No changes needed to blanket guarantee for bank deposits, says bot

As Malaysia and Singapore have moved to provide blanket guarantee on bank deposits to ease depositors' concern, Thai authorities said yesterday the country's guarantee system, introduced last August, will remain intact.

According to the Bank of Thailand, there will be no change to the existing blanket guarantee for deposits in the Thai banking system.

"Our existing system is already good enough. Several countries came out with their systems, which don't cover or partly cover [deposits]." said Governor Tarisa Watanagase.

According to the new Deposit Protection Agency Act, the guarantee limit on public deposits will be scaled back in steps, from 100 per cent currently to Bt1 million per person per bank in four years. Next August, the guarantee will be reduced to Bt100 million, then to Bt50 million, Bt10 million and finally Bt1 million each succeeding year.

Malaysia and Singapore have said they would guarantee bank deposits to shore up confidence in their financial institutions amid a deepening credit crisis, following in the footsteps of Hong Kong, Indonesia, Australia and New Zealand.

"However, from now until four years [when the guarantee will fall to Bt1 million], the law allows flexibility for any change. But we have to look at the timing then, at what the situation will be," she said.

The International Monetary Fund has suggested that Asian economies might have to consider guaranteeing bank deposits as a defensive option against global market turmoil, even though the region's financial system remains sound.

European nations and the United States have moved to guarantee either deposits in their entirety or all bank liabilities, in order to maintain investor confidence in the wake of a credit crunch amid a global stock market meltdown.

"I think Asia needs to think seriously about it [guaranteeing deposits]," David Burton, IMF's Asia-Pacific director, said in an interview at his Washington office on Thursday.

Malaysia's ringgit rose from a 21-month low after the central bank said it would guarantee all deposits. Government bonds gained. It halted a two-day slide after Bank Negara Malaysia said on Thursday it would guarantee all local and foreign-currency bank deposits until end-2010.