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Thailand Banks are going to collapse?


AussieBob

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There are so many examples over the years to show how corrupt the Thai Banks and the 'banking management processes' have become this century. The most recent example being that despite all the evidence to show that customers were ripped off by an employee of a Thai bank (mainly Expats), the police have still not charged anyone - and the Govt is showing no inclination to start an investigation into Thai banking practices.  Seems that a Thai employee of a bank stealing customer's money while working in the Thai bank (with other employees) is somehow not the responsibility of the Thai bank. This is just one example of what happens in a corrupted and unmanaged system where there is no accountability and the extremely wealthy and powerful are not at all interested in anything but making more wealth.

Banking practices that in the West are outlawed and controlled, have been running rampant in Thailand for decades. One example is the 'book value' of assets held against loans in Thailand - in both the commercial and residential markets. Unlike in the west where there are strict formulae and policies, in Thailand a bank can loan money to Somchai to buy his new Ute, and Promchai to buy his new house, and the Hisochai Family to build their latest Condominiums in Bangkok. The Thai banks holdsthe monetary value of the Ute and the House and the Condominiums at their 'agreed' value .... forever, or until the loan is payed.  That is why so many Thais living in poor villages have a brand new Ute, even when they cannot pay back the loan - the bank takes their land and values it massively over its true value.  That is why so many Thai houses and units are vacant and for sale, but are not being sold at 'true value', but are advertised at the bank's book value and they refuse to drop the price. That is why so many commercial properties are not completed but are never torn down and the land sold off to recoup the lost loan money.   This banking practice is rampant across all forms of bank loans in Thailand, and it is the reason why they very very rarely foreclose on bad loans, and is also why they continue to give out loans. 

When this banking practice that is rampant in Thailand was 'allowed' in the West, it ended up with billions of dollars of 'bad loans' being provided to poor people in USA who obviously could not pay the loans - with the resultant housing asset values being leveraged way too far,.  The GFC of 2008/2009 occurred because of this and IMO the Thailand banking system is currently just like the situation before the GFC.  The Thai banks balance sheets are massively corrupted and vastly over-valued - it is just a matter of time before they collapse.  There is a reason why so many Finance Ministers have resigned since the Junta took over - they dont want to be the one left holding the bag. 

For those that dont remember, in the late 90s the Thai Banks were in serious trouble and the Thai currency crashed - and they got away with it back then (just).  It is because of the reality of the Thai banking practices, that when the GFC hit in 2008, the Thai Govt implemented the Deposit Protection Institution Act which provided a full-coverage protection of 100 million Baht per depositor per financial institution. That was reduced to 50 million Baht in 2012 when things worldwide had returned to near normal.  Since the Junta took over that amount of bank guarantee was firstly reduced to 15 million Baht in 2016, and it has been slowly reduced each year or two since then to its current amount of 1 million Baht.  There is a reason that guarantee has been reduced so drastically IMO - the reality is that the Thai banks' asset values on their books are actually worth far far less than what they claim, and they have leveraged them way too far.

IMO the main reason the Junta pursued the Chinese tourist market and the massive infrastructure building projects, which Chinese Govt supported as they were going to get most of the business, was because of the potential collapse of the Thai banking system.  The Junta is not only desperate for the tourism industry to come back for jobs and the economy, it is also desperate to keep the banking system afloat, and they are running out of money. The Junta has put a hold on many infrastructure projects because of the Covid Pandemic, and they are desperate for those projects to re-start.  But it is clear that the Chinese Govt has put a hold on all the massive infrastructure projects that were massively corrupted and uneconomic (as evidenced by the real estate collapses), and it is unlikely they will be so supportive of Thailand's needs in the near future. With their current clampdowns and tourism bans it is likely that China will be holding back for at least 2022 and maybe even most/all of 2023.  Without the money circulation from massive tourism and infrastructure projects, the Thai banking system is exposed - and the longer that happens, the more likely it is to collapse.  The covid pandemic social and economic sanctions are starting to recede in the world, and when things start to ramp back up again the world's currency flows will gravitate towards those economies that are growing and are secure.  The Thai Baht has been dropping for most of this year and will likely continue to do so for some time yet. The Thai banking system is IMO close to the edge - if things dont change and improve by 2023, it may well collapse.

