Debt office to help wealthy depositors

General news - Thursday December 13, 2007

DEPOSIT INSURANCE

Debt office to help wealthy depositors

WICHIT CHANTANUSORNSIRI

The Public Debt Management Office is drafting a plan to offer alternative savings instruments for high-net-worth individuals in anticipation of a new limited deposit insurance programme.

Pongpanu Svetarundra, the PDMO's director-general, said the instruments would give wealthy individuals an alternative, low-risk investment option to bank deposits.

The Deposit Insurance Act would replace the blanket guarantee on bank deposits with a limited protection scheme capped at one million baht per client per institution. Coverage would be gradually reduced over a five-year period to minimise the impact on local banks and customers.

The National Legislative Assembly has already approved the draft law in a first reading, and is likely to ratify the bill later this month.

While the one-million-baht ceiling effectively covers 98.7% of the 70 million deposit accounts in the country, the cap covers only 1.72 trillion baht, or 25.3% of total deposits in the system. Around 1.2% of depositors, who control nearly 75% of total bank deposits, would not be fully protected under the one-million-baht limit.

The PDMO, which manages debt securities issues for the government, is considering expanding a public savings bond programme to help offer a low-risk investment option for wealthy depositors.

The current bond issue plan could be increased four-fold to two billion baht per month from 500 million now to help meet increased demand.

Mr Pongpanu said any increase would likely be made by April 2008. He added that market demand remained strong, as seen by the central bank's quick sale of 80 billion baht in public savings bonds last month.

He said the bonds could be offered through non-competitive bidding, in contrast to the traditional bidding used to place government bonds with institutional investors and dealers.

''Increasing investment options for retail investors would help to mitigate concerns about the new deposit insurance programme,'' Mr Pongpanu said.

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