Central bank's net loss shrank to B154bn in 2018

Central bank's net loss shrank to B154bn in 2018

The Bank of Thailand's net loss narrowed to 154 billion baht in 2018 from 271 billion in the previous year, largely due to interest earned from foreign reserve investment surpassing interest paid for the first time in several years.

Net interest income swung back to a profit of 18.8 billion baht last year as income from investing in foreign assets exceeded interest payment cost incurred from managing liquidity and interest in the financial system plus inflation, the central bank said on Thursday.

Net interest income had sat in negative territory to the tune of 15.1 billion baht in 2017, 29.1 billion in 2016, 44.8 billion in 2015, 62.6 billion in 2014, 96.6 billion in 2013, 100 billion in 2012 and 74.7 billion in 2011.

The positive net interest income was due to higher global interest rates, the Bank of Thailand said, adding that the local policy rate is still below the US Federal Reserve's benchmark rate and those of several countries.

The central bank recorded a net loss from foreign reserve management of 95.8 billion baht last year, mostly stemming from the cost of foreign asset purchases exceeding earnings derived from divesting of such assets in terms of baht.

Moreover, the bank posted an unrealised valuation loss of 76.1 billion baht from holding foreign reserves in 2018, as the baht was stronger against major currencies such as the US dollar, euro, yuan and pound.

The baht stood at 32.417 to the dollar at the end of 2018, compared with 32.659 at the end of 2017.

Accounting standards require the Bank of Thailand to record the value of foreign reserves based on baht at the end of every year.

Foreign reserves surged to US$205 billion at the end of 2018 from $203 billion a year earlier. The 154-billion-baht net loss in 2018 brought the central bank's retained loss to 880 billion baht.

The bulk of last year's net loss stemmed from foreign asset revaluation based on baht terms, the central bank said.

"Several central banks posted a loss, and many studies have pointed out that such losses don't have any impact on central banks' ability to implement policy if the central banks can maintain credibility," the Bank of Thailand said. "The BoT still gained trust from markets and investors, reflecting higher demand for its bond issuance than supply."


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