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26 Nov 2020

Econ Digest

Things to Know Before Opening an FCD Account

      On November 20, 2020, the Bank of Thailand (BOT) issued measures aimed at easing pressure on Baht to help balance the flow of funds into and out of Thailand. One of the measures announced on the same day was regarding BOT’s foreign currency deposit (FCD) account, which allows Thais to deposit funds into FCD accounts and freely transfer funds between FCD accounts of Thais. The relaxation of the FCD standard will help provide more assistance to import/export operators and the public in managing foreign exchange risk.

    There are different types of FCD accounts, including current accounts, savings accounts and time deposit accounts, similar to pre-existing Baht deposit accounts. According to the new BOT measures, Thais can open FCD accounts to deposit foreign currency without any limit on the amount, depending on the type of account offered by the commercial bank. Each currency deposit will receive a different interest rate depending on the direction of interest rates in that currency’s country of origin, e.g. a six-month USD time deposit account will have an annual interest rate of between 0.00 and 0.80%, while most Japanese Yen and Euro currency deposit accounts will receive an interest rate of 0.00%, as interest rates in Japan and the Eurozone are negative (information as of November 26, 2020).

    Import/export operators, as well as the general public who have not yet opened an FCD account but will do so in order to benefit from managing risks and exchange rate fluctuations or to hold funds for investment in foreign assets, must pay attention to the conditions associated with FCD accounts at commercial banks, such as the starting amount for opening an account, the requirement of a minimum average account balance, fees for balances below the required amount, fees for inactive accounts, transfer fees, deposit/withdrawal fees, and a 15% tax on deposit interest for Thai natural persons. Most importantly, the Deposit Protection Agency's deposit protection only covers domestic Baht deposits, not foreign currency deposits in FCD accounts.

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Econ Digest