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Thai banks reduce deposit protection to 1M THB from Aug 11th.


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Thai Banks will provide deposit protection for only 1 million THB, starting on Aug 11 onwards

 

Thailand’s Deposit Protection Agency (DPA) says the current protection of 5M BHT will be reduced to 1M BHT from 11th August 2021 onwards, per individual account holder in one financial institute. 

The DPA coverage includes individual and juristic depositors in 18 Thai commercial banks, 12 foreign bank branches, 2 finance companies and 3 credit financial companies dealing only in the Thai baht currency.

The DPA coverage does not include foreign currency accounts.

For foreigners this means if you have more than 1M BHT tied up with the same financial institution, it may be time to consider opening separate accounts in different financial institutions to ensure your deposits are covered.

 

 

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Just now, Lowseasonlover said:

I dont need to worry I dont have any money

Same, holding cash in Thailand is always a risky business

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Just now, thai3 said:

Why, are they expecting to go bust?

Stranger thing have happened 

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Now that's worrying... time to keep our money in borderless accounts. Personally, I use Wise and only transfer money in when I need to.

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The deposit insurance here in Thailand is really no different than the deposit insurance in other countries.  If one bank encounters financial troubles, the government reserves are large enough to cover the depositors.  If the entire banking system or a substantial part of it collapses, there is not enough reserves to cover everyone.  That is not to say that the government could not open the printing presses and give everyone their balance, but the money would be worth about the value of the paper it was printed on. 

I am a former bank executive.  Personally, I keep only a modest amount here in Thailand transferring my pension each month to live on.  I am suspect of the true health of the Thai banks.  Banks are a reflection of the economy they operate in.  If the economy is good, businesses expand and borrow.  People purchase cars, homes, etc and they borrow and repay it.  When the economy is poor, businesses fail, people go bankrupt and the borrowings from the bank can not be repaid.  I can't think of a more lousy economic condition for Thailand.  I suspect the banks have lots of delinquent loans and repossessed properties.  If they have to reprice those loans and properties to their true liquidation value, the reserves which is the true strength of the bank gets decreased.  I am very wary that many of these loans and properties are still being carried on the bank balance sheet at book value and that grossly overstates their true value. 

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45 minutes ago, longwood50 said:

I am very wary that many of these loans and properties are still being carried on the bank balance sheet at book value and that grossly overstates their true value. 

that sound like usa 2008 , anyone ?

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53 minutes ago, yetanother said:

that sound like usa 2008 , anyone

It is similar but not identical.  In the USA banks are required to mark their bad loans and repossessed properties down to market value as they occur.  What cratered the banks and insurance companies was they carried huge amounts of mortgage backed securities.  Specifically they were bonds issued by the U.S. government agencies Fannie Mae and Ginnie Mae.  Those bonds were always "thought" to have the implied backing of the U.S. government.  But, when repossession occurred and housing prices plummeted people stopped paying on their mortgages.  The mortgages were the collateral for the bonds.  The market value of the bonds then plummeted.  Since the banks and insurance companies held those bonds as reserves, they had to reflect on their books the much lower value and that rendered them "technically" insolvent.  

The same could happen here in Thailand but not having anything to do with mortgage backed securities.  "if" they have homes, businesses, equipment, accounts receivable, personal guarantees etc shown on the banks books at market value, it is likely when liquidated those assets will bring anything close to what the bank says they are worth.  I have been told but don't know if it is true, that banks here only recognize the loss when the loan is totally written off and any home or business held as collateral is sold.  That is then "hiding" the loss.  Lets say you have a home that was purchased for 10 million baht and the bank has a loan against it at 9 million.  If they show that asset on their books at 10 million but in truth if it was sold could only get 5 million for it the true asset value that should be on the bank's books it 5 million.  So "if" suddenly the bank is forced to liquidate those assets to raise money, the true asset value would be recognized and the financial strength of the bank is revealed.  So long as the bank can "cash flow" it can continue to hold on to those repossessed assets hoping the economy recovers and that the value of the assets go up.  That is not any different than lets say a homeowner who buys that 10 million baht home that is now worth only 5 million.  So long as the homeowner can make the payments on the mortgage and the expenses of maintaining the home, the homeowner can hang on hoping the price goes up. 

