Cabinet approves delaying deposit insurance cut to phase in financial plans
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THE CABINET has approved amending the Deposit Protection Agency Act to delay until 2021 the reduction of deposit insurance to a maximum of Bt1 million, instead of this August as previously scheduled.
Finance Minister Apisak Tantivorawong said the reduction now would be made gradually, as it was feared that the one-time cut from a maximum of Bt25 million per deposit account to only Bt1 million would have caused depositors to panic.
Earlier, the reduction of deposit insurance to a maximum of Bt1 million per account per financial institution was to take place on August 11, 2016.
After the amendment, the protection maximum will be reduced to Bt15 million by 2018, Bt10 million by 2019, Bt5 million by 2020 and finally Bt1 million by 2021.
Deputy Government Spokesman Sansern Kaewkamnerd said the act shortened the return of deposit to deposit owners to no more than seven days from earlier 2-3 months.
Bank of Thailand Governor Veerathai Santiprabhob said the amendment had nothing to do with financial institutions’ stability. Thai commercial banks have robust capital bases with high excess liquidity, and were well prepared for the reduction of deposit insurance as scheduled previously, he said.
The central bank has been monitoring the movement of deposits in and out of the country’s financial institutions closely and has not found any irregularities, he said.
Veerathai said the gradual reduction under the amendment would allow depositors to take more time to adjust their financial plans.
The extension could be good for lending rates in the system as financial institutions would not be concerned about competition when they were offering products with special rates to lure big depositors, Veerathai said.
Financial institutions could better management their costs of deposit interest, which could mean lending rates stay at a low level.
