3 banks stand to gain from reciprocal pact
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Malaysia-based CIMB Bank and RHB Bank, with their sizeable presence in Thailand, stand to gain from the new reciprocal arrangement of the Thai and Malaysian central banks, while Bangkok Bank will benefit from the new liquidity facility for its branches in
Last week, the Bank of Thailand and Bank Negara Malaysia signed an agreement for a cross-border reciprocal arrangement aimed at boosting liquidity facilities for financial institutions in both countries.
Eligible financial institutions operating in Malaysia may obtain ringgit liquidity from that country’s central bank. A similar arrangement is agreed for financial institutions operating in Thailand.
This arrangement is credit-positive for banks operating in Malaysia and Thailand as it strengthens their liquidity by providing them an alternative to obtaining Malaysian ringgit or Thai baht funding in times of need, Moody’s said in its weekly credit outlook yesterday.
CIMB Bank and RHB Bank “are operating under tighter liquidity conditions in Thailand than at home, which is reflected by the higher loans-to-customer-deposits ratios (LDR) of their Thai operations relative to their consolidated operations,” Moody’s said.
As of last September, overall LDR was 80 per cent for CIMB Bank while the figure for its Thai operations was 110 per cent. RHB Bank’s overall LDR was 88 per cent, compared with 146 per cent for its Thai operations.
CIMB has a subsidiary, CIMB Thai Bank, while RHB, Malaysia’s fifth-largest bank, has a branch in Thailand. Both banks’ deposit bases here are constrained by their limited branch network compared with the four largest local banks.
The liquidity facility provides them with a new funding alternative, reducing their need to rely on interbank funding and putting them in a better position for growth in Thailand.
CIMB and RHB can now pledge their ringgit or ringgit-denominated government securities and obtain baht from the Thai central bank. As of September, ringgit government securities accounted for 3.6 per cent of CIMB’s total assets and 6.4 per cent of RHB’s total assets.
Thailand’s largest lender, Bangkok Bank, has five branches in Malaysia but its limited presence there hampers its ability to gather ringgit deposits and in turn fund credit growth in the highly competitive Malaysian market.
This may help the bank expand in Malaysia and diversify its Thailand-centric operations, Moody’s added.
