TMB Analytics proposes higher deposit guarantee ceiling

 In a research released on March 12, the unit said that those with deposits of Bt5-Bt10 million are unnecessarily the rich, but they may be the retired who have saved the amount through decades of work. Based on the end-2011 figures, the ratio of savers with Bt1 million in deposit is 98.5 per cent of all. If the base is enlarged to cover Bt5 million and Bt10 million deposit accounts, the ratio would be 99.7 per cent and 99.99 per cent. However, if the Bt1 million mark is kept, the protection scheme would cover only one fourth of deposits. Once the minimum ceiling is raised to Bt10 million, the scheme would cover half of total deposits.
 The Deposit Protection Agency, set up in 2008, now provides full protection to deposits worth no more than Bt10 million per account per bank. From August 11, 2012, the protection ceiling will be downsized to Bt1 million.
 TMB Analytics noted that such increase would encourage savers to keep deposits at their banks, as they do not need to rush spreading their deposits above the Bt1 million to other banks which incur financial costs.
 It also added that the increase would also reduce competition for deposits between commercial banks and state-owned banks. Now, deposits are flowing to state-owned banks, given that they would be fully protected. Due to the lower protection, commercial banks in the past three years (2009-2011) saw a 4 per cent increase in deposits against 23 per cent by state-owned banks. During 2006-2008, the gap was narrower, at 5 per cent against 9 per cent.
 The unit noted that the DPA's higher burden is the only downside risk to this proposal. Based on the Bt100 billion fund, the DPA's burden would be 28 times of the fund size if the maximum protection amount is Bt1 million. But if the maximum is raised to Bt5 million or Bt10 million, the burden would be 42 and 48 times, respectively.