Seetalavajit Sabayjai
Sucheera Pinijparakarn
The Nation January 14, 2012 1:00 am
Thirachai said yesterday that he would soon ask the Cabinet to approve his proposal to provide adequate funding to the Deposit Protection Agency (DPA) if part of the agency's funding is used to pay off the Bt1.14-trillion debt of the Financial Institutions Development Fund (FIDF) left over since the 1997 financial crisis.
His comments came after critics sharply attacked the debt executive decree, saying it would hit the funding of the DPA and warned that inadequate funding would pose serious trouble if some banks fail and investors lost their deposits. The DPA was created to provide compensation to depositors, at up to Bt1 million per savings account.
Thirachai said the DPA currently has accumulated premiums collected from commercial banks of about Bt80 billion.
Thirachai assured banks that the premiums would not be high, as the government does not want to increase the cost for banks, which could result in banks passing on the cost to customers. "A premium rise by 0.2 per cent, or total premium not exceeding 0.6 per cent of total deposits, is adequate to pay off the debt of the FIDF in 25 years," he said.
Also, as the baht has started to depreciate against the US dollar, the central bank will make profits from its market operations, he said. The profits would also be used to pay off the debt.
Meanwhile, the Bank of Thailand (BOT) said it would raise with the Finance Ministry concerns about the banking industry's distorted structure if commercial banks are required to contribute higher fees, which are planned to service the FIDF debts.
The move follows a meeting of the Financial Institutions Policy Committee (FIPC) yesterday.
The central bank will have a discussion with the Finance Ministry after a meeting of the Thai Bankers' Association (TBA) next week. The central bank will also propose ways to repay the interest burden and principal then.
The BOT governor and the TBA met on Thursday to discuss the planned executive decree related to the FIDF debt and the part relevant to commercial banks.
"The commercial banks expressed their concerns over this issue and we brought it before the FIPC, which passed a resolution that we should give their opinion to the Finance Ministry," BOT Governor Prasarn Trairatvorakul said.
This is about advantages and disadvantages between commercial banks and state-run specialised financial institutions (SFIs), he added.
There is already a problem, as commercial banks are required to contribute 0.4 per cent of their deposit base to the DPA while SFIs are not.
"We need to have a level playing field [in the banking industry]," Prasarn said.
TBA president Chartsiri Sophonpanich said on Thursday night after meeting Prasarn that any action had to take into account the impact on the competition of commercial banks. Some bankers were worried that the increasing cost from the rising premiums levied on them could make them less competitive than other banks in the region, especially with the 2015 Asean Economic Community bringing about full liberalisation of the financial market.
Meanwhile, in a related development, bank lending in response to last year's severe flooding has increased more than expected and it will boost growth in the first quarter, said Thirachai.
Thirachai said economic recovery will begin in the first quarter of this year and gross domestic product is expected to expand 2.6 per cent. The full year's growth is forecast to be 5 per cent. Since late last year, new bank lending has increased to almost Bt200 billion, at a pace faster than expected, he said.
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