The Deposit Protection
Agency (DPA) Act is now deliberated in Thai Parliament
after the Cabinet approved the bill on August 28, 2007.
The main points of this bill are as follows :
1.To set up the DPA to be a juristic person.
2.To set up the deposit protection fund.
3.To set rules and regulations of reimbursement.
4.To ensure that the DPA reimburses financial institution's client in
case of default.
5.To set up penalties for non compliant institutions or persons that use
symbols to identify their business that they are covered under this act.
The Finance Ministry is intent on passing the bill during the current
government's term for fear that an elected government would lack the
political will to do so.
''If this government does not pass the law, an elected one may never do
so for fear of losing popularity,'' and 'If we can't enact this law, we
should be ashamed. Indonesia did so three or four years ago already.''
said Sommai Phasee, the deputy finance minister. Bangkok post reported
If this bill sails smoothly through Thai Parliament, it may become law
Subsequently, the DPA (formerly the 'Deposit Insurance Agency') would
likely be established within the first half of 2008. Then, the deposit
protection will be gradually reduced to only THB1 million per depositor
per financial institution over the next four years.
Speaking at a seminar on "In-depth Analysis of the DPA Act," Ruechukorn
Siriyothin,director of the BOT Programme Service Office, said the BOT
would conduct field trips to give the public a better understanding of
the act and its implications for existing clientale. It would enable
people to decide to deposit money with commercial banks based mainly on
the operating performance and sound financial position of the banks
rather than hefty interest rates. The Business day reported.
Cautious investors who are not fully covered by the DPA should be
careful how strong of banks they deposit with. Deposit protection was
pioneered by the U.S. in 1933 following a number of bank failures in the
Depression. Initially it was set at $2,500, but it has since been raised
and now guarantees up to $100,000 per depositor per bank.
According to the Bank of Thailand, 98.7% of Thailand's 79 million
deposit accounts have balances of less than one million baht and would
be fully covered by the new law.
deposit potecion system was in introduced in Thailand by the
establishment of the Deposit Protection Agency (DPA) on 11
August 2008, in accordance with the Deposit Protection
Agency Act B.E. 2551. The objectives of the Agency as
specified by law are providing protection to deposits in
financial institutions system; administration of
institutions subject to control under the Financial
Institutions Businesses Act and liquidation of financial
institutions whose licenses have been revoked. Deposit in
Thailand is fully guaranteed until September 2011, It will
be decreace to THB 1,000,000 in 2012
Thailand – Deposit Protection Agency
The Deposit Protection Agency (DPA) was established under the Deposit
Protection Agency Act B.E. 2551 (2008), and came into force on August
11, 2008. The main objective of DPA is to provide protection to
depositors so that their deposits would be rapidly reimbursed in the
unlikely events of failed financial institutions. DPA provides
protection to domestic deposits denominated in Thai Baht, namely current
accounts, savings accounts, term accounts or other similar feature
accounts under different titles.
The insured deposits exclude deposits
in the Non-Resident Baht Account which is the account opened for special
purposes according to the Exchange
Control Act, deposits embedded with derivatives and interbank deposits.
Commercial banks, finance companies and credit foncier companies in
Thailand are compulsorily under the deposit protection system. Extension
coverage to other financial institutions established under special laws
can be made by promulgation of Royal Decree. As of December 2008, there
were 41 member financial institutions under the Deposit Protection
Agency, including 18 commercial banks registered in Thailand, 16
branches of foreign banks, 4 finance companies and 3 credit foncier
Prior to the establishment of DPA, blanket guarantee had been employed
since 1997. The transitional from the blanket guarantee is designed to
be gradually phased out to the coverage of Baht 1 million per
financial institution in 4 years from 11 August 2012 onwards.
The 4 year transition was planned
to be Baht 100 million, Baht 50 million and Baht 10 million in the
second, third and fourth year respectively. In the latter half of 2008,
the financial crisis in the US adversely affected the Thai economic and
financial positions to extend the period of blanket guarantee for two
more years, until 10 August 2011 and to increase the coverage of the
fourth year or from 11 August 2011 to 10 August 2012 to Baht 50 million.
The extension of the blanket guarantee was done with the purpose to
provide a precaution measure against any negative effect and to maintain
confidence of depositors in the system. Financial institutions are
obliged to remit premiums to the Deposit Protection Agency twice a year,
within the last working day of June and December.
The calculation is based on monthly
average amount of deposits of prior 6-month period. The premium rate is
0.4 percent per annum based on total deposit of insured typed. From 2010
onwards, the daily average amount of deposits will be exercised in
calculation of the premium. DPA is empowered to request the financial
institutions to submit any information and reports. However, DPA and the
Bank of Thailand, supervisory authority, shall exchange
information in order to avoid duplication of data reported by the
In case where the Bank of Thailand places any financial institution
under control, DPA shall submit a list of nominees to be appointed as
members of the Control Committee. DPA shall also act as liquidator of
BANGKOK (Dow Jones)--Thai commercial
banks won't have any liquidity problems when the deposit protections
provided by the Deposit Protection Agency Act are scaled back as
scheduled starting in August, Bank of Thailand Assistant Gov. Sorasit
Soontornkes said late Thursday.
The Deposit Protection Agency Act, which took effect in August 2008,
extends full protection to deposits in the event of a financial crisis.
Starting in August, deposits of up to only THB50 million per account per
bank will be protected. From August 2012 onwards, the deposit protection
will be scaled back to THB1 million per account per bank.
To continue receiving full protection, wealthy depositors are expected
to spread their savings around to multiple banks.
"Thai commercial banks passed the stress test on their liquidity status
and capability to handle the situation both in the worst and normal case
scenarios," Sorasit told reporters.
He added that banks have used financial tools such as Bills of Exchange
to support the liquidity change as the deposit protections are scaled
Thai banks generally have capital amounting to around 15%-16% of their
risk-weighted assets, above the 8% requirement.
As of March, there were 78.8 million deposit accounts at commercial
banks holding a combined THB7.58 trillion ($249.5 billion).
Only 9,636 accounts contained more than THB50 million, accounting for
0.01% of the total number of accounts. However, such accounts held
THB1.80 trillion of deposits, 23.7% of total deposits.