BoT eyes higher bank capital reserves

BoT eyes higher bank capital reserves

Outlays in sector must cover lofty risk

The business groups of commercial banks planning to invest in digital asset businesses will have to keep sufficient capital reserves to handle possible risk, according to the central bank.

Bank of Thailand assistant governor for financial institutions policy group Roong Mallikamas made the remark at a seminar on digital assets held by Prachachart Turakij newspaper on Thursday.

As digital asset businesses have high levels of uncertainty, investment in them can cause a significant impact for banks, which have a duty to protect people's deposits. The central bank wants to emphasise consumer protection, she said.

The Bank of Thailand is drafting new rules to supervise bank investment in digital asset businesses, including digital exchanges, digital asset brokerages and dealers.

Banks are allowed to invest up to 3% of their total capital in digital asset businesses.

Banks' holding companies and subsidiaries can invest more than 3% of total capital in digital asset businesses, assuming they prepare adequate capital to handle the risk of such investment, according to the central bank.

If banks or their units invest in digital asset companies and can operate them and control risk in compliance with central bank conditions, the regulator would consider increasing the 3% ceiling on a case-by-case basis, she said.

Mrs Roong said the 3% rate is a suitable level based on the risk and opportunity in the banking business. Large global commercial banks, such as JP Morgan, Citibank, Standard Chartered Bank and BNP Paribas have invested in such assets at an average of 7 billion baht, accounting for 0.43% of a bank's total capital, she said.

On Wednesday, the central bank announced guidelines for digital asset investment regulations governing commercial banks and their business groups. The central bank plans to hold public hearings about the regulations, which are expected to be implemented in the middle of this year.

The central bank in collaboration with the Securities and Exchange Commission (SEC) held a media briefing on Thursday on the SEC prohibition on using digital assets as a means of payment for goods and services.

On Wednesday, the SEC announced a ban on using digital assets to pay for goods and services, effective from April 1, citing concerns over the country's financial stability, risks of cybertheft and losses from currency volatility.

Digital asset business operators and market participants said the SEC's move, though it may have a minimal impact on the fledgling local digital asset industry, will stunt innovation and kill long-term economic gains from adopting such payment systems.

According to the Bank of Thailand and the SEC, digital asset business operators must comply with the new rules within 30 days from April 1.

A lot of business operators have been broadening the scope of digital assets as payment under a partnership model or to expand an ecosystem.

The SEC also plans to hold a public hearing about utility token regulations in May before implementing rules later.

The central bank has been developing Central Bank Digital Currency (CBDC) for retail users and plans to test it in the Bank of Thailand's regulatory sandbox in the second half of this year. CBDC is a digital currency, not a digital asset.



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