I never will have more than the 1 million Baht in any bank in Thailand - and if they scrap the guarantee completely - I will only ever hold enough money in Thailand for month to month expenses.  IMO the complete removal of the bank guarantee will probably be a trigger/signpost that the collapse is about to happen (or is happening). 

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43 minutes ago, AussieBob said:

I never will have more than the 1 million Baht in any bank in Thailand - and if they scrap the guarantee completely - I will only ever hold enough money in Thailand for month to month expenses.  IMO the complete removal of the bank guarantee will probably be a trigger/signpost that the collapse is about to happen (or is happening). 

Bingo

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Have have long said of third world countries- do not invest anything that you are not prepared to walk/run away from. 
 

interesting thoughts, could the banking collapse herald the return of 19 yo BGs for 1K LT ?   Ah , the good old days

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1 hour ago, tommy dee said:

wow. what a long post.  first things first, the thai banking sector is involved in an awful lot more than somchais house and car where, yes,  they are often doing what banks i the US and Uk did before the last crash and lending MORE THAN THE SALES PRICE.. what they lend against is the actual valuation of the property, ( sorry thats a fact) and there is a strict procedure to properly value property here.  ( ask Tony at magna).  the end result is that they have a half decent loan to value on new mortgages, but based on true value and not sellers marked down price. so i fact its not quite the same as the failed US  crap credit loans that took down institutions there.  also buyers have to qualify for a loan which in the crap credit era in the US .. they didnt.

to re possession.  followig the debalce of the last crash HERE, banking laws were amended so that property could t be sold by by sa bank for less than , i think, 85 or 90% of outstsanding balance.  that was done to stop abc company going tits, then starting again as xyz but buying their previous asset for 10 or 20% of their previous loan.

A million baht PER ACCOUNT is low, yes. so spread your assets.

 

the SINGLE issue of a bent employee rippig expats off from within the bank, which means there was more than one for it to work IS being investigated and court cases are pending, with many already compensated.  those uncompensated had lesser docuementation to prove their being defrauded.  in the grand scheme of things, the amout is negligible, but for the account holders, its a lot.  banks here have insurance against fraud and we think its the insurance that is playing hardball

 

there isnt one mainstream thai bank that is currently in any form of difficulty.  not because of inflated balance sheets (check credit acceptance USA) but because they have income spread across the board here.  write offs are deducted annualy

on the whole the banking is pretty good and certaily soild.  plus if i trnsfer 100 baht to somene, they have it there and then.  in the UK Baas is three days and doesnt work weekends.

 

conclusion:  banks here are no more or less strong than those in the west, all have taken their toll with covid .  thai banks are often owned by people who will simply not allow them to fail ( o names pls)  and in the ful knowldege that if they were to fail it would cause potential anarchy.  also no media comany is trying to destroy them, as they unrightly did to the U building society simply with bad reporting, as was the case with Woolworth Europe, which wasnt insolvent either

 

 

 

 

Excellent post young Thomas ........ nail hit on head,

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2 hours ago, tommy dee said:

if i trnsfer 100 baht to somene, they have it there and then.  in the UK Baas is three days and doesnt work weekends.

If I'm not misinterpreting what you intended to write, you are out of date with your UK info. A bank transfer within the UK is almost instantaneous.

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24 minutes ago, Bazle said:

If I'm not misinterpreting what you intended to write, you are out of date with your UK info. A bank transfer within the UK is almost instantaneous.

Yes, bank transfers have pretty much been instant for quite some time now.

