Surcharge will have 'minimal effect' on state banks: Viroon

This would have only “a minimal impact” on their operations, he said. 

Meanwhile, the government on one side and the Democrats and senators on the other will today give testimony to the Constitution Court regarding two controversial emergency decrees, one of which orders the Bank of Thailand to pay off the FIDF’s Bt1.14-trillion debt burden. 

Viroon yesterday met executives of state-owned banks to discuss the impact on them of paying a surcharge of 0.47 per cent of their deposit base. 

“The cost to state-run banks will be about Bt10 billion to Bt15 billion,” he said. 

 

Move to up the premium

The move came after the Finance Ministry and Bank of Thailand ordered commercial banks to pay a premium 0.47 per cent on their deposits, up from the 0.4 per cent currently paid to the Deposit Protection Agency (DPA). 

Under an emergency decree, 0.46 per cent will be used to pay off the debt of the FIDF, and the remaining 0.01 per cent will go to the DPA for deposit protection. 

Viroon said the government had not yet decided how to allocate the premiums collected from state-run banks to finance specific public investment projects. 

It will decide later what purpose the national development fund would serve, he said. 

The surcharge being levied on state banks is part of the government effort to create a level playing field between them and commercial banks. 

Until now, state-owned banks have not been required to pay any deposit premium to the DPA, but they are required to transfer 50 per cent of their profits to the government coffers.

The Government Savings Bank (GSB), whose deposit base is worth Bt1.5 trillion, is expected to pay fees totalling Bt8 billion under the new measure, while the Bank for Agriculture and Agricultural Cooperatives will pay about Bt3 billion to Bt4 billion, the deputy finance minister said. 

The Government Housing Bank (GH Bank) is expected to pay Bt3 billion, and the Islamic Bank Bt400 million.

“It will have a minimal impact on these banks, and they will be able to the pay the fee [without damaging their financial position],” he said, adding that they would however have to think about how to cope with the additional cost incurred. 

Viroon also said he had asked the GSB, which has the largest deposit base among state-run banks, to lend to GH Bank, which has to provide mortgages to low-income groups.

Former finance minister Korn Chatikavanij yesterday told a press conference that the way the government planned to make use of fees collected from state banks suggested there was no real emergency behind the emergency decree for the management of public debt. 

The government should allocate for debt payment everything that is levied from state and commercial banks if it thinks it is an urgent matter to pay off the FIDF debt, he said. 

If the government were also to use the surcharge on state banks to pay off the debt, it would take only 10 years to fully pay off the amount. However, as it plans to use only the fees collected from commercial banks for debt repayment, it could take more than 25 years, he said. 

The Democrat Party and senators have filed a case with the Constitu-tion Court, asking it to verify whether two emergency decrees, one for borrowing Bt350 billion and the other to order the central bank to pay the FIDF debt, violate the charter. 

 

Defence for govt decrees

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong will defend the decrees at the court.

Korn, who said past administrations had chosen to dissolve Parliament or resign when emergency decrees were shot down, insisted the government did not have a clear plan for flood prevention, so there was no logic in borrowing a large amount of money, since it would create an additional burden on taxpayers.

Kittiratt responded by defending the government’s need to borrow Bt350 billion to finance investment projects for flood prevention.

Meanwhile, Bank of Thailand Governor Prasarn Trairatvorakul said the move to raise bank deposit fees to repay state debt would not have much of an impact on the country’s lenders, Bloomberg reported.

“It shouldn’t raise the burden for them much and won’t significantly affect net interest margins,” he told reporters yesterday. 

Under the government’s plan, the debt will be paid off in 24 years, he said.

The central bank will review the 0.47-per-cent fee in three years’ time, the governor said, adding that it may then be lowered, depending on the rate at which the deposit base expands and the interest rate on the outstanding debt. 

The Bank of Thailand expects the deposit base to expand by 4 per cent per year, he said.