Fee changes to affect banks' funding costs, spur deposit shifts
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Banks are expected to see impacts on their funding costs and a shift of deposits due to higher contributions to the Bank of Thailand and the Deposit Protection Agency (DPA), and some discrepancies among commercial banks and specialised financial instituti
Speaking yesterday at a seminar organised by Thaipublica.org, Phatra Securities analyst Pipat Luengnaruemitchai expressed concerns over likely impacts on small commercial banks.
“Almost all of large banks’ funds come from deposits. Small banks have non-deposit bases such as bills of exchange. At some banks, three-fourths of their funding is from non-deposit bases. If [the fees are] compared across banks, much impact is expected,” Pipat said.
Banks will pay additional surcharges on their deposit base, covering all deposits, B/Es and short-term bonds, to help service the Financial Institutions Development Fund’s debt left over from the 1997 financial crisis.
Small banks may experience some impact, as previously they were not required to make DPA contributions on B/Es, a main funding source, said BOT Deputy Governor Suchada Kirakul, noting: “They need to adjust themselves.”
Despite making similar levels of contributions to the relevant financial authorities, a deposit-protection disparity between commercial banks and state-run specialised financial institutions (SFIs) still exists, said Fiscal Policy Research Institute director Kanit Sangsubhan.
Deposit protection by the DPA will be capped at Bt1 million at commercial banks from August 1 onwards, while deposits on SFIs are fully guaranteed by the government.
“If I have more than Bt1 million [in commercial banks], I will shift that money to SFIs,” said Nitinai Sirismatthakarn, an expert formerly with the Fiscal Policy Office.
SFIs hold about 25 per cent of total deposits in the country’s financial system.
Systematic risk may be shifted to SFIs if more deposits move to them, Pipat said.
Most impacts arising from the contribution changes will likely fall on four state-run SFIs, Kanit said. Government Housing Bank announced yesterday that it had to set aside Bt2.7 billion for contributions to the central bank and the DPA.
Commercial banks may face some difficulty, given the planned reduction of corporate income tax to 23 per cent that could offset higher contributions, Kanit said.