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2 hours ago, Bazle said:

If I'm not misinterpreting what you intended to write, you are out of date with your UK info. A bank transfer within the UK is almost instantaneous.

 

2 hours ago, boydeste said:

Yes, bank transfers have pretty much been instant for quite some time now.

When I use on-line banking to transfer money from my current account to pay off my credit card account (all within the same bank/branch) it takes at least one day, normally 2 days. Very important as "New Statement" day arrives and I have been caught with my pants down!

Transfers from the same account using on-line banking to my UK family using different UK banks are instantaneous.

I don't think there is a general rule that fits all scenarios whether it be instantaneous or 2 days.

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Wise accounts are usually seconds unless Sunday and Thai Bank Holidays.

Bank transfers such as large numbers of pounds (property. cars. bikes)  in my humble experience take around 36/48 hours to verify process and ultimately receive etc.

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3 hours ago, Derek Dangleberries said:

When I use on-line banking to transfer money from my current account to pay off my credit card account (all within the same bank/branch) it takes at least one day, normally 2 days. 

I've had the same experience, and I think it is because the money is being sent to Visa or Mastercard. 

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Look at what happened back in '97.

 

These trends are cyclical. Almost a certainty something similar will happen again. The question is when ?

 

Gold prices are near record highs. But even so, it may be a good idea to have some (for liquidity).   

 

Like I have said on other threads recently.  IT IS CRITICAL TO DIVERSIFY YOUR ASSESTS, HAVE NUMEROUS OPTIONS AVAILABLE FOR ACESSING CASH (LIQUIDTY).

 

Realize that with the corrupt banking systems/laws, vulnerability of the internet and banking transfer systems, war and pandemic - things can get bad, much worse than they appear to be at the moment. Not only with Thai banks but everywhere. 

For those who are vulnerable or thinking of making a purchase of Thai property, do so carefully. Good idea (if you are thinking of buying something) to position yourself properly (with your home currency) so that if a serious default or currency devaluation occurs you can take advantage of it.

As unfortunate as a currency collapse would be, there are those who can benefit from it (if they play their cards right).

 

Currencies can also crash and then bounce back. Don't get caught in that trap either like a lot of those guys who sold everything back in the late 90's. Then a few years later got burned in paradise.

Use common sense, don't overeact based on emotion. Stay calm, stay diversified.... DON'T PANIC.

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5 hours ago, Derek Dangleberries said:

 

When I use on-line banking to transfer money from my current account to pay off my credit card account (all within the same bank/branch) it takes at least one day, normally 2 days. Very important as "New Statement" day arrives and I have been caught with my pants down!

Transfers from the same account using on-line banking to my UK family using different UK banks are instantaneous.

I don't think there is a general rule that fits all scenarios whether it be instantaneous or 2 days.

 

Transfers (bank to bank (ACH), can take 1-3 days, sometimes more). CC payments can be done anywhere from same day to up to 10 days (different banks have different policies) some of the fucking banks will not post a payment for up to 10 days (if you have recently made a late payment).

Wire transfers (SWIFT) can take up to 15 days (but usually less). 

 

Bottom line - is there is no certain timeline for each product. Holidays can also f**k things up - big time.

 

Best policy is to plan far ahead on your payments or transfers. Don't get stuck in the cycle of needing cash in a day or two, because it usually ain't gonna happen.

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19 hours ago, Khun Ling said:

Have have long said of third world countries- do not invest anything that you are not prepared to walk/run away from. 
 

interesting thoughts, could the banking collapse herald the return of 19 yo BGs for 1K LT ?   Ah , the good old days

If the predicted collapse occurs that could well be the case. The Baht is about 20% over-valued under the Junta (to pay for the war toys and import mercs and other toys).  For over 12 years prior to the Junta (except 2 years of the GFC) the Thai Baht averaged about 28 to an AUD and about 32 to a USD and about 51 to a GBP (the GBP used to equate to 60 THB but it did not recover as much after the GFC).  If the collapse occurs you will see exchange rates like before the GFC I reckon. 

