Banks ready to shift emphasis after

The Securities and Exchange Commission apparently wants to rein in commercial banks, which had turned to B/Es to top up liquidity amid strong loan growth.

Kris Chantanotoke, executive vice president of Bank of Ayudhya, said yesterday that the move by the SEC would not have a significant impact on BAY’s operations, but B/Es would become less interesting and several banks would likely promote other financial instruments instead.

BAY is among the banks focusing on selling B/Es to retail investors. About 30 per cent of its B/E sales are less than Bt10 million per investor.

The customer group will be narrower than before. B/Es would become a choice for only larger investors and institutional investors.

Special saving accounts and time deposits will return to the fund-raising spotlight, Kris said.

Short-term fixed income and debenture products are also two financial instruments through with banks can mobilise funds.

Banks have to boost their funds aggressively to serve the expected expansion in lending after the massive flood, he added.

Smith Banomyong, executive vice president of Siam Commercial Bank, said the exposure of SCB’s B/E portfolio to the SEC’s directive was minor, so the bank’s operations would not have to change. Most buyers of B/Es are larger investors and institutional investors that are familiar with B/Es and other debt products, Smith said.

B/Es are an alternative for retail investors who want to earn higher returns than on deposits. When the Bt10-million minimum kicks in, SCB will promote a medium-term loan product, debentures and financial instruments that match retail investors’ requirements, he added.

Banks like to use B/Es as a kind of deposit instrument because they are not subject to deposit-insurance premiums of 0.4 per cent like real deposit products, so banks can offer a higher return.

B/Es have become a popular product for individuals, leading the SEC to express concern over the rapid increase in B/Es marketed to small investors.