The Deposit Protection Agency Act is deliberated in Thai Parliament

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 recently.

If this bill sails smoothly through Thai Parliament, it may become law within 2007.

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.

More details of this act will be presented later.