BoT: New regulation won't weaken banks

BoT: New regulation won't weaken banks

Target customer groups are different

The Bank of Thailand's recent requirement for commercial banks to inform it of their customers' total financial obligations when considering loans will not weaken their competitiveness against state-owned financial institutions.

Unlike commercial banks, public banks typically provide financial services to small businesses and low-income workers, said the central bank's deputy governor Krirk Vanikkul.

The central bank doesn't necessarily have to supervise the operations of public banks as long as they act according to their financial obligations, Mr Krirk said.

The central bank issued a notice last week to commercial banks cautioning against unrealistic promotional advertisements on zero-percent interest rates for mortgages. These banks must disclose the effective interest rate in their advertisements and notify the central bank of their customers' financial burden when applying for mortgage loans.

Commercial banks are regulated by the central bank while state-owned financial institutions are under Finance Ministry regulations.

The central bank requirement came after repeated warnings over rising household debt and bubbles in some property areas.

Mr Krirk said state-owned banks are set up to perform different financial operations than their counterparts.

He added increasing competition from international banks entering Thailand will enhance services and productivity from Thai commercial banks.

"I think the Thai banking sector is strong in traditional business services as opposed to creating financial products such as collateralised debt obligations (CDO) and credit default swaps (CDS) to generate profits," said Mr Krirk.

In accordance with the second phase of the Financial Sector Master Plan to liberalise the local financial market, the central bank gave the green light for up to five foreign banks to set up subsidiaries here. The process is expected to be completed by mid-2014, given approvals by both the central bank and the Finance Ministry.

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