New SFI rules due year-end

New SFI rules due year-end

The Bank of Thailand's regulatory policies for supervising specialised financial institutions (SFIs) are expected to be unveiled in December and take effect early next year.

Policies associated with state-run banks' capital, reserves, risk management, financial disclosure and governance of SFIs are being accelerated to be put into practice after discussions with the SFIs are concluded, said Ronadol Numnonda, assistant governor of the supervision group.

The cabinet approved the central bank supervising SFIs last December after several state-backed banks were saddled with high bad loans due to imprudent lending.

Ronadol: SFIs to follow Basel II accord

Section 20 of the Financial Institution Business Act of 2008 must be amended to allow the central bank to enforce penalties or resolve the financial position for SFIs, Mr Ronadol said.

The law now only allows the central bank to supervise these institutions.

The eight SFIs are the Government Savings Bank, Small and Medium Enterprise Development Bank of Thailand, Bank for Agriculture and Agricultural Cooperatives (BAAC), GH Bank, Thai Credit Guarantee Corporation, Islamic Bank of Thailand, Export-Import Bank of Thailand and Secondary Mortgage Corporation.

Mr Ronadol said regulations on SFIs' banking capital and related risks would be adopted based on the Basel II accord.

Commercial banks are required to meet the tougher standards of the Basel III, he said. 

Mr Ronadol said loan quality would be classified in line with the business operations of each SFI.

For instance, loans provided to BAAC customers, who are mainly farmers, will not be categorised based on loan age, as many farmers can repay their debts only after harvesting their crops, he said.

Mr Ronadol said loans provided to small and medium-sized enterprises would also not be classified by age.

These companies are too vulnerable to economic problems and liquidity, he added.

Commercial banks typically classify based on ageing criteria.

Loans overdue for 30-90 days are defined as special mention, while those more than 90 days late are non-performing.

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