Bending deposit protection for the richest one per cent

Initially, the depositor protection limit was reduced from Bt50 million to the current level of Bt25 million. This was then set to fall to Bt1 million on August 11.
But that plan has changed with the latest government announcement, which laid down new rules covering the period from August 11 this year to August 11, 2020.
The new rules will see a gradual reduction in depositor protection, to Bt15 million from August 11 this year to August 10, 2018, then Bt10 million from August 11, 2018 to August 10, 2019, and Bt5 million from August 11, 2019 to August 10, 2020.
The official reason given for the change was that it would allow depositors more time to understand the new rules so they wouldn’t withdraw their deposits in a panic.
There were a total 2.4 million savings accounts in the country as of February, according to the latest Bank of Thailand data. Of these, only 60,000 accounts contained more than Bt1 million.
The Deposit Protection Agency says 98.5 per cent of Thai savings accounts contain less than Bt1 million.
So, in going back on its plans to protect the highest-value accounts, is the government protecting the rich?
Many high-income earners shun banks and their modest deposit rates of 1 per cent per annum or less (or a maximum 2 per cent for fixed deposits). They can get potentially much higher returns by investing elsewhere – in mutual funds, properties, gold, stocks, bonds, debentures and other financial products.
Almost two million accounts would have gone unaffected by the drop in deposit protection to Bt1 million.
But with its decision to extend protection for higher-value deposits, the government faces accusations of pampering the “lazy money” lying in banks.
Looking at the intent of the law, deposit protection is designed to assure depositors they will receive their savings back if their bank should collapse and have its licence removed.
On the other hand, the government won’t have to bear too much burden in the event of a repeat of the disastrous financial crisis of 1997.
Under the deposit protection law, people can diversify to minimise risk by depositing their money in up to 35 legitimate financial institutions (30 commercial banks, two finance companies and three credit fonciers). An individual with Bt30 million could deposit Bt1 million in each, and thus receive legal protection for all their savings.
That’s enough, we think.
Moreover, the deposits eligible for legal protection cover savings and fixed accounts, depository receipts, co-deposit accounts and deposit accounts for other persons.
Some financial analysts reckon the 2-per-cent interest rate plus protection guarantee is preferable to the risk entailed in putting your money into other investments given current global financial volatility that could get worse. 
After all, it is the wealthiest one per cent who are most vulnerable to the government’s plans on deposit protection, and their voice is always louder.
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