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Bank Runs Spread To Thailand

Tyler Durden's picture




 

Thailand's Government Savings Bank (GSB) president admitted that clients withdrew 30bn Baht (around $1bn) in a single-day last week and Bank for Agriculture and Agricultural Cooperatives (BAAC) and Krungthai Bank (KTB), although of a much smaller magnitude, have also seen withdrawal spikes of similar magnitude according to The Bangkok Post. The 'bank run' comes after speculation that cash at the state-run banks are being used by the government (which is in turmoil) to fund farmers (who have not received their 'promised' rice subsidies of over 130 bn Baht). Withdrawal requests are met with banks warning that there were insufficient funds at the time due to many depositors withdrawing cash. One depositor, rather ironically summed it up, "I started to feel concerned that my money may become only paper."

 

Via The Bangkok Post,

The deposit flight from the Government Savings Bank (GSB) is not out of fear for its financial stability but rather is a response to speculation the state-run bank is involved in lending to the troubled rice subsidy of the Yingluck Shinawatra government.

 

Spikes in money withdrawal have also been seen at the Bank for Agriculture and Agricultural Cooperatives (BAAC) and Krungthai Bank (KTB), although of a much smaller magnitude.

The bank run comes after the Thai government's "rice-pledging" scheme - which

The rice pledging scheme, a key plank of the Pheu Thai Party’s winning platform in 2011, is proving to be the Achilles heel of Yingluck Shinawatra’s caretaker government.

 

Problems with the scheme, which offered farmers a price 40-50% higher than market prices, loomed shortly after it began in October 2011. The Yingluck government hoarded a large supply in state warehouses, wagering that global rice prices would rise.

 

The attempt to manipulate the market backfired as rice flooded the global market. The bad bet has left Thailand with a record stockpile, and the country has relinquished its crown as top rice exporter to India and Vietnam.

 

Thailand’s rice shipments in 2012 and 2013 totalled less than 7 million tonnes, down from 9-10 million tonnes in the past. The scheme is tarnishing the caretaker government, and things worsened when the National Anti-Corruption Commission last month announced a probe of Ms Yingluck’s role in the scheme after bringing formal corruption charges against two of her cabinet ministers.

 

...

 

With the huge stockpile and the government’s vow to buy every single grain, the rice subsidy is estimated to have caused losses north of 400 billion baht for the first two harvest seasons, quickly exhausting its 500-billion-baht outstanding budget.

 

In response, the government sought 180 billion baht from the BAAC to make advance payments to farmers.

And the current bank run was sparked when...

Due to the cash crunch, the Yingluck government delayed paying 130 billion baht to 1.4 million farmers — a core constituency of Pheu Thai. Ms Yingluck’s decision to dissolve the House last Dec 9 has obstructed the caretaker government’s ability to borrow more to pay farmers, as such borrowing could be ruled unconstitutional and leave banks open to charges of wrongdoing.

 

...

 

GSB president Worawit Chailimpamontri insisted during urgent press conferences yesterday and Sunday that the GSB has extended 5 billion baht to the BAAC as part of its existing 20-billion-baht credit line to the BAAC in the interbank market, and that the funds were not meant to fund the rice pledging scheme.

 

...

Even so, the lending has spurred rumours that it would be used to pay the government’s overdue debt to rice farmers.

Interbank borrowing is a channel that allows banks experiencing a glut of savings to lend to banks that are falling short of liquidity.

 

But both the GSB and the BAAC have surplus liquidity, said Dr Lalida, adding that such borrowing is considered a hidden deal.

The people are not happy that their deposits are being used this way...

Such actions are deemed to help the government avoid legal restrictions,” said Lalida Veeravithayanant, a doctor at a local hospital, referring to the alleged loans.

 

She withdrew 800,000 baht from her two accounts at KTB a day after she learned the country’s biggest state-owned bank had approved short-term loans to existing customers who are rice traders and exporters taking part in government rice auctions.

 

Dr Lalida said it was a surprise when she requested a cash withdrawal at KTB’s branch in the Zuellig House building on Silom Road and was denied. The excuse given was that there were insufficient funds at the time due to many depositors withdrawing cash.

 

She also closed her savings account with the GSB after withdrawing 100,000 baht and redeeming savings certificates to the tune of 1 million baht after local media reported the bank had extended billions of baht in loans to the BAAC through interbank lending.

 

...

 

The right way to solve the rice pledging problem is by selling rice to pay off farmers. The current method will create a distortion of the problem,” she said.

Simply put - the people no longer trust the banks...

“Being a state-owned bank, it must have responsibility,” she said. “The bank cannot say it does not know what the BAAC will use the lending for. If so, how can the bank extend loans without any risk evaluation, and how can people trust the bank?”

