BoT pushes liberalisation under new plan

BANKING

Thailand's new financial master plan will offer greater opportunities for foreign banks, says Bank of Thailand governor Tarisa Watanagase.

New specialised financial institution categories will be set up and commercial banks will be given more flexibility in their business operations, she added.

The central bank's second financial-sector master plan would gradually liberalise the sector from 2010-14.

The first master plan, from 2004-08, aimed to improve the efficiency of, and public access to, financial services. The second will focus on reducing funding costs to support growth while increasing flexibility to cope with market volatility.

Liberalisation will be split into three stages. Phase one, from 2010-11, will focus on increasing the competitiveness of Thai commercial banks. Local banks will be encouraged to merge, while bank regulations will be revised to allow for an orderly exit in case of crisis.

Banks will also have free rein to open branches, providing they comply with ratings criteria and demonstrate risk management and internal controls.

Commercial banks will also have flexibility to expand to other financial services, such as asset management.

From 2012-13, the central bank will allow greater competition within the sector, starting by allowing foreign banks to open up to two branches in addition to their head offices.

Retail commercial banks - a category that covers institutions such as Land and Houses Retail Bank - will be allowed to upgrade to full bank licences if their tier-one capital exceeds 10 billion baht.

The second phase will bring licences for services such as microfinance, trusts, Islamic finance and investment banking.

Foreign banks operating in Thailand may also apply to change their legal status to bank subsidiaries with the capacity to open up to 20 branches and 20 ATMs. Foreign bank subsidiaries must maintain minimum tier-one capital of 10 billion baht and pass criteria on ratings and risk-management practices.

In the third phase from 2014, regulators plan to focus on Thailand's regional presence and Asean economic integration.

The central bank has no plans to offer new universal banking licences, seeing the current 15 banks as enough for the country's needs.

Regulators said the new plan maintained broader goals of improving small business and public access to financial services and expanding asset types permitted for use as collateral. About 10% of the population is estimated to lack access to mainstream financial services.

Finance Minister Korn Chatikavanij said interest margins would be one measure the public could use to judge the plan's success. Bangkok Bank, the country's largest bank, currently offers savings deposit rates of just 0.5% against prime lending rates of 5.875%.

Despite flat loan growth in the first half of the year, Thai banks generally continued to post strong profits in terms of both interest and fee-based income.

Mr Korn said the capital market would also be liberalised, with new securities licences offered to increase competition.

Regulators hope the eight-step development plan for the capital market will help expand its size to 130% of GDP by 2013 from 86% in 2008, while increasing the investor base and facilitating the use of equities and bond markets as funding sources for local companies.

Currently, just 2.4% of the population invests in mutual funds. This is projected to double to 5% by 2014 under the plan.

Relate Search: Bank of Thailand, Tarisa Watanagase, Land and Houses Retail Bank, Korn Chatikavanij