Featured Product

    BOT Announces Measures to Ease Impact of COVID-19 Outbreak

    April 07, 2020

    BOT announced measures to stabilize the corporate bond market and to assist small and medium enterprises affected by the COVID-19 pandemic. These measures are in the form of a six-month loan payment holiday, soft loans, market liquidity enhancement to stabilize the corporate bond market, and reduction in the Financial Institutions Development Fund (FIDF) fee, with an intention to pass on such savings to ease the loan interest burdens on businesses and households. BOT also announced relief measures for debtors, which include credit assistance measures and revisions to rules on loan classification and provisioning. Finally, BOT, along with a couple of industry associations, announced that all member banks and financial institutions have prepared business continuity plans to enable customers to continue to utilize various important services.

    The Cabinet has approved the two Draft Emergency Decrees: one on financial assistance to small and medium-size enterprises affected by the pandemic and the other on provision of liquidity support to stabilize the corporate bond market. These two decrees authorize the BOT to manage liquidity and direct funds to the affected target groups. The decrees also put in place a mechanism that allows the government to indemnify for losses that may arise in the future in connection with these measures. The following are the key highlights of the announced measures:

    • Loan payment holiday for SMEs. SMEs with a line of credit with a commercial bank or a specialized financial institution not exceeding THB 100 million baht are automatically eligible to pause payments of both principal and interest for six months. This payment holiday will not be considered as a missed payment and thus will not impair credit history. During this period, BOT expects financial institutions will work closely with the borrowers to restructure their debts. BOT advises that the SMEs that are in a position to continue servicing the loans should repay their debts as normal. In addition, to further encourage financial institutions to provide liquidity to borrowers, the BOT has temporarily relaxed liquidity-related regulations.
    • Soft loans to support liquidity. BOT will provide soft loans of THB 500 billion at 0.01% interest rate per annum to financial institutions for two years. Financial institutions will then on-lend to SMEs at a concessional rate of 2% per annum. SMEs that are eligible for this measure must be operating domestically, be not listed in the Stock Exchange of Thailand or the Market for Alternative Investment (MAI), have a credit line with a financial institution not exceeding THB 500 million, and still have a performing loan with normal repayment status or arrears of less than 90 days, as of December 31, 2019. The maximum draw down for the soft loan is 20% of the loan outstanding as of end-December 2019. Interested SMEs can apply for soft loans at their banks.
    • Market liquidity enhancement to stabilize the corporate bond market. BOT and the Ministry of Finance are establishing the Corporate Bond Stabilization Fund (BSF) to provide bridge financing to high-quality firms with bonds maturing during 2020-2021, at higher-than-market "penalty" rates. Eligible corporate bonds or issuers must meet a number of criteria; they must be at least an investment grade, have raised the majority of their funding needs through other means such as bank loans or capital increase, have a clear long-term financing plan, and meet other conditions as set out by the investment committee of BSF. In addition, if the issuers simultaneously offer secured bonds to the general public, the bonds that the BSF will invest in must also be secured with collateral no inferior than that pledged on the bonds sold to the general public.
    • Reduction in FIDF fee to ease the loan interest burden of businesses and households. BOT will halve the rate of contribution from financial institutions to the FIDF from 0.46% of deposit base to 0.23% annually for the period of two years. This is intended for financial institutions to immediately pass on such cost savings to businesses and households by further reducing their loan rates. FIDF was established to provide financial assistance to troubled financial institutions and, by injecting funds into a number financial institutions in difficulties, the FIDF ended up holding stakes in several financial institutions, asset management companies, and eventually managed assets and collected debt from bailing out financial institutions.

     

    Related Links

    Keywords: Asia Pacific, Thailand, Banking, SME, COVID-19, Liquidity Risk, Corporate Bond Market, Credit Risk, Loan Moratorium, BOT

    Featured Experts
    Related Articles
    News

    EBA Publishes Standards on Disclosure of Investment Policy Under IFR

    The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).

    October 19, 2021 WebPage Regulatory News
    News

    EBA Updates Filing Rules for Supervisory Reporting

    The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.

    October 19, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Procedures for Collection of AnaCredit Data

    The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.

    October 19, 2021 WebPage Regulatory News
    News

    APRA Finalizes Guidance for New Prudential Standard on Remuneration

    The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.

    October 18, 2021 WebPage Regulatory News
    News

    OCC Updated LIBOR Self-Assessment Tool for Banks

    The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).

    October 18, 2021 WebPage Regulatory News
    News

    TCFD Updates Guidance for Financial Disclosures on Climate Risk

    The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

    October 14, 2021 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel III Framework

    The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.

    October 14, 2021 WebPage Regulatory News
    News

    ACPR Implements Updates Related to DPM Version 3.1

    The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.

    October 14, 2021 WebPage Regulatory News
    News

    EBA Note Examines Transition Risks of Benchmark Rates

    The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.

    October 14, 2021 WebPage Regulatory News
    News

    OSFI to Communicate Next Steps on Climate Risk Policy in Early 2022

    In a letter to the federally regulated financial institutions and pension plans, the Office of the Superintendent of Financial Institutions (OSFI) published a summary of the feedback received to the January 2021 discussion paper on ways to address climate risks.

    October 12, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7568