Govt must announce new protections for depositors: Korn

The government will have to come up with new measures to protect depositors if it goes ahead with its plan to use funds from the Deposit Protection Agency (DPA) to service the Financial Institutions Development Fund's Bt1.14 trillion debt, former finance minister Korn Chatikavanij said.

Korn, deputy leader of the opposition Democrat Party, also expressed concern that commercial banks would pass on the additional fees to be collected by the government to their customers.

At present, the DPA levies a 0.4-per-cent fee on all deposits held by banks and other financial institutions.

To service the public debt of Bt1.14 trillion, a legacy from the 1997 financial crisis, the government is planning to boost the DPA fee to 1 per cent, bringing the total levy to about Bt76 billion per year based on the country's total deposits of Bt7.6 trillion.

This will allow the government to service the annual interest payment on the Bt1.14 trillion debt as well as some principal debt.

Korn said the Finance Ministry would have to issue a formal announcement that the government will protect depositors in the event of future banking crises on behalf of the DPA if its funds were diverted to pay back the debt.

Korn said the Yingluck government's decision to back off its original plan to transfer the legacy debt directly to the central bank was a positive step.

Bank of Thailand Governor Prasarn Trairatvorakul confirmed that the government would remove a key article in its executive decree on the public debt transfer so that the central bank would not be affected. The government earlier attempted to pass on responsibility for servicing the Bt1.14-trillion debt to the central bank.

Korn said the central bank had the right and duty to speak up against measures that may hurt its independence in conducting monetary policy, which he said was crucial to the country's macro-economic stability.