Fixed Deposits Are Insured

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I take your point guys and maybe the Malaysian Government needs to be nudged on this issue...maybe a proviso to guarantee the Visa remains if the Malaysian Bank lost the money in RM's.

I think if Global HSBC went belly-up the world would be facing bigger problems than I would with my FD disappearing.

David

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hi,

I think that after the banking shocks of the past 2 years then keeping any money in a bank is now an act of faith rather than a sensible business decision. On all the money-related websites that I read the informed advice to the layman is to keep only up to a guaranteed amount in any 1 bank.

With the expiration of the Malaysian government's guarantee in December 2010 and a PIDM limit of RM100,000, it's not a happy situation for the carefree retiree. I think that I'll email around the authorities and see if anyone has any thoughts on this.

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I certainly cant see myself doing it, depositing 500,000 for under 50's or even 300,000 for overs so as to earn a whopping 2.5% , No thanks

I am trying to make money so as to spend it in Malaysia during my retirement years
Not go backwards.

If, as some say it is the price of getting a 10 year visa, well tell me what the "actual" price is and I'll pay it, but seeing my hard earned retirement funds slowly whittled away in a poor performing bank account is not for me.

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hi, breathless,

You've got the figures wrong.

The FD for under 50's is RM300,000.

The FD for over 50's is RM150,000.

However when you make the application the authorities want to make sure that you've got sufficient general funds to support yourself for the 10-year period in Malaysia. Funds in excess of RM500,000 (for under 50's) and RM350,000 (for over 50's) are needed. But they're your funds that are used to support the application, and nothing to do with the later FD's. (Although you'll probably get the FD from these funds.)

Support funds as at 14th March 2009

You can use part of the FD for housing, education and medical expenses. RM150,000 of the RM300,000 can be used. RM50,000 of the RM150,000 can be used.

So you could end up with FD's of RM150,000 or RM100,000 earning 2.5%.

My FD is RM100,000 and it doesn't worry me that I'm only getting 2.5%. I bet next year it'll be about 3.5% and anyway my RM100,000 cost me US$26,315, and now it's worth US$31,250. And I've had loads of visa years.

Changes : 1st April 2009

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hi, breathless,

You've got the figures wrong.

The FD for under 50's is RM300,000.

The FD for over 50's is RM150,000.

Happens sometimes, Sunday arvo, a few beers

But the fact still remains that $100k aud @ lets say 3% = 134k at year 10 and at 6% (not unreasonable) its = $181k@year 10

Thats $46,000aud difference or an additional RM138,000

Seems like an expensive visa when you put it on paper and look at the numbers, but I realise cost of living is lower so it balances out plus some.

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If you leave your money in AUD you implicitly take the view that AUD rates stay high, AUD inflation stays low, etc... This is not a given.
On a risk adjusted basis the FX market is fair. It's really then about avoiding any large spreads or fees. This is the part we have control over.

For interest rates the story is similar. Basically it's for us to find a bank that pays a rate close the benchmark. What the benchmark rate is, we cannot control. We can only control small things like the term and to optimise the structure(every FD less than 100,000 to minimise reporting).

And you can always cancel the FD and visa and walk away. So even though it's tied up. It's not really tied up.
Having said that, it'd be good to hear a case where if a MM2H visa holder passed away that his heirs were able to reclaim the FD.

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hi,

. . . And you can always cancel the FD and visa and walk away. So even though it's tied up. It's not really tied up.

Nicely put.

. . . Having said that, it'd be good to hear a case where if a MM2H visa holder passed away that his heirs were able to reclaim the FD.

I imagine that because of the lien letter the banks won't release the FD without confirmation from Motour that the visa is cancelled. A death certificate would be a pretty good reason for cancellation. The FD would then be part of the estate and subject to probate. I'm no lawyer but I guess this is what happens.

I've made a will in Malaysia, using a Malaysian lawyer, for disposal of all assets held in Malaysia. Assets elsewhere aren't included.

Check out : Wills

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If you leave your money in AUD you implicitly take the view that AUD rates stay high, AUD inflation stays low, etc... This is not a given.
On a risk adjusted basis the FX market is fair. It's really then about avoiding any large spreads or fees. This is the part we have control over.

I'm not a leave the money in the bank" kind of guy anyway
I would be making it work a bit harder, for example when the boat is out of the backyard I could put a removal house in there for around $100k and rent it out for between $350 and $400/week .(thats approx a 19.5% ROI gross)
I have done this before on other properties that I have in other areas.

If it was really about guarantees of self sufficient while living in Malaysia I would think you should be allowed you to put your money into an asset class that actually produces income instead of one that does little.
As long as proof is provided of these assets and income, what difference does it make?
Why does it have to be money held hostage in the bank benefiting only the bank?

