BoT studies warehousing concept

BoT studies warehousing concept

Banks to sell asset management loans

The Bank of Thailand has been studying a warehousing concept that allows commercial banks to sell commercial loans parked in funds of asset management companies at prices acceptable to both the creditor and borrower.

Given the difficulties amid the Covid-19 crisis, some businesses have had to temporarily close and wait for economic conditions to return to normal before they can reopen.

With this scenario prevailing, the central bank has been studying a warehousing concept where it provides an opportunity for commercial banks to sell commercial loans that have been frozen in funds of asset management companies, said Ronadol Numnonda, deputy governor for financial institutions stability.

The central bank, however, has not finalised conditions of the model yet as this needs to be discussed with relevant parties. The regulator expects the conditions of the warehousing concept to be concluded by year-end.

The warehousing concept could allow the setting up of either a new asset management fund or the use of an existing asset management company to manage the sold-out assets.

The regulator is also studying fund mobilisation and the business model of such asset management funds. Under international standards, warehousing can manage both good and bad assets.

Basically, asset sales and pricing need to be acceptable for both the creditor and borrower.

The central bank aims to apply this concept to any sector apart from the hotel business in which hospitality assets have been frozen for a while as hotels have been hard hit by the Covid-19 crisis.

"Despite several ideas of such asset management funds, the Bank of Thailand is not concerned about underpricing because assets still have to be classified as performing loans. Therefore, business operators have enough bargaining power, differing from bad asset sales during the 1997 Asian financial crisis," Mr Ronadol said.

There have been several ideas devised for setting up asset management funds by both regulatory bodies and the private sector.

Besides the Bank of Thailand's warehousing concept, capital market participants are also studying an asset management model.

The Joint Standing Committee of Commerce, Industry and Banking has also proposed the government set up an asset management fund to manage assets of the hotel business following a heavy blow dealt to the tourism industry by the coronavirus outbreak.

Private companies, both local and offshore, are also planning to set up asset management funds to purchase assets of hotels that are facing a liquidity crunch.

One of them is SET-listed Asset World, a property arm owned by the Sirivadhanabhakdi family, and the other is an undisclosed Singaporean company.

Apiphan Charoenanusorn, co-president of Siam Commercial Bank (SCB), said the bank is waiting for a clearer model and conditions of the central bank's warehousing concept before making any decision on asset sales.

Around three to four hotels, which are SCB customers, have decided to close permanently because of the impact of the pandemic.

Some 350 customers of SCB operate hotel businesses, racking up outstanding loans of 16 billion baht.

Around 80% of total hotel clients have sought debt-relief measures under the central bank's first-phase debt relief scheme, whereas 10% have managed to exit the programme.

Meanwhile, 70% of total hotel clients have continued to receive financial assistance for the second-phase debt relief measures such as a grace period for debt repayment, loan maturity extension and additional credit line offering on a case-by-case basis.

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