 

Even though the irregular withdrawals from the GSB stemmed from depositors’ discontent over lending to the BAAC, fears from other depositors that they may not get their money back in full and immediately as requested could escalate — and the bank could be in hot water at that point.

 

“I withdrew 20,000 baht from my savings account at the GSB and redeemed another 180,000 baht in savings certificates, as I started to feel concerned that my money may become only paper like the farmers’ pledging invoices,” said another employee of an international company.

So - in summary - the government won an election by promising to pay rice farmers (a major part of Thailand's voting population) more money... soon after, the 'promise' was shown to be entirely false and now the government is using its banks (and thus other people's deposits) to make good on its 'promises' and to keep the rest of the people happy... sound familiar?

 

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Tue, 02/18/2014 - 12:40 | 4448385 Alpha Dog Food
Alpha Dog Food's picture

 

 

About the one country this guy didn't cover in his spoof on TED Talks.

 

http://www.youtube.com/watch?v=7QPxDugs0Nw

Tue, 02/18/2014 - 12:43 | 4448409 fonestar
fonestar's picture

Woohoo!  More bank runs! 

fonestar has his bits lined up!  Come to fonestar!

Tue, 02/18/2014 - 13:03 | 4448523 Divided States ...
Divided States of America's picture

Yup the rich fuckin 1% knows whats going to happen....their paper money will be worthless...so spend it all now on hard assets or anything, even expensive handbags, jewellery and nice cars. I just dont understand why these 1% elite fuckin greedy bastards want to fight it out to be the 1% of the 1% at the expense of more ravaging of the sheeps. Honestly, Mr. Fink/Loeb/Ackman/Tepper/Icahn, one day, everyone will be going after your head.

At least get something out of your money while its worth something. Smart ppl will buy precious metals, and food and protection aka guns and ammo.

Tue, 02/18/2014 - 15:48 | 4449295 mickeyman
mickeyman's picture

Guns and ammo are for the hoi polloi. The 1% of the 1% buy armies.

Tue, 02/18/2014 - 13:25 | 4448415 y3maxx
y3maxx's picture

Re: Banker Suicides... NSA, CIA & Banksters at work here.....First exposing the malcontent American Generals and now the Bankers. These are not suicides. They are messages to the rest of the bankers who may be thinking of turning "Whistleblower".

Tue, 02/18/2014 - 12:46 | 4448430 TruthInSunshine
TruthInSunshine's picture

-- "I started to feel concerned that my money may become only paper."

Proof that Idiocracy is a global, and not merely American, phenomenon

Oh,'and easily QOTday (maybe even week).

Tue, 02/18/2014 - 13:00 | 4448503 fonestar
fonestar's picture

"I started to feel concerned that my money was the rehypothecated, digital abstraction of paper money.... and that they didn't even have that."

Tue, 02/18/2014 - 13:02 | 4448520 Doubleguns
Doubleguns's picture

Spreading the wealth to the farmers via the banks. Didn't our govt just sign a farm bill with subsidies to the farmers. 

Tue, 02/18/2014 - 13:16 | 4448578 Harbanger
Harbanger's picture

Did Marc Faber run or walk to the bank?

Tue, 02/18/2014 - 13:50 | 4448763 Son of Loki
Son of Loki's picture

" If you see a line in front of your bank, get in it, fast!"

 

~ El Erian, 2008

Tue, 02/18/2014 - 12:41 | 4448396 SAT 800
SAT 800's picture

I started to worry that my money might become only paper. That's a great quote. food for thought, there alright.

Tue, 02/18/2014 - 13:52 | 4448767 gafgroocK
gafgroocK's picture

 

 

 

"I started to feel concerned that my money may become only paper."

 

He really should worry  that it is really only electronic digits....hmmm...that sounds like Bi...nevermind

Tue, 02/18/2014 - 12:43 | 4448405 Dr. Engali
Dr. Engali's picture

You mean to tell me that people don't like banks gambling with their currency? WTF is wrong with them? Don't they know that the bankers need to gamble so they can trickle down on the peasants? 

Tue, 02/18/2014 - 12:48 | 4448413 HRamos_3
HRamos_3's picture

Bank runs in Thailand?

Bullish! 

Tue, 02/18/2014 - 12:44 | 4448414 Global Hunter
Global Hunter's picture

"I started to feel concerned that my money may become only paper."

Keep going down the rabbit hole and he'll come to find out its not even paper.

Tue, 02/18/2014 - 12:44 | 4448419 shutdown
shutdown's picture

Oh, please, please, pretty please,  can we have bank runs in the USA, too? Let's get this show on the road!

