Thailand’s deposit protection system will apply to virtual banks, agency says

The commitment is part of the agency’s five-year plan to improve deposit protection unveiled on Thursday.

DPA president Songpol Chevapanyaroj said the plan was the fourth phase of the agency’s 2023 to 2027 roadmap, which focuses on improving the efficiency of its deposit protection system.

In particular, enhancements are being made to deposit reimbursement and liquidation. The reimbursement process currently takes about 30 days, but the agency's goal is to complete the process in seven days, Songpol said.

The DPA will prepare tools and regulations to work with licensed virtual banking providers once the Bank of Thailand gives them the green light later this year, Songpol said.

"Our deposit protection regulations will apply to virtual banks," he said.

Depositors will now be protected up to the legal maximum of 1 million baht per depositor per bank, according to the DPA.

If a financial institution's license is revoked due to a financial crisis, the depositor reimbursement process must be quick and simple, use modern channels, and comply with all applicable laws and regulations, the agency said.

The DPA announcement came just a few days after the Bank of Thailand unveiled its virtual bank licensing framework, which will allow virtual banks to operate as financial service providers.

The central bank anticipates that Thailand's first virtual banks will begin operating in 2025, and that they will improve the banking sector's competitiveness and accessibility.

"DPA is prepared to support Thailand's virtual bank ecosystem. It is another step in our financial innovation to serve the digital economy's future,” Songpol said. “Virtual banks will help people in rural areas access legal deposit and loan services while also lowering costs for customers and businesses."

DPA said its roadmap has four key strategies to support its vision of being a dependable, trustworthy and modern deposit protection organisation. All four strategies will ensure its systems, tools, regulations, governance, communication, and relationships provide assurance to Thai depositors.

"We have adapted our strategic and operational direction to ensure that we are up to date with the latest financial innovations and new forms of financial services, such as the upcoming virtual banks, which will soon emerge in Thailand due to the growth of digital technology and changing consumer behaviour,” Songpol said.

The main challenge the agency faces is collaborating with the 32 traditional domestic and international banks operating in Thailand, as well as non-bank financial service providers, in order to share and develop data analytics, agency officials said.

The goal is to analyse deposit data to ensure the financial system's stability, they said.

The agency will continue its efforts to increase public and depositor confidence in its protection system, Songpol said.

Deposits are expected to rise this year as expected interest-rate hikes make bank deposits more attractive, according to a DPA report.

The number of protected depositors is expected to rise to 89.66 million, a 3.83 million increase from 2021, representing a 4.46% increase, the report says.

The total amount of deposits protected during the first 10 months of 2022 was 16.12 trillion baht, representing a 3.36% increase over the same period in 2021.

Individuals with deposits of less than one million baht account for the vast majority of all depositors.

Currently, 98.01% (87.88 million) of all depositors are fully protected.

The Deposit Protection Fund has 137 billion baht ready to be used to protect depositors, the DPA report said.