The Bank of Thailand (BOT) issued a statement in context of the lowered credit ratings of four Thai commercial banks by S&P Global Ratings. The central bank is also revising the guidelines for supervision of financial business groups of commercial banks doing digital asset business and published a summary of responses to the proposed policy framework for repositioning the financial sector for a sustainable digital economy.
Below are the key highlights of the aforementioned developments:
- With respect to the lowered credit ratings of four Thai commercial banks by S&P Global Ratings, BOT notes that provisioning at THB 890 billion in the banking system is equivalent to 1.6 times of nonperforming loan (NPL) Coverage ratio and that it is adequately monitoring the loan quality and financial position of banks. Moreover, BOT has required regular stress tests on banks’ capitals (between 2021 and 2023) and found that the Thai banking system remained resilient and able to withstand future risks and uncertainties. Going forward, the continued recovery of the Thai economy from the pandemic will help improve income and debt serviceability of borrowers as well as the loan quality of banks.
- The revisions to guidelines for digital asset businesses of banks eliminate the investment ceiling in fintech businesses from the previous ceiling that was set at 3% of the capital. Banks are not allowed to operate the digital asset business directly while the introduction of new products, especially high-risk digital assets, has to be done with caution. As per this recent communication, "BOT will issue a draft criteria for public hearing on the BOT website before issuing relevant regulatory announcements within the first half of 2022."
- The responses to the proposed policy framework on reposition of financial sector mostly agreed with its guiding principle and the three policy directions following this principle; these are leveraging technology and data to drive innovation via Open Competition, Open Infrastructure, and Open Data; managing the transition toward digital economy and sustainability; and shifting from stability to resiliency in terms of supervisory framework and safeguarding the financial system from emerging risks. The respondents suggested that BOT should quickly provide clear guidelines on the three directions, specifically for, among others, permissions to set up a a virtual or digital bank, risk proportionality supervisory framework, and the roles of financial institutions in supporting environmental sustainability and their compliance to related standards. BOT will incorporate comments and recommendations to improve the policy directions and guidelines and will subsequently publish directional papers and guideline and directions on open banking policy in the third quarter of 2022.
Related Links (in English and Thai)
Keywords: Asia Pacific, Thailand, Banking, Credit Ratings, S&P, Regtech, Sustainable Finance, ESG, Fintech, Digital Assets, Open Banking, Open Data, Digital Banks, BOT
Hasan leads Moody’s Analytics ESG methodology development. He is expert on carbon transition, nature related risks and is a guest lecturer at ESSEC Business school on sustainable finance.
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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