Policymakers expect the banking system and the capital market to play a coordinated role in financing a surge in the domestic investment cycle.
A worker puts the finishing touches on a board showcasing an infrastructure project ahead of the opening of the Thailand 2020 exhibition last Thursday. For capital-intensive projects, both banks and the bourse must play a part in raising funds, say regulators. TAWATCHAI KEMGUMNERD
Banks can do their part by lending more to appropriate projects, while the stock market may try harder to accommodate companies wanting to raise funds.
Prasarn Trairatvorakul, governor of the Bank of Thailand, said he expects the two markets to jointly support the foundation of the country's market economy rather than relying too much on one or the other.
Both markets should continue adjusting to major challenges brought on by the new investment cycle, which is spearheaded by the government's infrastructure projects. They should also be prepared for intensified competition in the financial system, he said.
"Thailand is undergoing an economic structural adjustment pushed ahead by the collaboration of the public and private sectors. The change will lift competitiveness, which will have some implications on the financial system," Mr Prasarn told a forum.
He said the banking system will need to prepare liquidity and risk management for long-term financing of large projects by the public and private sectors.
It should also get ready for foreign exchange risk stemming from Thai companies' venturing abroad.
Half the financing for the total 4-trillion-baht infrastructure investment in the pipeline over the next seven years will be borrowings backed by an off-budget bill.
Mr Prasarn urged the government to raise funds from the capital market too, as such a move would diversify risks away from the banking system.
At the same time, the capital market will also become a channel for banks to raise funds for long-term financing through financial instruments such as covered bonds and securitisation.
The central bank's head also said the country must promote long-term savings in the capital market through long-term funds such as provident funds, pension funds and the Social Security Fund.
The longer life of these funds will make the financing more sustainable, he said.
Mr Prasarn also called for the government to dust off plans to set up a National Savings Fund since it can serve as another long-term fund.
Regulators should ensure these funds can invest in a broad range of long-term debt papers and educate investors about the broader choices, he said.
Mr Prasarn said the financing of complicated and capital-intensive infrastructure projects will underscore the importance of foreign-exchange risk management and loan syndication.
For regulators, a key challenge lies in how to improve the competitiveness of the financial sector in the wake of growing foreign interest in using the country as a regional logistics hub, he said.
The central bank and the Stock Exchange of Thailand (SET) have announced to continue its cooperation in promoting domestic customers' investment in the capital market through banks' wealth management units.
SET president Charamporn Jotikasthira said the bourse plans to increase the number of customers investing through banks' wealth management units by 20,000 this year.
This will be achieved by training personnel and promoting sales among online accounts.
"Banks are developing on the universal banking model, which offers comprehensive financial services to serve customers' needs. This is the service model for the global banking system," said Mr Charamporn.
He said 70% of bank customers who are potential investors have expressed interest in investing in the capital market through banks.