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Banking

Bank of Thailand steps in to curb recent baht strength

Bank of Thailand accelerates measures to advance the development of the new Thai FX Ecosystem and to limit excessive currency volatilities

Olivier Languepin

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In a press release published on the 20th of November, the central bank’s Monetary Policy Committee (MPC) has expressed concerns over the rapid appreciation of the baht as this affects the fragile economic recovery.

The baht has strengthened by 4.3% against the dollar since the last MPC meeting on Sept 23, third after the Indonesian rupiah (5.3%) and Korean won (5.2%).

The rapid appreciation of the Baht may affect the fragile recovery of the Thai economy. Throughout this, the Bank of Thailand has closely monitored and intervened in the market as necessary to limit excessive currency volatilities.

Bank of Thailand, 20 November 2020

Ms. Vachira Arromdee, Assistant Governor for Financial Markets Operations Group, revealed that the US presidential outcome and the progress of the Covid-19 vaccine development have strengthened confidence in the global economy, resulting in renewed inflows into emerging market economies, including Thailand. 

The MPC voted unanimously last week to maintain the benchmark policy rate at 0.5% to support economic recovery, saying the economy is expected to recover slowly and needs support from the loosening policy interest rate.

In addition, to further mitigate pressures on the currency and to address structural issues in the Thai foreign exchange market, the Bank of Thailand has released additional measures as follows.

1. Allow residents to freely deposit funds in Foreign Currency Deposit (FCD) accounts

And allow free fund transfers between them. This will enable exporters to effectively manage liquidity and foreign exchange risk. It allows residents to conduct FCD transactions electronically, which reduces transaction costs.

FCD accounts may also be used for residents to diversify investment into assets denominated in foreign currencies such as foreign equities and gold denominated in US dollar.

 2. Relax regulations regarding investment in foreign securities

These include increasing investment limits and expanding eligible financial products, in order to expand investment options for residents and enhance portfolio diversification.
               1) Increase investment limit for retail investors from 200,000 US dollar per year to 5,000,000 US dollar per year. Moreover, there is no investment limit in foreign securities through local financial institutions such as brokerage firms and asset management companies.
                2) No investment limit in foreign assets for investors regulated under the Securities Exchange Commission (SEC).
                3) Allow the listing in Thailand of foreign securities such as Exchanged Traded Funds (ETF) that track foreign securities.

 3. Require a Bond Pre-Trade Registration

Prior to investing in Thai debt securities, investors are required to complete a registration process. Pre-registration will upgrade the bond surveillance system which will allow close monitoring of investor’s behaviours and thereby enable the implementation of targeted measures in a timely manner.

Similar registration measures have also been adopted in various other countries such as South Korea, Malaysia, and Taiwan.

Bangkok Correspondent for Siam News Network. Editor at Thailand Business News

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Banking

Standard and Poor’s maintain Thailand’s credit rating at BBB+

The agency is confident in Thailand’s finances, in spite of measures needed to respond to COVID-19, resulting in a deficit for 2020-2021 and hiking state debt.

National News Bureau of Thailand

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BANGKOK (NNT) – Standard and Poor’s credit rating agency has kept its level of confidence in Thailand at BBB+, in spite of COVID-19 turmoil and political unrest, but has noted it is monitoring the situation.

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Banking

Bank of Thailand keeps policy rate at 0.50 percent

The Committee voted unanimously to maintain the policy rate at 0.50 percent to support economic recovery while placing emphasis on more targeted measures.

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The Monetary Policy Committee (MPC) assessed that despite the recent better-than-expected outturn, the Thai economy would recover slowly and need support from the continued low policy rate.

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Banking

Thai banks remain resilient in Q3 2020 but profits declined

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Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. 

Debt relief measures, coupled with revisions to rules on loan classification and provisioning facilitated bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.

Details are as follows:

Capital Fund of the Thai banking system was at 2,959 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.8%.

Loan loss provision remained high with NPL coverage ratio of 149.7%

Loan loss provision remained high at 782.5 billion baht with NPL coverage ratio of 149.7%. Liquidity coverage ratio (LCR) registered at 184.9%.

 In the third quarter of 2020, banks’ overall loan growth stood at 4.6% year-on-year, a slight decline from last quarter at 5.0%. Details on bank loan are as follows:

Corporate loan (64.6% of total loan) expanded at 4.5% year-on-year, but contracted quarter-on-quarter as some large corporates switched their funding source from bank loan to bond and equity issuance. SME loan1 contracted at a lower rate, attributed to the soft loan scheme and a gradual economic recovery.

Consumer loan grew at 4.8% year-on-year

Consumer loan (35.4% of total loan) grew at 4.8% year-on-year, and increased quarter-on-quarter following the relaxation of lockdown measures. In particular, mortgage lending expanded, consistent with an increase in demand for low-rise residential properties from last quarter.

​Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. 

Debt relief measures, coupled with revisions to rules on loan classification and provisioning facilitated bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.

Details are as follows:

Capital Fund of the Thai banking system was at 2,959 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.8%.

Loan loss provision remained high with NPL coverage ratio of 149.7%

Loan loss provision remained high at 782.5 billion baht with NPL coverage ratio of 149.7%. Liquidity coverage ratio (LCR) registered at 184.9%.

Loan loss provision remained high with NPL coverage ratio of 149.7%

 In the third quarter of 2020, banks’ overall loan growth stood at 4.6% year-on-year, a slight decline from last quarter at 5.0%. Details on bank loan are as follows:

Corporate loan (64.6% of total loan) expanded at 4.5% year-on-year, but contracted quarter-on-quarter as some large corporates switched their funding source from bank loan to bond and equity issuance. SME loan1 contracted at a lower rate, attributed to the soft loan scheme and a gradual economic recovery.

Consumer loan grew at 4.8% year-on-year

Consumer loan (35.4% of total loan) grew at 4.8% year-on-year, and increased quarter-on-quarter following the relaxation of lockdown measures. In particular, mortgage lending expanded, consistent with an increase in demand for low-rise residential properties from last quarter.

 Debt relief measures, together with revisions to rules on loan classification and provisioning, have continued to alleviate banks’ loan quality deterioration in the third quarter of 2020. The gross non-performing loan (NPL or stage 3) outstanding was at 513.9 billion baht, equivalent to 3.14% of total loan, slightly edging up from 3.09% in the previous quarter.

Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans was at 7.03%, down from 7.49% in the last quarter.

The banking system recorded net profit of 28.0 billion baht in the third quarter and 130.4 billion baht for the first 9 months of 2020, a decline from last year due to continued high level of provisioning expenses to cushion against potential loan quality deterioration going forward.

As a result, the ratio of return on asset (ROA) declined to 0.52% from 0.60% in the last quarter. The ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) declined from 2.60% to 2.55%, largely due to a decline in interest income on loan.

(1) Corporates with a maximum credit line of 500 million baht with a bank.

>>​Download​​ Press   PDF 

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