BoT allays deposit run concern
Surplus liquidity a strong buffer
The central bank insists it is not worried about a possible deposit run after pro-democracy demonstrators called for a boycott of a commercial bank.
Given the existing surplus liquidity of the banking industry, there has not been significant withdrawals in the banking sector, said Tharith Panpiemras, senior director of banking supervision and risk assessment at the Bank of Thailand.
Thousands of youth-led protesters staged a big rally in Bangkok on the weekend to press their demands, including a call for people to withdraw deposits from SET-listed Siam Commercial Bank, 23.38% of which is held by the monarchy, according to the Stock Exchange of Thailand's data.
According to Mr Tharith, the commercial bank reported the issue to the central bank, which is monitoring it.
Money circulates in the financial market through both deposits and lending. For withdrawals from one financial institution, money could go to other banks and be routed back to the original bank via an interbank loan, a normal financial mechanism.
As of June, the liquidity coverage ratio of the commercial banking industry was 183%, about one time higher than the central bank's requirement.
At the same time, the central bank has already asked commercial banks to run stress tests in preparation for uncertainty the next three years related to the Covid-19 pandemic. The Bank of Thailand has not shown any concern about liquidity.
According to Mr Tharith, Thailand's financial stability is quite strong with an existing BIS ratio of 19.2% for the commercial banking sector.
One commercial bank issuing additional tier-one capital (AT1) adds a cushion, while another bank announced it is cancelling its stock buyback scheme, he said. There are also several instruments to strengthen buffers depending on a bank's strategy and the financial cost of each.
Recently Bangkok Bank issued AT1 worth US$750 million, offering a coupon rate of 5% per year to strengthen the tier-one capital base.
Meanwhile, Kasikornbank announced a decrease in paid-up registered capital by writing off unsold repurchased shares totalling 23.93 million shares.
In a related development, the central bank on Monday debuted the Data Regulatory Impact Assessment (RIA) project to improve big data analytics. Updated and clearer data will support the regulator's policymaking, with more accuracy and speed in line with the digital era.
Wanpracha Chaovalitwongs, the senior director of the central bank's data management and analytics department, said it developed a big data analytics system from 2019 in preparation for commercial banks' data transformation.
Under the Data RIA project, the central bank creates regulatory data transformation to improve the information reports of commercial banks and the data analytics of the Bank of Thailand to international standards, in line with the existing data collection of banks. The development lowers banks' operational costs, said Mr Wanpracha.
On average, the cost-to-income ratio of the commercial banking sector is 45% and it is expected to decline to 40% over the next several years.
The project's data guillotine sees the central bank cancel out-of-date data collection and hard-copy data.
He said the central bank scheduled a discussion with commercial banks about the new information report model starting in October, with implementation expected in late 2021.