Pointless rant anyway,the rules are the rules

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What is interesting is that the PIDM guarantee of RM60,000 covered the residual amount that MM2H visa holders needed to leave in the FD once approved expenses were taken out. However the residual amount has now been raised to RM100,000.

Maybe the PIDM limit will be raised? It needs tracking to see what happens.

regards, Scott

Your wish is now being fulfilled when the Prime Minister announced this today. This news will appear in tomorrow Star papers.


Published: Tuesday May 11, 2010 MYT 4:28:00 PM

PM: Fixed deposits to be insured up to RM250,000 by 2011

KUALA LUMPUR: Prime Minister Datuk Seri Najib Tun Razak announced Tuesday increased financial consumer protection whereby deposit insurance limit will be raised to RM250,000 effective 2011 from the current RM60,000.

The Finance Ministry, in a statement here Tuesday, said the prime minister intended to advance a package of legislative initiatives aimed at enhancing financial consumer protection for Malaysians.

The ministry said Malaysia Deposit Insurance Corp (PIDM) would bring forward legislation to enable the government to increase the deposit insurance limit.

“The plan is for this package to be tabled in Parliament for debate and enactment before year-end,” it said.

“This demonstrates the government's continued commitment to enhance financial consumer protection for Malaysian and to promote continued public confidence in the financial system,” it said.

It said since the temporary government deposit guarantee would lapse as scheduled at the end of this year, the enhanced protection package would continue to provide increased protection to depositors.

“With this new limit, 99% of depositors will be protected in full,” it said.  - Bernama

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hi, ypchoon,

Many thanks for that, it's great news. It's one thing going up that I'm sure none of us mind.   

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Hi, was wondering if the specific reference to consumer protection for Malaysians in the quote is significant? Is the idea that this scheme would be applicable only to Malaysian citizens?

“This demonstrates the government's continued commitment to enhance financial consumer protection for Malaysian and to promote continued public confidence in the financial system,” it said.
Thanks
RMG

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hi, rmgthatsme,

I don't think there's much to worry about. The old limit applied to all deposits irrespective of the nationality of the holder. The current blanket guarantee (introduced for the GFC) also applies to all.

Imagine the sudden Foreign Exchange exodus if it didn't apply to foreigners. And there would be a worldwide sneer that Malaysian banks are so dodgy, and the Malaysian government so impoverished, that they can only afford to insure their own citizens' cash. And bang goes Labuan as an international financial centre.   

So I think that you can bet your flip-flops on this one.   

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Somehow the fact that the deposits are insured by a government agency doesn't make me sleep better at night.

Lord knows the FDIC in the US is broke (yes, that's right, they are out of funds as of this year) from all the recent bank failures in the US.  Most US citizens do not know this.  Of course, the FDIC has the ability to borrow more funds from...yes, wait for it....the US Government, which is also technically broke.  Lots of IOU's in the Soc Sec Trust Fund and all that....doesn't make my confidence level rise in the least.

So, perhaps the Malay government is on a more sound footing, financially speaking.  All things considered, if I had the option of making the FD deposit in a bank with 100% reserves (if such a thing existed) and a long history of sound operations, I'd feel much more comfortable than a guarantee from a government agency.

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hi,

Before the 1997 AFC Malaysia had any number of banks. The AFC crisis did a lot of them in, plus the Malaysian government set up an agency to oversee the merging of bad banks/financial houses with better assetted banks. That's how CIMB came about.

So really, Malaysia had it banking bust 13 years ago.

But I agree with you on government agencies guaranteeing funds by having a charge on various financial institutions. As do the thousands of Isle of Man account holders who got run-over when Kaupthing Singer & Friedlander, the Icelandic bank, went iceberg and it was 7/8th underwater to start with.

And the UK government gave them, the account holders, 2 fingers as, technically, the Isle of Man isn't part of the UK - it's part of the British Isles.

And Vince Cable, the current Secretary of State for Business, Innovation and Skills in the British Cabinet, admitted to knowing the sinkability of Kaupthing months before it sank. I remember his comment after the sinking when he said that he didn't make his information public in order to stop any panic. Jeez.

But MM2H comes with these rules. You could choose Maybank, it's got more capitalisation than all the rest combined. Or try Citibank et al.

Barings Bank, the United Kingdom's oldest investment bank, had a long history of sound operations then along came Nick Leeson. Whilst durability is obviously a factor I'd like each bank to publish a greed-index under a new KYB (know your bank) charter.   

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Scott, good data and I accept it gratefully.

I'm aware of the circumstances around the AFC, however I am very conservative financially and expect that the worst is yet to come.   It will not be regional, it will be world wide, so despite the fact that SE Asia has had a crisis, it will not avoid the coming one.  It will start in the US.  So when I look for a financial institution for that FD, it will have to be a very stable bank, preferably with limited exposure to the derivatives peddled by the US banks.