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Fund-raising takes on new urgency
SOMRUEDI BANCHONGDUANG
Local banks are expanding their deposit bases and considering raising additional funds in anticipation of a possible liquidity squeeze across global markets due to the US sub-prime mortgage crisis.
Kannikar Chalitaporn, the president of Siam Commercial Bank, said the bank was seeking to raise additional funds as a safeguard against external risks such as a possible downturn in the US financial system.
Any sudden shock to the world market would have a certain impact on Thai financial markets, potentially leading to capital outflows and tighter liquidity conditions across the region.
"Capital outflow is a concern, as it could affect Asian market liquidity. The situation is quite unpredictable, and certainly, we're now in the second round of the US sub-prime crisis," Mrs Kannikar said.
The slowing US economy and downturn in housing prices has caused a sharp fall in the value of trillions of dollars worth of securities backed by mortgage assets. International banks have absorbed massive losses and been forced to raise new capital over the past several months as a result.
Markets were severely shaken last week over concerns about the financial health of Fannie Mae and Freddie Mac, two US mortgage finance giants that together hold $6 trillion in assets.
Executives at both Krung Thai Bank and Kasikornbank also agreed that risks have jumped for local banks due to global economic uncertainties.
KTB over the weekend launched a special three-month fixed deposit offering interest rates as high as 6%, while KBank offers a similar rate for its 24-month bills of exchange.
Banks are seeking to mobilise deposits not only to solidify their funding bases, but also to lock in costs in anticipation of further interest-rate increases by the Bank of Thailand. Last week the central bank's Monetary Policy Committee raised its one-day repurchase rate by 25 basis points to 3.5%, and signalled that rates would move higher if inflation continued to rise.
Mrs Kannikar said SCB, the country's third-largest bank, had no need to raise interest rates following the MPC action, as it had adjusted its loan and deposit rates before last week's meeting.
For now, she said, liquidity remained plentiful in the local market and sufficient to support projected sector loan growth of 5% to 6% this year.
"In any case, banks have to become more defensive and exercise prudence in lending considering the economic uncertainties. But overall, lending has not really tightened and remains normal," Mrs Kannikar said.
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