The Pheu Thai Party on Monday urged the government to defer a planned reduction in the state guarantee of bank deposits, citing the fragile economic situation and the possible public distrust in financial institutions.
Lertsak Pattanachaikul, a Pheu Thai MP and member of the party’s economic team, said that Thailand is experiencing an unprecedented economic crisis.
The change in the protection rate may “trigger distrust in financial institutions and a surge of withdrawals,” Lertsak said. He also warned of the potential harm to the fiscal system.
The government should postpone the cut until the economy starts to recover, Lertsak said.
Last week, the Deposit Protection Agency (DPA) announced that from August 11, it will only guarantee protection for 1 million baht per account holder, rather than 5 million baht.
The new rate will still completely cover the deposits of 82.07 million account holders at 35 financial institutes, or 98.03 per cent of all account holders in the country’s banking system, according to the DPA.
In response to concerns, the DPA said that the move is in line with the original plan set by the Deposit Protection Agency Act in 2008.
Meanwhile, The Kasikorn Research Center noted that lowering the protection rate should be aimed at encouraging prudent financial discipline in both financial institutions and depositors, as well as “reducing the chance of the 1997 economic crisis being repeated.”
The impact from reducing the state guarantee during the Covid-19 pandemic is anticipated to be limited as Thai commercial banks still have strong liquidity and capital positions, Kasikorn added.