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11 minutes ago, longwood50 said:

It is similar but not identical.  In the USA banks are required to mark their bad loans and repossessed properties down to market value as they occur.  What cratered the banks and insurance companies was they carried huge amounts of mortgage backed securities.  Specifically they were bonds issued by the U.S. government agencies Fannie Mae and Ginnie Mae.  Those bonds were always "thought" to have the implied backing of the U.S. government.  But, when repossession occurred and housing prices plummeted people stopped paying on their mortgages.  The mortgages were the collateral for the bonds.  The market value of the bonds then plummeted.  Since the banks and insurance companies held those bonds as reserves, they had to reflect on their books the much lower value and that rendered them "technically" insolvent.  

The same could happen here in Thailand but not having anything to do with mortgage backed securities.  "if" they have homes, businesses, equipment, accounts receivable, personal guarantees etc shown on the banks books at market value, it is likely when liquidated those assets will bring anything close to what the bank says they are worth.  I have been told but don't know if it is true, that banks here only recognize the loss when the loan is totally written off and any home or business held as collateral is sold.  That is then "hiding" the loss.  Lets say you have a home that was purchased for 10 million baht and the bank has a loan against it at 9 million.  If they show that asset on their books at 10 million but in truth if it was sold could only get 5 million for it the true asset value that should be on the bank's books it 5 million.  So "if" suddenly the bank is forced to liquidate those assets to raise money, the true asset value would be recognized and the financial strength of the bank is revealed.  So long as the bank can "cash flow" it can continue to hold on to those repossessed assets hoping the economy recovers and that the value of the assets go up.  That is not any different than lets say a homeowner who buys that 10 million baht home that is now worth only 5 million.  So long as the homeowner can make the payments on the mortgage and the expenses of maintaining the home, the homeowner can hang on hoping the price goes up. 

Think it goes something like this:

Key term here is "cash flow" and when the bank has no cash flow and begs the Govt (who are broke) for help, then they start printing money and inflation runs riot, the economy goes bust under mountains of debt. Cash in a foreign currency then comes in snapping up the bargains and the top five billionaires in Thailand, who conveniently have lots of foreign currency and laws to stop foreigners buying in, well they make a killing. Oh and the poor well they are just poorer.

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3 hours ago, longwood50 said:

The deposit insurance here in Thailand is really no different than the deposit insurance in other countries.  If one bank encounters financial troubles, the government reserves are large enough to cover the depositors.  If the entire banking system or a substantial part of it collapses, there is not enough reserves to cover everyone.  That is not to say that the government could not open the printing presses and give everyone their balance, but the money would be worth about the value of the paper it was printed on. 

I am a former bank executive.  Personally, I keep only a modest amount here in Thailand transferring my pension each month to live on.  I am suspect of the true health of the Thai banks.  Banks are a reflection of the economy they operate in.  If the economy is good, businesses expand and borrow.  People purchase cars, homes, etc and they borrow and repay it.  When the economy is poor, businesses fail, people go bankrupt and the borrowings from the bank can not be repaid.  I can't think of a more lousy economic condition for Thailand.  I suspect the banks have lots of delinquent loans and repossessed properties.  If they have to reprice those loans and properties to their true liquidation value, the reserves which is the true strength of the bank gets decreased.  I am very wary that many of these loans and properties are still being carried on the bank balance sheet at book value and that grossly overstates their true value. 

How many other countries have drastically reduced the guaranteed amount? mostly it gets increased not cut to the bare minimum they think they can get away with 

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9 minutes ago, palooka said:

Key term here is "cash flow"

You are correct.  The key element in this is cash flow.  So long as the bank can through current operations generate sufficient cash to pay ongoing operations it can continue to hide any loss of value in assets.  It is like a person who owns a stock and the stock has lost value.  So long as the investor does not need money they can continue to hold the stock hoping it will go up in the future.  

Under normal circumstances I would expect that the banks could continue to operate.  However in today's economy I would expect the number of loans that go unpaid to increase and the amount of repossessed homes, businesses, accounts receivable, inventory, and equipment to only continue to increase so long as Covid devastates people and companies. 

Now in the banks could attempt to shore up their capital by selling more shares of stock which would be dilutive to the existing shareholders.  The could also issue bonds to raise money increasing cash but putting more debt on their balance sheets.  The government is always a good source as a bondholder of last resort.  If the banks can't sell bonds to the public, the government could purchase the bonds calling them an investment.  That works so long as there is not a run on the bank from depositors who sensing the bank in distress start to pull out their deposits. 

I know I personally have not had much money on deposit in Thai banks.  I transfer only my pension each month sufficient to continue my visa extension.  I adopted that policy long before Covid.  The current Covid situation only increases my concern plus in Thailand there has been recently a coup, so there is not a long history of a stable government and ongoing rules.  With any change in government any law you thought might be protecting your assets goes out the window and is subject to the whim on the new leadership. 