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18 hours ago, Derek Dangleberries said:

SCB will never collapse..........

True - but it will devalue a lot on the books and subsequently suffer liquidity issues, and the Baht will collapse. Not all banks collapsed in 2008/2009, but they all suffered, and with so much of the Thai banks 'value' invested in Thailand and not as much abroad, they will not be able to mitigate the damage like as an example JPMorgan in the GFC. 

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15 hours ago, Bazle said:

If I'm not misinterpreting what you intended to write, you are out of date with your UK info. A bank transfer within the UK is almost instantaneous.

i apologise and yes am out of date perhaps.  my wise transfer was on a saturday, so she couldnt access it until the tuesday.  i didnt know the baacs system had improved.  thanks

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17 hours ago, tommy dee said:

wow. what a long post.  first things first, the thai banking sector is involved in an awful lot more than somchais house and car where, yes,  they are often doing what banks i the US and Uk did before the last crash and lending MORE THAN THE SALES PRICE.. what they lend against is the actual valuation of the property, ( sorry thats a fact) and there is a strict procedure to properly value property here.  ( ask Tony at magna).  the end result is that they have a half decent loan to value on new mortgages, but based on true value and not sellers marked down price. so i fact its not quite the same as the failed US  crap credit loans that took down institutions there.  also buyers have to qualify for a loan which in the crap credit era in the US .. they didnt.

to re possession.  followig the debalce of the last crash HERE, banking laws were amended so that property could t be sold by by sa bank for less than , i think, 85 or 90% of outstsanding balance.  that was done to stop abc company going tits, then starting again as xyz but buying their previous asset for 10 or 20% of their previous loan.

A million baht PER ACCOUNT is low, yes. so spread your assets.

the SINGLE issue of a bent employee rippig expats off from within the bank, which means there was more than one for it to work IS being investigated and court cases are pending, with many already compensated.  those uncompensated had lesser docuementation to prove their being defrauded.  in the grand scheme of things, the amout is negligible, but for the account holders, its a lot.  banks here have insurance against fraud and we think its the insurance that is playing hardball

there isnt one mainstream thai bank that is currently in any form of difficulty.  not because of inflated balance sheets (check credit acceptance USA) but because they have income spread across the board here.  write offs are deducted annualy

on the whole the banking is pretty good and certaily soild.  plus if i trnsfer 100 baht to somene, they have it there and then.  in the UK Baas is three days and doesnt work weekends.

conclusion:  banks here are no more or less strong than those in the west, all have taken their toll with covid .  thai banks are often owned by people who will simply not allow them to fail ( o names pls)  and in the ful knowldege that if they were to fail it would cause potential anarchy.  also no media comany is trying to destroy them, as they unrightly did to the U building society simply with bad reporting, as was the case with Woolworth Europe, which wasnt insolvent either

I hope some people like the 'size' of my post too - and will also respond with some thoughts and ideas on the matter. 

Agree with some of what you said Tommy, but disagree with some of it too.

Sure the issues of a crisis are different than the GFC, but the reasons for a potential collapse are basically the same - massively over-valued book assets that have been over-leveraged for other business activities.  I dont know a lot about what happened in the late 90s that caused the collapse in Thailand and then across SEAsia and the subsequent float of the Baht, but I see the same types of 'manipulation' of the numbers that probably/inevitably caused that collapse.  And for almost 20 years I have seen very little evidence that the Thai culture learns a lot from their past - in fact my observations are that the Thai society repeats their mistakes from the past and does not change much at all. There are many good things about that I like, but when it comes to financial matters it is not a good thing. 

