Bank of Thailand foresees no surge in bad loans

Bank of Thailand foresees no surge in bad loans

The capital positions of Thailand's commercial banks will remain strong and the latest measures to bolster their buffer will be good for the long term, the central bank said on Monday.

The Bank of Thailand (BoT) on Friday asked lenders to prepare capital management plans for the next 1-3 years and suspend 2020 interim dividend payments and share buybacks.

That sent banking shares tumbling on Monday on concerns about the health of the sector.

"Financial situations remain strong but we still want them to get stronger for handling problems over the next 2-3 years," Deputy Governor Ronadol Numnonda told a news briefing.

The banking system's capital adequacy ratio is currently high at 18.7%, compared with the BoT's requirement of 12.5% and against a legal minimum requirement of 8.5%, he said.

The measures will help assess banks' capital levels post-Covid-19, Mr Ronadol said.

The stress test results will be known in late July, he said, adding that capital raising may not be a bad thing as it would make banks stronger and able to lend more.

The BoT will ensure bad loans at banks will not surge, like what happened during the 1997-98 Asian financial crisis, when non-perform loans (NPLs) hit 50% of lending, Mr Ronadol said.

NPLs stood at 3.05% of lending at the end of March.

Fitch Rating said the measures would help banks "maintain the necessary resources to support their lending activities and absorb credit losses, during this economically fraught period".

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