BoT gauges dividend suspension decision

BoT gauges dividend suspension decision

Banks' operations and capital assessed

Customers browse financial services at Money Expo 2019. The central bank is assessing banks' stress tests and capital increase plans for the next two years before considering easing the interim dividend payment suspension.
Customers browse financial services at Money Expo 2019. The central bank is assessing banks' stress tests and capital increase plans for the next two years before considering easing the interim dividend payment suspension.

The Bank of Thailand is assessing banks' stress tests and capital increase plans for the next two years before considering whether to relax the interim dividend payment suspension.

The central bank requires banks to prohibit interim dividend payments to maintain sufficient liquidity in preparation for uncertainties arising from the pandemic.

Financial institutions have reported their updated stress tests under pandemic scenarios for this year to the central bank. Results have so far shown a strong capital base and solid cushion for the sector.

With several uncertainties amid the pandemic, the financial regulator requires banks to submit a stress test and capital increase plan for 2021 and 2022 by October this year to affirm financial stability for the next two years, said Tharith Panpiemras, senior director of the banking supervision and risk assessment department at the central bank.

The commercial banking sector showed solid financial status for the second quarter.

As of June, the total capital base of the banking industry was valued at 2.87trillion baht, representing a strong BIS capital adequacy ratio at 19.2%, higher than the regulator's requirement at 8.5%.

The industry also had a solid provision for bad debts at 744 billion baht for a non-performing loan (NPL) coverage ratio of 144% and 183% for the liquidity coverage ratio.

"There is no issue for banks' stress tests this year. The central bank wants to assess the situation for the next two years amid the outbreak. If the capital base of a bank is lower than 12%, we would need a capital increase plan on a case-by-case basis and would also relax the existing prohibition of interim dividend payments," he said.

Mr Tharith said the banking sector managed to contain the NPL ratio at 3.09% from 3.04% in the first quarter, mainly due to the central bank's debt relief measures.

There are 12.8 million borrower accounts receiving debt relief measures, accounting for a total sum worth 6.88 trillion baht. A slight rise in the NPL ratio mostly came about from a large aviation company, he said.

Despite a 12.2% year-on-year economic contraction for the second quarter, the banking sector booked loan growth of 5%, rising from 4.1% logged in the previous quarter.

Total soft loans offered from the central bank, the Government Savings Bank, and the Thai Credit Guarantee Corporation to 130,000 SMEs are worth a combined 223 billion baht.


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