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Asia: Governments to the rescue

Updated On: Oct 20, 2008

Asia’s wealthiest governments are moving fast to guarantee bank deposits for their citizens. Hong Kong and Australia were amongst the first to do so. Hong Kong was especially unnerved by depositors responding to unfounded rumors of financial foundations of banks (e.g. Bank of East Asia) by withdrawing their deposits in droves.

This was followed by New Zealand which guaranteed all retail bank deposits fro two years. Japan, Asia’s economic superpower, is also considering a blanket guarantee for all bank deposits after already instituting an initiative to protect savings of up to 10 million yen (100,000 dollars).

In Southeast Asia, its wealthiest economy Singapore has guaranteed accounts are covered for losses up to 20,000 dollars (13,200 US). Long considered a bastion of sound banking laws and strong fundamental foundation, Singapore does not seem to need further measures at the moment.  

Other Southeast Asian economies have their own protective measures. Indonesia which is Southeast Asia's largest economy increased the limit on deposit protection to the level which savings are guaranteed by 20 times to two billion rupiah (206,000 dollars).  In the Philippines, deposit insurance covers savings of up to 250,000 pesos (5,300 dollars), protecting 95 percent of accounts.

Such decisions were made, taking their cues from European countries instituting similar policies. Other Southeast Asian countries have no need for such measures. In Vietnam, less than six percent of the population have a bank account, with families traditionally putting their wealth in gold and property.

Other than guarantees, East Asian countries earlier this year proposed an $80 billion currency swap agreement, expanding a much more modest agreement that was set up in the wake of the 1997/98 Asian financial crisis to protect any country facing a balance of payments crisis.

Sources:

AFP, "Asia's richest economies shield savers from financial crisis" in the Google AFP website [downloaded on 19 Oct 2008], available at 
http://afp.google.com/article/ALeqM5hY5ZD58IRoCD1Ug8HHZ3C6ZyrWlw

Bello, Walden, "All Fall Down: The Asian Financial Crisis, Neoliberalism and Economic Miracles" dated 30 July 2007 in Japan Focus [downloaded on 18 Oct 2008], available at http://japanfocus.org/products/details/2486







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