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A question then concerning the reluctance of people to hold money in Thai Banks - is there a history of Thai banks going bankrupt and people losing their money ?

At least one bank is government owned, don't recall which one, and you'd think that would be safe enough.

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8 minutes ago, thai3 said:

How many other countries have drastically reduced the guaranteed amount? mostly it gets increased not cut to the bare minimum they think they can get away with 

In truth deposit insurance is really a façade.  It is there to protect depositors in the event of a single or small number of bank failures.   In the USA there is approximately 10.7 trillion dollars that are insured deposits.  One report shows the FDIC insurance fund at about 118 billion.   If a group of banks fail, no problem the FDIC will come in, and shore up the bank.  If the entire industry collapses it is a repeat of 2008 where the Federal Government had to step up to the plate and guarantee the money.  Now of course the Federal Government is already insolvent with over 25 trillion in direct obligations but that does not seem to stop them from being able to borrow even more.  So long as the government can borrow it can keep all the balls in the air.  It is like the person who uses his credit cards to pay their mortgage, car payment and ongoing living expenses.  No problem unless they eventually max out and can't borrow anymore. 

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On 8/7/2021 at 9:00 AM, palooka said:

Think it goes something like this:

Key term here is "cash flow" and when the bank has no cash flow and begs the Govt (who are broke) for help, then they start printing money and inflation runs riot, the economy goes bust under mountains of debt. Cash in a foreign currency then comes in snapping up the bargains and the top five billionaires in Thailand, who conveniently have lots of foreign currency and laws to stop foreigners buying in, well they make a killing. Oh and the poor well they are just poorer.

The government of Thailand are a long long way from being broke! Last time I looked they were ranked around 12th in the world for dollars in reserve AHEAD of the UK and Germany, the 5th and 6th largest economies on the planet and only behind the big hitters of China, Russia, Saudi etc. (Though oddly South Korea are in the top 10). This is the reason the baht has always been so strong, albeit fading a little now.

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5 minutes ago, Benroon said:

This is the reason the baht has always been so strong, albeit fading a little now.

ahh, but what about sentiment, a key market driver;

i wouldn't invest in thai at the moment; quite the opposite

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On 8/7/2021 at 9:34 AM, longwood50 said:

In truth deposit insurance is really a façade.  It is there to protect depositors in the event of a single or small number of bank failures.   In the USA there is approximately 10.7 trillion dollars that are insured deposits.  One report shows the FDIC insurance fund at about 118 billion.   If a group of banks fail, no problem the FDIC will come in, and shore up the bank.  If the entire industry collapses it is a repeat of 2008 where the Federal Government had to step up to the plate and guarantee the money.  Now of course the Federal Government is already insolvent with over 25 trillion in direct obligations but that does not seem to stop them from being able to borrow even more.  So long as the government can borrow it can keep all the balls in the air.  It is like the person who uses his credit cards to pay their mortgage, car payment and ongoing living expenses.  No problem unless they eventually max out and can't borrow anymore. 

Correct - it then boils down to credit ratings, when they're triple A you can do what you like, borrow what you like, lenders are tripping over themselves to give you cash, but when the brokers start downgrading you, that's when the stuff really hits the fan !

Thailands current rating is 'BBB+ with stable outlook'

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Just now, yetanother said:

ahh, but what about sentiment, a key market driver;

i wouldn't invest in thai at the moment; quite the opposite

Totally agree yes but as I just posted sentiment is really reflected in credit ratings and right now Thailands is quite strong. Why is another matter.

The subject matter is moot to me as I cannot envisage any scenario (apart from property purchase where you have to bite the bullet) where I would want millions on deposit here, as someone else said I just transfer as and when necessary from UK banks.

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Posted (edited)
14 minutes ago, Benroon said:

Thailands current rating is 'BBB+ with stable outlook'

ok, thank you ; might you translate that rating into 'regular-guy-ese' ? , please

Edited by yetanother
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Posted (edited)
13 minutes ago, yetanother said:

ok, thank you ; might you translate that rating into 'regular-guy-ese' ? , please

This is it in a nutshell - this states for corporates but still applies with self explanatory notes, then with each rating brokers can add further notes such as 'stable outlook' for Thailand as opposed to be a BBB+ with unstable outlook ie likely to be downgraded soon - sorry you have to cut and paste it, for some reason I can't post the link as a URL ?

https://wolfstreet.com/credit-rating-scales-by-moodys-sp-and-fitch/

 

 

Edited by Benroon
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