DPA fund needed to tackle FIDF debts
The financial authorities agreed to have Deposit Protection Agency (DPA) shoulder partial interest burden of the Financial Institutions Development Fund (FIDF) and pondered a possible increase in commercial banks' contribution to the DPA.
Finance Minister Thirachai Phuvanatnaranubala said that commercial banks now contribute 0.4 per cent of deposits to the DPA. If 0.39 per cent can be retrieved for this purpose, the Finance Ministry will receive Bt30 billion per annum. This could clear some of the Bt45 billion interest burden of the FIDF. A law would be implemented to widen compulsory contribution from commercial banks to the DPA.
"We may ask commercial banks to contribute a higher sum to help us cope with the interest payment," he said after a meeting with Bank of Thai Governor Prasarn Trairatvorakul and Deputy Prime Minister Kittiratt Na-Ranong.
The meeting followed Kittiratt's desire to have the FIDF's Bt1.14 trillion debts to the central bank. Both Thirachai and Prasarn opposed the move, as that would automatically boost the central bank's net loss from Bt400 billion to Bt1.5 trillion and could rock investor confidence in the central bank's financial help.
FIDF amassed huge debts following the rescue of several banks after the 1997 financial crisis. It is supposed to be dissolved next year. Meanwhile, DPA is set up to collect contribution from commercial banks, as a cushion for the next crisis. Such agency is designed in the way that no more public financing would be needed in rescuing financial insitutions.
