Deposit withdrawals from GSB appear to be of a manageable size for now. GSB reported that the net amount of the pull-out was around THB20bn on 17 February, while its total deposit base was THB1,724bn (as of August 2013). The withdrawals are related to public skepticism over GSB's new THB20bn credit line to the Bank for Agriculture and Agricultural Cooperatives (BAAC) in support of the government's rice subsidy programme - and motivated by political suasion rather than heightened financial risk. GSB has already indicated that it will cancel this credit line.
We think GSB's liquidity buffers, as well as the scope for policy-driven financial support from the central bank or from other state-owned institutions, should enable GSB to surmount any limited, near-term funding challenges.
One key risk, though not a central scenario, is an acceleration of deposit withdrawals from additional state-owned banks. This could place an increasing burden on inter-bank credit lines, and potentially the central bank.
At the moment, we believe the authorities are able to ward off near-term funding challenges for the state-owned banks. However, systemic risks are skewed to the downside - as a resolution of the political deadlock is not in sight, and the funding of the government's rice subsidy programme remains uncertain.
GSB and BAAC are both backed by acts of parliament, and are likely to obtain high levels of support. They account for 10.6% and 6.1%, respectively, of banking system assets (as of June 2013), and their stability is important for overall confidence across the Thai banking system.