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WICHIT CHANTANUSORNSIRI
The second financial master plan, which establishes the sector's development strategy from 2009 to 2013, will effectively ensure that at least 60% of the market will be served by Thai financial institutions, according to Chodechai Suwannporn, director of financial policy for the Fiscal Policy Office.
Commercial banks that are majority-controlled by Thai shareholders must have a market share of at least 60% under the new plan, with foreign banks the rest. Currently foreign banks control around 20% of the market.
Dr Chodechai said the conditions set under the financial master plan represented a ''safety valve'' to ensure that the financial sector, considered the heart of the Thai economy, would remain in the control of local residents.
The new Financial Institutions Act, approved by Parliament earlier this year, allows foreign shareholders to hold up to 49% of a local financial institution. Holdings of 50% or higher are permitted only with the approval of the finance minister.
Authorities argue that foreign restrictions are required due to fears that foreign banks would focus only on wealthy, urban clients or corporate clients to the exclusion of provincial, low-income residents.
In any case, the Finance Ministry is expected to approve the new foreign investments in several banks shortly. Malaysia's CIMB has already tendered a bid to take over BankThai, while ING took a 30% stake in TMB Bank late last year. The central bank's Financial Institutions Development Fund also plans to divest its shareholding in Siam City Bank in the near future.
The master plan is due to be completed this month and will be reviewed by the cabinet by the end of the year to take effect in 2009.
The plan allows for the issue of new bank licences, whether to local or foreign investors, to help cover existing gaps in the banking sector or to help increase competition among existing providers.
Niche services, such as microfinance or Islamic banking, are among the areas that authorities believe remain underserved by existing banks. In any case, authorities do not expect to issue any new banking licences until 2013, the last year of the second financial master plan.
The second plan also extends broad development goals outlined in the first plan, including development of small and medium-sized businesses, financial services for low-income groups and extending access to financial services to all residents nationwide.
While Thailand's banks have improved significantly from a decade ago, authorities say that the sector continues to lag its counterparts in other countries, whether it be in terms of interest rate margins, efficiency, profitability or cost-to-income ratios.
Dr Chodechai said the new plan would encourage consolidation among existing players to help improve scale and efficiency.
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