Local banks worry about Basel III

Thai Bankers Association secretary-general Twatchai Yongkittikul said local banks had voiced their worries to the Bank of Thailand and this issue was also being discussed among financial institutions in the region.

The association is working with banks in region to pressure the Basel Committee on Banking Supervision to review some requirements of Basel III, which would require banks to increase capital adequacy. The association argues that the regulations should strengthen the banking industry, not increase its costs. 

Twatchai said banks had no need to increase their capital adequacy in the near future, but should make plans to do so to comply with Basel III, especially the Tier I ratio, which must be 10.5 per cent. The increases in capital should be gradually made and should not have an impact on customers or stakeholders. However, the large increase in capital under Basel III would affect bank stocks and cut return on equity, he said.

Moreover, some Basel III regulations would have an impact on banks’ accounting procedures.

Earlier, some banks in the United States and Japan declined to comply with Basel II as they learned some rules were not helping them manage their operations, he said.

The Thai Credit Retail Bank is planning to increase its registered capital by Bt1 billion from Bt1.6 billion to prepare for microfinance expansion. Twatchai said this bank would not be affected by the new rules and had no need to increase its capital much because its Tier 1 is already 13 per cent, higher that the Basel III requirement.

He said Thai Credit Retail Bank was talking with foreign partners on sale of a 25-per-cent stake. Major shareholder Thai Life Insurance would reduce its stake to 75 per cent from 100 per cent stake currently.

The bank is seeking foreign partners familiar with the microfinance business. After finding partners, it plans to list on the Stock Exchange of Thailand and upgrade to a commercial bank by next year.