That reason for the banks not being allowed to sell off at too cheap a value, as you correctly pointed out, is also why they have so much massively over-valued assets on their books - and it has been growing every year for almost 2 decades. The 'true value' of a bank's asset is what it would get on the current and near-future market - and the regulated formulae used by the banks in the west ensure they dont hold asset values that would collapse if/when they were a forced sale - as in an industry collapse.   The formulae used by the Thai banks and supported by the Thai Govt banking rules and regulations, means they are massively over-valued in a collapse.  A bit here and there is not an issue, but 30 million Somchais, 20 million Promchais, and a million Hisochais, and there is a very serious potential problem.

I hear you about the insurance companies playing hard ball and that sounds correct, but my main issue is that there is very little media attention on this matter, that would be front line news in the west for weeks - and even less political attention and coverage.  Banks in Thailand (and many companies and people) get away with so many things in Thailand because of the fear of being sued for defamation, whether true or not.  Banks are the biggest single benefactor of that reality in Thailand, because one of them is owned by you know who. They are immune to local discontent and complaints about their practices - and with over 20 years of massive lending freedoms. Thailand's Public debt to GDP ratio has increased from about 40 percent to a predicted 69% in less than 2 years, and meanwhile the Personal debt to GDP ratio has increased from about 60% to 90% in the same period.  Sure, a lot of that is because of the economic collapse and subsequent GDP reduction, but Thailand has grown in both ratios far more than the vast majority of other industrialised countries. 

Good point you made that it is very likely that the Thai banks will not be allowed to fail as such, for the reasons you outlined.  But the necessary support provided will only occur when the collapse starts, and as you rightly said, if they dont act quickly enough then there will be anarchy. I agree that although a collapse could happen, the banks will be supported and 'held up' - but the subsequent collapse of the Baht is not something they can stop - they can only reduce the severity and the speed of the collapse.  Plus the subsequent tightening of the banking regulations would occur because the global liquidity market is not going to allow the same banking practices to again result in the same end result. Therefore liquidity in Thailand will slow (maybe collapse), and without the support of a very large financial benefactor (CCP? IMF?) banking loans will slow inside Thailand and that will tighten things across the whole economy.

After every 'economic bubble' there is always a collapse. Thailand has been economically booming for quite some time - but things have been slowing across all industries (except tourism) since 2015. Neighboring countries like Vietnam and Cambodia have been competing with Thailand for a while now and are starting the make inroads. The Baht has been too high for almost 8 years and that has not helped the economic situation of a country so dependent on exports and tourism.  The smarter economies know who to ease the pressure slowly to avoid the 'burst' - in fact they start to tighten monetary policy when the financial situation dictates.  I see no evidence that the current or previous Thai Govts have recognised that economic reality - in fact the current Govt is borrowing even more money than before - the massive reserves Thailand had some years ago are disappearing fast. The Junta cabinet on Tuesday approved new borrowing of 1,410 Billion Baht in the current fiscal year to September. And when I see things like the Junta imposing new taxes on the on-line sales transactions (and Paypal leaving), and now a new proposed financial tax on share tradings, the portends tell me they are desperately seeking money to hold things up. The problem with that 'kicking the financial can down the road' is that it only makes the inevitable collapse bigger. 

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8 hours ago, Glasseye said:

Look at what happened back in '97.

These trends are cyclical. Almost a certainty something similar will happen again. The question is when ?

Gold prices are near record highs. But even so, it may be a good idea to have some (for liquidity).   

Like I have said on other threads recently.  IT IS CRITICAL TO DIVERSIFY YOUR ASSESTS, HAVE NUMEROUS OPTIONS AVAILABLE FOR ACESSING CASH (LIQUIDTY).

Realize that with the corrupt banking systems/laws, vulnerability of the internet and banking transfer systems, war and pandemic - things can get bad, much worse than they appear to be at the moment. Not only with Thai banks but everywhere. 

For those who are vulnerable or thinking of making a purchase of Thai property, do so carefully. Good idea (if you are thinking of buying something) to position yourself properly (with your home currency) so that if a serious default or currency devaluation occurs you can take advantage of it.

