The Bank of Thailand is preparing an additional measure to help the struggling hospitality and property sectors through an asset warehousing programme.
The new Covid-19 outbreak has caused the economic recovery to be more uneven and depressed fragile business segments, especially small and medium-sized enterprises (SMEs) and the property sector, which has seen an oversupply of condos and a focus on foreign buyers, said Chayawadee Chai-Anant, senior director of the economic and policy department.
The hospitality sector has endured a prolonged slowdown for almost a year, said Ms Chayawadee.
These industries have a lot of property assets and many businesses have used them as loan collateral. Meanwhile, SMEs face difficult access to bank loans, especially during the pandemic crisis as banks have implemented a stronger risk management strategy to cushion against deteriorating loan and asset quality.
These business segments need more financial aid, including additional credit lines and loan guarantees, leading to the roll-out of a targeted measure aimed at assisting each segment directly, she said.
The government, financial authorities and the private sector have been deliberating on an asset warehousing programme to aid SMEs, hotels and the property sector.
Under the concept, asset warehousing would allow business operators to suspend debt repayment and transfer property assets, as loan collateral, to their creditors temporarily within a specific time frame.
Business operators would then be allowed to either lease these frozen assets from the creditors to continue their business operations or let the creditors manage the frozen assets.
A buy-back agreement within a specific time frame would also be embedded as a condition in the asset warehousing programme.
This condition would be based on fair prices and a voluntary agreement of the borrowers and creditors, said Ms Chayawadee.
"The asset warehousing programme would help contain non-performing loans in the banking industry and prevent asset auctions and asset devaluation, along with cushioning the impact on employment," she said.
A banking industry source recently told the Bangkok Post the central bank approved in principle commercial banks setting up a bank-owned asset warehouse to freeze non-performing assets in the hospitality sector. The frozen-asset period would be around 3-5 years.
The government has also considered amending the Bank of Thailand's 500-billion-baht soft loan decree and using 100 billion to fund the asset warehousing programme, said the source.
The prolonged pandemic crisis has caused the revenue of SMEs, hotels and the property sector to dwindle sharply, subsequently making it hard for businesses to generate sufficient liquidity to operate and service debt liabilities.
Despite receiving a debt holiday from financial institutions, interest liability is still a burden.
Ms Chayawadee said the central bank forecasts the number of foreign tourist arrivals to gradually improve in the second half, in line with vaccinations.
Under this scenario, the existing debt burdens of businesses could exceed the loan collateral value, she said.
The first wave of the outbreak in Thailand resulted in a nationwide lockdown, with stringent containment measures that caused business activities at hotels to plunge by 97%. The second wave saw a 58% contraction for hotels, according to Bank of Thailand data.
Passenger transport activities fell by 65% last year before improving to a 20% decline recently, while the property sector saw its activities decline by 28% before recovering to a 10% decrease.