BOT Revises Eligibility Criteria for Regulatory Capital Instruments
BOT revised the eligibility criteria for financial instruments to be qualified as banking capital, in line with the international standards. The amendment aims to support the capital funding of banks via issuance of financial instruments qualified as banking capital. Therefore, BOT is amending criteria for inclusion of financial instruments in Tier 1 capital (Additional tier 1) and Tier 2 capital. The amendments shall come into force from the day following the date of its publication in the Government Gazette.
BOT has amended the regulations on Additional Tier1 (AT1) capital instrument so that issuance banks are allowed to pay interests or other returns to holders without prior approval from BOT, provided that BIS ratio of the bank is higher than the specified ratio as prescribed by BOT. Moreover, this amendment has revoked the clause requiring banks to have the rights to postpone the schedule for payment of interests for Tier 2 capital instrument. In addition, this regulation had been revised to accommodate the implementation of the new Thai financial reporting standard on financial instruments (TFRS 9), which came into effect from January 01, 2020 onward.
BOT has issued the regulations on capital supervision under the Basel III framework, based on the BCBS guidelines. The regulations aim to ensure that locally incorporated banks sufficiently hold good quality capital that can absorb losses during normal and stressed periods and to preserve the stability of the overall financial system. The amendments shall apply to all commercial banks according to the law on financial institution business exception of foreign bank branches.
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Effective Date: Government Gazette + 1 Day
Keywords: Asia Pacific, Thailand, Banking, Regulatory Capital, Financial Instruments, TFRS 9, IFRS 9, Additional Tier 1 Capital, Tier 2 Capital, Basel, BOT
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