DPA today's the day for the new act

What is the Deposit Protection Agency?

The Deposit Protection Agency (DPA) is a staterun organisation established to guarantee the deposits of savers in financial insti¬tutions.

It replaces the Bank of Thailand's Financial Institutions Development Fund, which has given a blanket guarantee on all deposits in all financial institutions since the 1997 financial crisis.

The establishment of the DPA takes the burden of deposit guar¬antees off the FIDF which will be liquidated over the next five years. However the guarantee by the DPA will gradually fall from a blanket guarantee to a maximum guaran¬tee of Bt1 million per person per bank.

What is the key principle of the deposit protection system?

DPA gives protection on the deposits of retail savers who are major depositors in the banking system, so they will not be affected by the closure of any financial institution.

In addition, it wants to encour¬age financial discipline among savers and strengthen financial stability in the banking system.

Savers need to put money in the banks or other financial channels based on financial literacy, while the financial institutions must strengthen their balance sheets to assure customers of their strong financial background.

Who is under the deposit protection?

Both Thai and foreign deposi¬tors who have deposit accounts in a financial institution registered in Thailand.

Deposit accounts include cur¬rent, savings and fixed accounts, but not nonresident baht accounts.

Which deposits in financial institutions are under the protection system?

Deposits in 41 financial institu¬tions are under deposit protection. They are 17 Thai commercial banks, 17 foreign full branches and representatives and seven financial companies and credit foncier com¬panies.

Deposits in special financial institutions, such as the Government Housing Bank and the Bank for Agriculture and Agricultral Cooperatives are not under protection.

The Government Pension Fund, Provident Fund, Social Security, foundations, longterm funds and retirement mutual funds, which put money in deposit accounts, will get the guarantee under the same conditions as other depositors. However, the authorities would have to indicate in detail how much of their members' money would be covered by the DPA act.

The authorities may have to introduce new regulations later in order to cover deposits in the spe¬cial stateowned financial institu¬tions under the DPA act.

How do depositors obtain deposit protec¬tion?

When any financial institution is shut down, the depositors will receive their deposits back to a cer¬tain amount. In the first year, between August 11, 2008, and August 10, 2009, the depositors receive a blanket guarantee.

In the second year, between August 11, 2009, and August 10, 2010, the depositors get a Bt100million guarantee each of com¬bined accounts in a financial insti¬tution. In the third year, between August 11, 2010, and August 10, 2011, depositors get a Bt50million guarantee each of combined accounts in a financial institution.

In the fourth year, between August 11, 2011, and August 10, 2012, depositors get a Bt10million guarantee each of combined accounts in a financial institution. After that, from August 11, 2012, the depositors have a Bt1million guarantee each of combined accounts in a financial institution.

For example, Wichit has deposits of Bt1,200,000 in Chicken Bank, with Bt500,000 in the Nakhon Nowhere branch and Bt700,000 in the Buriburi branch. He has deposits of Bt750,000 in Egg Bank - Bt650,000 in the Bangkrapi branch and Bt100,000 in the Prattaya branch.

As of December 31, 2008, Wichit will get the full amount of Bt1,200,000 if the Chicken Bank is closed. He will receive all his money, Bt750,000, if the Egg Bank is shut down.

As of November 15, 2010, Wichit will obtain only Bt1,000,000 from DPA and the rest from the liquidation process. He will get all his Bt750,000 from DPA if the Egg Bank is closed.

What should depositors do when their financial institutions are closed?

They are required to state their intention to reclaim the money from the DPA, which will announce time, place and other details.

Within 40 days after the finan¬cial institutions are closed, the DPA will inform the depositors of the closed financial institutions and ask them to state their intention. The depositors will get the money back within 30 days of the inten¬tion date.

What should depositors do if they do not state their intention?

The depositors are allowed to ask for the money from the closed financial institutions in accordance with the liquidation process.

How will the depositors of jointname deposit accounts get protection?

They will get the money back in the proportion of the deposits they made. If they do not know the exact proportion, they will get the money equally. The money will be included with the money in any private account of each depositor.

For example, Wichit and Siriporn have a jointname deposit account worth Bt1,000,000 in a bank. Wichit has his own account worth Bt800,000 and Siriporn has her private account worth Bt400,000 in that bank.

If the bank is closed in December this year, Wichit will receive his full money of Bt1,300,000 and Siriporn will get the full amount of Bt900,000.

If the bank is shut down in October, 2012, Wichit will receive Bt1,000,000 from the DPA and the rest from the liquidation process, and Siriporn will get Bt900,000 from the DPA.