Thailand's negotiation of the Trans-Pacific Strategic Economic Partnership Agreement (TPP), which could involve opening up the financial service sector, has rattled Thai banks worried about their competitiveness relative to those in member countries, says Prasarn Trairatvorakul, the governor of the Bank of Thailand.
The central bank envisions a gradual opening up of the banking sector to foreign investors to strengthen the financial sector. Local banks are ready to comply with Basel III, a new international capital accord requiring existing minimum capital of 15%, up from 8.5% now, he said.
Mr Prasarn said Asean countries set a target for banking sector liberalisation by 2020, which is five years later than its framework for integration of trade and investment.
All Asean countries have experienced banks based in other Asean countries opening full branches locally, except for Brunei and Myanmar, though some banks have opened representative offices.Asean central banks are currently negotiating the draft criteria for qualified banks to operate in other countries. Local banks are expected to be ready to operate once liberalisation takes place, said Mr Prasarn.
A key difference between the TPP and the AEC is that members of the AEC have similar levels of development and the agreement is seen as more flexible than the TPP, said Mr Prasarn.
"Thai banks are strong enough to operate in the domestic market in which foreign investors have a greater presence. But they are still at a disadvantage in terms of capital, notably compared with the US, in expanding abroad," said Mr Prasarn.
He said the integration of the Asean banking sector in 2020 would lead to a closer linkage of financial flows among Asean countries, which should help balance the country's capital inflows and outflows and promote the progress of the local capital market.