Gov’t agrees to fully guarantee all local bank deposits

Wednesday, October 15, 2008
Issue 497, Page 1 & 3
Word count: 487
Published in: Macau Daily Times

By Poyi (Natalie) Leung

Secretary for Economy and Finance, Francis Tam Pak Yuen, announced yesterday that the Macau government would provide a full guarantee for all deposits in local banks and sufficient liquidity or capital support to the banking system with immediate effect until the end of 2010.

However, the Secretary emphasised that the measures were not prompted by any particular local banks facing financial difficulties or being at possible risks, adding Macau’s financial and banking systems were “always sound and stable and strictly monitored by authorities”.

The announcement was made at the Monetary Authority of Macau shortly after similar measures were made known publicly by the Hong Kong government yesterday.

According to Tam, the decision was made “to maintain the stability of the banking system and to minimise external economic impacts on Macau,” adding that “it is to protect the interests of the public, not that of the banks”.

The Secretary said the chance of any local banks declaring bankruptcy before 2010 was “zero”, and even if a bank did close down, its assets “would not become completely valueless”.

Thus, he said it was “very unlikely” that such measures would be executed, but he affirmed that the SAR government had “sufficient resources”, which comprised of the 120 billion pataca foreign exchange reserve assets and the SAR reserve funds, to cover the total bank deposits in Macau.

The total amount of deposits in local banks was 228.4 billion patacas, Tam said, and each individual bank had deposits ranging from one billion patacas to 60 billion patacas.

However, he added that the 40 billion patacas deposited in off-shore banks operating in Macau would not be covered by the government.

The Secretary refused to disclose how much back-up funds in total the SAR government had, but he said that “there is no other government in the world that will have a reserve as much as all its citizen’s deposits”.

Tam added that, however, the public should maintain confidence in Macau’s financial body as “it is nearly impossible that all banks in Macau will close down at the same time”.

On the other hand, the Secretary said he predicted that in the next three years Macau must be affected in response to the global financial turbulence, but the extent would be of “small significance” thanks to the “small scale of the local economy”.

“It is more important now to secure and retain the fundamental structure of the economy,” Tam said, adding “it’s proper to adjust the development pace at this stage and is also predictable that the US investment projects in Macau will be slowing down.”

“It is understandable if foreign investors want to reconsider or re-plan their projects in Macau,” he said.

According to the Secretary, the SAR government “fully comprehends” the conditions of each bank and supervision would also be reinforced.

He urged the public to maintain faith in Macau banks in order to “safeguard the SAR’s financial, economic and social stability”.

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