Tue, 02/18/2014 - 13:20 | 4448595 ZeroPoint
ZeroPoint's picture

It would be a non-event. The Fed would print, print, print to cover the FDIC insurance gap.

There are three likely scenarios that would bring about financial hell on earth:

#1 A foreign bank or Sovereign debt default. Then there would be a serious problem. Credit stops, transactions stop.

#2 The rejection of the petrodollar and/or global supply chain refusing to settle in dollars for finished goods.

#3 China dumping its teasuries, which cause #2.

 

Tue, 02/18/2014 - 17:33 | 4449787 syntaxterror
syntaxterror's picture

50% of the sheep in the USA have less than $1000, so no need to worry about bank runs. There's nothing to withdraw.

Tue, 02/18/2014 - 12:45 | 4448422 Spungo
Spungo's picture

It's different because they don't have EBT cards.

Tue, 02/18/2014 - 12:53 | 4448462 NOZZLE
NOZZLE's picture

Look like ryce about boil over in hookertown, gambling 9n rice prices by stockpiling,  wonder where they got that bright idea,   probably Dimon passed it off to some thai ladyboy.

Tue, 02/18/2014 - 12:54 | 4448468 Magnix
Magnix's picture

Withdraw all of your cash and buy GOLD!

Tue, 02/18/2014 - 13:53 | 4448772 gafgroocK
gafgroocK's picture

 

 

 

What if you just did that?

Tue, 02/18/2014 - 16:37 | 4449530 Amagnonx
Amagnonx's picture

Its incredibly easy to buy and sell gold in Thailand, and the spread is around $10/oz (B300).  No reason to hold cash at all.

 

Tue, 02/18/2014 - 13:01 | 4448516 falak pema
falak pema's picture

EM : the soft underbelly of the global fiat system....

Tue, 02/18/2014 - 13:05 | 4448534 Magnum
Magnum's picture

Bank run staged by the jealous royals and their celebrity stooges.

Tue, 02/18/2014 - 15:34 | 4449201 Urban Redneck
Urban Redneck's picture

And who exactly owns those banks in Thailand?

(Asa might be out of office, but he's still a member of the club, and serves a higher authority)

Tue, 02/18/2014 - 13:22 | 4448606 HamRove
HamRove's picture

Well it's not on CNBC so it didn't happen.

CNBC is still trying to figure out if the weather is the cause of all our economic distress

Frozen economy: All weather or something else?
http://www.cnbc.com/id/101424313

Fuckin idiots

Tue, 02/18/2014 - 13:28 | 4448639 Sick
Sick's picture

Banks are trying to control withdrawls.  Several months ago I requested a withdrawl of only $5K from BofA...they asked me what I was going to use the money for so I told them a lie after all it is my currency (not real money that I was going to purchase).  Today I contacted USAA (brokerage) and got the same treatment.  Seems as though we have capital controls being implemented at all financial institutions.

Tue, 02/18/2014 - 13:34 | 4448679 Winston Churchill
Winston Churchill's picture

Same everywhere.I have accounts in a lot of places, a
habit I picked up from my Swiss father.Go on vacation
somewhere,open a rainy day bank account,or two or three.
Almost like someone knows a currency reset is coming
soon.

Wed, 02/19/2014 - 15:08 | 4453599 fedupwhiteguy
fedupwhiteguy's picture

Ditto here! Wells Funky and USAA both axed me questions in regards to the withdrawals. USAA even queried if I was wiring money to purchase BITCOINS!!!!

Tue, 02/18/2014 - 13:32 | 4448669 Minburi
Minburi's picture

A friend of mine just finished doing his retirement visa last week in Thailand. One requirement is to show income of 65,000 baht monthly or a bank account balance of 800,000 baht. (About $25K) 

Because he had his visa stamp done for 15 months, he went to take his money from Bangkok Bank on Monday this week. At least 3 bank employees urged him to roll it over into another 4 month Certificate of Deposit for about 2.7% annual interest. He declined and they begrudgingly handed over the cash.

He is now waiting for another monkey hammering of gold.

Tue, 02/18/2014 - 13:47 | 4448748 Cannon Fodder
Cannon Fodder's picture

If anyone is interested in real time reporting on the Thailand situation, this guy http://www.michaelyon-online.com/ is reporting from there.

Tue, 02/18/2014 - 14:38 | 4448989 Magnum
Magnum's picture

Michael Yon puke reporting

Wed, 02/19/2014 - 07:02 | 4451773 MaxThrust
MaxThrust's picture

Went to the GSB this morning with my daughter and she withdrew all her money and bought one "baht" of gold. She is a smart girl for 11 years old and understand why I suggested it.
I said before you had numbers in a bank-book and now you have real money in your hand. If the bank ran out of cash who would give you anything for the numbers in your book?

Max

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