DPA extends assurance to depositors
The Deposit Protection Agency yesterday reassured depositors that it could guarantee their savings even though the government is dipping into its funding to pay off the public debt incurred by the Financial Institutions Development Fund.
"Banks make big profits. There is no indicator that some bank will fail," chairman Naris Chaiyasoot told a news conference yesterday.
The protection of bank deposits is not from a standalone institution. The whole system contributes to the stability of the financial system, he said.
The government is reducing funding to the DPA. The agency will get only 0.01 per cent of commercial banks’ deposit bases instead of 0.4 per cent, under the emergency decree to manage debt worth Bt1.14 trillion left over from the 1997 financial crisis.
President Singha Nikornpun said the DPA has received about Bt100 billion in contributions since its establishment in 2008. The DPA is a mechanism to impose financial discipline on both bankers and depositors, as savers will get only limited insurance for their accounts, not 100 per cent as before the 1990s financial crisis.
Protection will drop to Bt1 million per account per bank in August from Bt50 million currently, according to the DPA law.
The debt decree will reduce the flow to the DPA to only Bt700 million from Bt28 billion annually, he said.
A study has suggested that to protect depositors in case of bank failure, the DPA should have Bt200 billion on hand.
Singha said that since the central bank has more power to intervene in financial institutions, this would not lead to widespread bank runs as seen in 1997-98. So the funds will be adequate to protect 98.5 per cent of bank accounts with no more than Bt1 million.
Many governments, when faced with the threat of a collapsing financial system, resume blanket guarantees to stabilise the market, he added.