As unfortunate as a currency collapse would be, there are those who can benefit from it (if they play their cards right).

Currencies can also crash and then bounce back. Don't get caught in that trap either like a lot of those guys who sold everything back in the late 90's. Then a few years later got burned in paradise.

Use common sense, don't overeact based on emotion. Stay calm, stay diversified.... DON'T PANIC.

Good advice.  If anyone is considering a large financial transaction in Thailand I suggest wait a bit. The Baht is devaluing and will continue to do so another 10-20% this year IMO, but if the banking collapse happens (even with the banks being supported) the Baht will crash another 20-30% - that is the time to bring in the money to buy a car or condo or whatever. 

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9 hours ago, Glasseye said:

Transfers (bank to bank (ACH), can take 1-3 days, sometimes more).

DD was referring to the UK system which does not use ACH transfers.  Instead most mainstream banks use the Faster Payments Service which usually settles in seconds.  Prior to that it mainly used BACS which typically took 3 working days.

https://en.wikipedia.org/wiki/Faster_Payments

 

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1 hour ago, AussieBob said:

Good advice.  If anyone is considering a large financial transaction in Thailand I suggest wait a bit. The Baht is devaluing and will continue to do so another 10-20% this year IMO, but if the banking collapse happens (even with the banks being supported) the Baht will crash another 20-30% - that is the time to bring in the money to buy a car or condo or whatever. 

 

Yes agree. But hard to say on how significant percentage wise it may be.

 

Also... with these type things, people can often see the writing on the wall, but really difficult to determine the timing of it. financial institutions and governments will make it sound like they have everything covered, yada yada. Then suddenly one day the sky will be falling.

 

Wait until the sky falls and then exchange the money....

 

Also warning to travellers heading anywhere within the U.S. (or especially leaving the country) with large sums of cash money. The police, or for that matter Fed. agencies can seize any money they deem as "suspicious". They can hold that money indefinatly and refuse to return it unless you sue them (which can take years and thousand$$$$).   ---- Asset Forfiture --- It happens all the time to innocent people. 

 

Also TSA personnel have been known to hold people coming through screenings and turn them over to the local police or a Federal Agency who then seize the cash. You can be completely f***d.

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'Wise accounts are usually seconds unless Sunday and Thai Bank Holidays.' 

Never for me. My Wise account and my bank account are both in Australia. Transfer my bank to Wise is very fast, minutes usually. Transfer from wise to our Philippine bank is never less than 3-4 days even if sent on a monday but has been longer. 

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3 hours ago, biggles said:

'Wise accounts are usually seconds unless Sunday and Thai Bank Holidays.' 

Never for me. My Wise account and my bank account are both in Australia. Transfer my bank to Wise is very fast, minutes usually. Transfer from wise to our Philippine bank is never less than 3-4 days even if sent on a monday but has been longer. 

 

*** Regarding transfers for immigration "income requirements" (Thailand) - monthly direct deposits of at least 65,000 baht (or more) ---   3rd party transfers (such as Wise) may not be considered "acceptable" from the Thai authorities.

 

There is a code (recorded on each transfer) that they will look at. Direct bank to bank "wire" transfers should have the proper code (not sure about ACH transfers though). However, 3rd party transfers (such as Wise, Zelle, etc.) may not be. Important to check with your bank in order to make sure you are using the proper transfer method in order to satisfy this requirement.

 

**** Someone could be transfering in the proper amount for several months. Then go to get their visa or extension and learn that they have not fulfilled the "income requirements" because of the incorrect code.

 

Advisable to have a recurring transfer number established with your home bank prior to beginning these transfers. Once you have this set up all you will need to do following that is to give the bank that number each time you make the monthly transfer of at least the minimum amount required. Of course there is a fee involved in this (amount of fee varies from bank to bank)..... but by doing these wire transfers you should be issued the proper code that will be indicated on your bank records. If not, you may be in for some massive headaches.

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