Connect with us

Banking

Thailand’s dangerous debt addiction

Thailand is now a top-ten highest household debt country among 89 countries worldwide and third highest among 29 Asian countries.

Olivier Languepin

Published

on

Thailand’s household debt has steadily increased to 78.6% of the country’s gross domestic products (GDP), or Bt12.8 trillion in the fourth quarter of last year, according to figures from the National Economic and Social Development Council.

A study by the Bank of Thailand reports that Thais get into debt in their 20s and tend to borrow more as they age and the level of their debt is maintained even as they approach retirement.

Speaking at the Bangkok Sustainable Banking Forum 2019 today, Veerathai Santiprabhob, Governor of the Bank of Thailand highlighted several aspects of the potential role of the financial sector in addressing common challenges facing the Thai society, such as income inequality, environmental degradation, excessive household debt, and the persistent problem of corruption.

Thais have more personal debt, as the median average debt obligation for each person doubles from Bt70,000 in 2010 to Bt150,000 in 2016, the Bank of Thailand reported, moreover, almost 16%, or 3 million Thais, have debt payments which are 90-days overdue.

Over the past few years, heightened competition in the real estate sector along with rising property prices, had led to aggressive sales and promotional campaigns by property developers, attracting real as well as speculative buyers. Seeing opportunities in the sector, some banks significantly relaxed their lending standards for mortgage loans, noted Mr Santiprabhob.

Data revealed that as high as 25 percent of new mortgage and related loans originated in 2018 had loan-to-value ratio above 100 percent. Moreover, numbers of homebuyers were getting mortgage credit lines in amounts much higher than the underlying property purchasing values, essentially gaining the extra “cash-back” from their borrowing activities.

Veerathai Santiprabhob, Governor of the Bank of Thailand

This created perverse incentives for individuals to buy homes merely to earn the cash-back, for use on general spending. These increasingly laxed mortgage lending standards by banks have in part worsened the household debt situation in Thailand.

The Bank of Thailand has recently introduced macro-prudential measures to mandate that financial institutions assess each borrower’s ability to repay a loan based on a prudent debt-service ratio.

When financial institutions focus mainly on short-term gains, neglecting the potential long-term effects or negative spillover of their activities, this can in fact increase financial institutions’ risks; risks that can impair their credibility, public trust, and financial positions in the long-run.

VEERATHAI SANTIPRABHOB, GOVERNOR OF THE BANK OF THAILAND

But without better credit culture and internal controls, it will be difficult for the Thai financial institutions to limit the worsening of household debt : trapped in a debt cycle, indebted household often don’t have sufficient financial literacy or spending discipline.

Continue Reading
Advertisement Load WordPress Sites in as fast as 37ms!
Comments

Banking

Thai Baht currency control mulled by central bank

The Industry Minister proposed measures to help business owners, such as the promotion of Thai Baht as a currency for international trade to reduce the risks from US Dollar currency fluctuation

National News Bureau of Thailand

Published

on

BANGKOK, 15th August 2019 (NNT) – The Minister of Industry has held talks with the Bank of Thailand’s Governor over measures to control the fluctuation of Thai Baht currency, minimize impacts faced by SMEs and promote the import of machinery during this time to take advantage of the stronger currency.

(more…)
Continue Reading

Banking

Thailand’s four challenges : Debt, inequality, plastics and climate change

Thais tended to get into debt faster, for longer and for higher amounts. Indebtedness starts as soon as they begin to work at age 25 and can increase until 56 years old.

Avatar

Published

on

Bank of Thailand Governor Veerathai Santiprabhob, in his speech entitled “Formulating for the Future of Corporate Governance”, delivered at the Finance and Beyond National Director Conference 2019 in Bangkok (July 24th), said Thailand faces four challenges that require good governance in businesses to address.

(more…)
Continue Reading

Banking

BOT cuts key rate from 1.75 to 1.50 percent

The Thai economy was expected to expand at a lower rate than previously assessed and below potential due to the slowdown of trading partner economies and global trade

Olivier Languepin

Published

on

For the first time since 2015, the Bank of Thailand cut its benchmark interest rate on Wednesday, by 0.25 percentage point from 1.75 to 1.50 percent, effective immediately

(more…)
Continue Reading

Most Read

Upcoming Events

Sep 19

ASEAN (Bangkok)Toys and Preschool Expo

September 19 @ 10:00 am - September 21 @ 7:00 pm BMT
Oct 16

GovInsider Live

October 16 - October 17
Nov 27

The Future Energy Show Thailand

November 27 @ 10:00 am - November 28 @ 5:30 pm BMT
Dec 05

The Healthcare+ Expo Taiwan

December 5 @ 9:00 am - December 8 @ 5:30 pm BMT

Press Release

Subscribe via Email

Enter your email address to subscribe and receive notifications of new posts by email.

Join 11,079 other subscribers

Trending