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[Garcia]

Here's a no-so-clear article on bank deposit insurance in Thailand.

"Having a Deposit Insurance Institute will benefit both depositors and financial institutions, the Bank of Thailand said.

The central bank went on record in an article written by one of its academics on "The Deposit Insurance Institute and the Efficiency of the Financial System" that by having such an institute, retail depositors - who comprise the majority in the overall system - will have a guarantee their deposits would be definitely covered to the amount set by law.

The system will help ease possible retail depositor panic, which could lead to deposit runs and a 'domino effect', if some financial institutions are in financial trouble. At the same time, the insurance mechanism will reduce fiscal costs and taxpayer burdens since it is unnecessary for the government to help shore up the financial positions of ailing financial institutions as in the past.

In Thailand, the institute will be set up under the Deposit Insurance Institute Act, which became effective on February 13. Under the Act, all deposits are insured in the first year of implementation. Then, deposits at a maximum of 100 million baht will be insured in the second year, 50 million baht in the third year, 10 million baht in the fourth year, and 1 million baht in the fifth year.

In this circumstance, depositors will have enough time to adjust to the changing system. More importantly, retail depositors with deposits of less than 34 million baht could distribute money into various financial institutions. Overall, Thailand's financial system will be more efficient and its fiscal burdens will be lessened in the future."

http://www.bangkokpost.com/breaking_news/b...s.php?id=128449

[Bob]

Under the Act, all deposits are insured in the first year of implementation. Then, deposits at a maximum of 100 million baht will be insured in the second year, 50 million baht in the third year, 10 million baht in the fourth year, and 1 million baht in the fifth year.

Generally, government insurance of this type is a good idea. To qualify, the banks have to meet certain
capital and reporting requirements and the insurance idea is designed to provide a more stable banking industry (which tends to prevent runs on banks when one knows your deposits are government insured). However, most governments that provide the insurance won't let a bank qualify for it unless the bank meets certain safe capital levels, fairly reports and audits its assets (i.e.,provides a somewhat fair picture of the worth of its loan portfolio), and complies with other regulations. In Thailand (TIT!), I'm really doubtful that one can trust the government to regulate the banks nor would I trust the banks to accurately report much of anything. Looking at the history of some of the Thai banks (e.g., Thai Military Bank) or other banks owned by the rich and politicos only makes one wonder if some or many of the banks are safe at all.

Further, providing insurance for only 1 million baht by the fifth year seems a bit low/dumb. While I realize that most Thais don't have more than that in a bank, what the heck is somebody with a lot of money supposed to do, spread it out over 30-50 different institutions? [I recognize that in the US the FDIC only insures accounts for $100,000.00 (about 3 million baht) but historically the FDIC has covered all accounts of failed banks. I doubt it that would/could happen in Thailand].