Thai banks forced to shift fo­cus af­ter de­posit rule change


The move to lower the de­posit pro­tec­tion limit from 50 mil­lion baht (US$1.42 mil­lion) per ac­count per bank to 25 mil­lion baht per ac­count per bank, which takes ef­fect to­mor­row, is not ex­pected to af­fect wealthy de­pos­i­tors, who can take up in­vest­ment prod­ucts of­fered by banks.

The low­er­ing of the de­posit pro­tec­tion limit is in line with the re­lated de­posit pro­tec­tion law.

De­posits over 25 mil­lion baht are fre­quently seen in small-sized banks as they of­fer higher re­turns than large and medium- sized banks.

How­ever, small-sized banks said that although the de­posit pro­tec­tion will be re­duced, cus­tomers are con­fi­dent in the strong fi­nan­cial sta­tus of the bank­ing in­dus­try and re­turns on in­vest­ment are key to as­set al­lo­ca­tion.

Land and Houses Bank (LHBank) has pre­pared to deal with the lower de­posit pro­tec­tion since the be­gin­ning of the year by fo­cus­ing on cus­tomers with de­posits of 1 mil­lion baht, said Chuta­mas Som­bun­yavi­roj, first se­nior ex­ec­u­tive vice pres­i­dent of the bank’s Com­mer­cial Bank­ing Mar­ket­ing Group.

LHBank has in­creased the num- ber of its mi­cro branch out­lets at HomePro Stores na­tion­wide while sev­eral other banks have slowed branch open­ings. LHBank wants to ex­pand its cus­tomer base from those with high net-worth to re­tail af­flu­ent to ac­quire de­pos­i­tors who have de­posit of 1 mil­lion baht, Chuta­mas said. So far this year, around 10 per­cent of new de­posits have been de­posits of 1 mil­lion baht. Out­stand­ing de­posits in the first half of this year to­talled 130 bil­lion baht.

Chuta­mas said that the lower de­posit pro­tec­tion would not af­fect wealthy clients as they were usu­ally fa­mil­iar with as­set man­age­ment and sev­eral cus­tomers have al­lo­cated their money to the cap­i­tal mar­ket.

Unattrac­tive re­turns for de­posits have prompted wealthy cus­tomers to al­lo­cate de­posits to mu­tual funds and deben­tures, which the bank of­fers to fill the re­quire­ments of cus­tomers. The bank is able to in­crease its fees by of­fer­ing more in­vest­ment prod­ucts to cus­tomers and the lower de­posit pro­tec­tion helps the bank to in­crease the num­ber of prod­ucts to at­tract more cus­tomers, she said.

Ki­at­nakin Bank said de­pos­i­tors with de­posits of more than 25 mil­lion baht rep­re­sent 19 per­cent of its to­tal de­posit base and those cus­tomers ac­count for 0.6 per­cent of the to­tal de­pos­i­tor base.

Aphi­nant Klew­pati­nond, pres­i­dent of the bank, said the bank did not see any un­usual de­posit al­lo­ca­tions in the run-up to lower pro­tec­tion. How­ever, it will re­view the im­pact on cus­tomers when the de­posit pro­tec­tion is cut to 1 mil­lion baht per bank on Aug. 11 next year.

Wealthy de­pos­i­tors have also ad­justed their sav­ings and in­vest­ments. In the past 2-3 years, the bank ad­justed the struc­ture of de­posits by fo­cus­ing more on re­tail de­pos­i­tors, putting the pro­por­tion of cur­rent and sav­ings ac­counts (CASA) at 48.2 per­cent of to­tal de­posits.

“The in­ter­est rate down­turn in the King­dom has en­cour­aged the bank’s de­pos­i­tors to look at al­ter­na­tive in­vest­ments. The bank has ini­ti­ated wealth man­age­ment ser­vices like Pri­or­ity Bank­ing and In­vest­ment Bank­ing to meet the needs of cus­tomers.

“Ex­ist­ing de­pos­i­tors have al­lo­cated their money to our Ki­at­nakin Pha­tra Fi­nan­cial Group through Pha­tra Se­cu­ri­ties and Pha­tra As­set Man­age­ment, both of which have as­sets un­der ad­min­is­tra­tion (AUA) of 43 bil­lion baht,” he said.

Chalit Silp­srikul, ex­ec­u­tive vice pres­i­dent of Tisco Bank, said the bank did not think the lower de­posit pro­tec­tion would in­flu­ence wealthy de­pos­i­tors to move to large-sized banks since the fi­nan­cial sta­tus of each bank was strong.

He said the bank has of­fered its cus­tomers in­vest­ment prod­ucts with higher re­turns than de­posits.

The bank has toned down de­posits this year in line with the slow­down growth of lend­ing; de­posit growth this year is pro­jected only at 1-2 per­cent.

In the first six months, Tisco Bank had out­stand­ing de­posits of 191.75 bil­lion baht, down by 10 per­cent from 213.09 bil­lion baht at the end of last year.

Ac­cord­ing to Kasikorn Re­search Cen­tre, as end of May, about 99.95 per­cent of to­tal de­posit ac­counts were pro­tected, as they have amounts of less than 25 mil­lion baht in them.

The re­search noted that the im­pact from the lim­ited de­posit pro­tec­tion should be seen next year when the de­posit pro­tec­tion will be re­duced to 1 mil­lion baht per ac­count per bank in Aug. 11, 2016.

Around 1.5 per­cent of to­tal de­posit ac­counts would not be pro­tected.

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