit the bulk of your assets with government banks, and have a current account or savings account with a commercial bank for daily expenses.

Deposits Protection Agency (DPA)

How are deposits guaranteed? A so-called Deposits Protection Agency (DPA) has been established, that collects money from banks. For a few years the banks were 'taxed' at 0.4% of deposits, actually a big chunk of money.
As of the beginning of 2012, the Deposits Protection Agency, had accumulated 80 billion baht. However, even the smallest of banks in Thailand likely have more deposits.

At present, since around 2012, the banks are taxed at 0.47% of deposits, but only 0.01% is going to the protection of deposits. The bulk (0.46%) is used to pay off debt incurred during the financial crisis of 1997. As of 2017, the amount of debt to be paid off still stood at about 1 trillion Thai baht (about 30 billion U.S. Dollar). It is estimated that this debt will be repaid within the next 15 years.

It was reported in the Bangkok Post of 1 October 2017, that 'section 19 of the Bank of Thailand Act' was amended. It now states that financial institutions are mutually responsible when financially ailing peers need to be bailed out! Bank of Thailand governor Veerathai is quoted : "In this way financial institutions will take care of one another by not letting any institution to be involved in activities that could cause risk to the system".
We will possible have to wait a bit to find out how this will work out in practice.

Important note

For protection, deposits need to be in Thai baht (foreign currency accounts are not covered), held in an account in Thailand. Also accounts in Thai Baht by foreign banks, located in Thailand, are covered. At least once I noticed that reportedly also deposits in baht by depositors residing outside Thailand are excluded (please check!).

Please check accuracy with your Thai bank and financial adviser, if the above is applicable to you.

It is worthwhile to check out this of the Deposit Protection Agency of Thailand.

It states the following are excluded from this insurance (we paraphrase) :

• Foreign currency deposit accounts
• (SSF, RMF) Money invested in bonds, debentures, mutual and tax-saving funds
• Deposits in cooperatives
• Cashier’s cheques and bills of exchange
• Electronic money (e-money)
• Savings insurance products offered by insurance companies

Source : reports in Thai media, especially the Bangkok Post.