The Bank of Thailand has decided to defer implementation of a new law related to guarantees and third-party mortgages that had been set to take effect next February.
Governor Prasarn Trairatvorakul said the central bank on Monday received a proposal for further amendment of a recently amended law covering guarantees, suretyships and third-party mortgages in the Civil and Commercial Code.
The proposal came from the Thai Bankers’ Association, and the central bank will submit comments for the Finance Ministry, which will then forward the matter to the National Legislative Assembly for consideration, he said.
“Amending it further means postponing the effective date until after Feb 11 so that all parties — the Finance Ministry, the Bank of Thailand, commercial banks, the private sector and guarantors — will have enough time to study the matter and be prepared for changes,” Mr Prasarn said.
He said the deferment would also allow further consideration and discussion of effects from the new law so that more prudent amendment could be made that would benefit all parties.
The government originally decided to amend the law to protect the rights of individual guarantors and mortgagors, who are often exploited by banks’ guarantee contracts. Major amendments include a requirement that the guarantee contract clearly specify a guarantor’s obligation in terms of the duration and amount of the obligation.
The advantage is the guarantor’s liability will then be limited, unlike at present when guarantors are often made to agree on unlimited liability through “all money” guarantees. Banks will also put all their effort into pursuing the borrower before proceeding against the guarantor.