BOT's money market operations under attack

Chakkrit Parapuntakul, director-general of the Public Debt Management Office, said the Bangkok Interbank Offered Rate (Bibor) in the overnight lending market had risen unreasonably.
It has driven the government’s borrowing costs up by 20-30 per cent over the past few months, which is strange since loans to the government are risk-free.
The short-term rate is also now as high as the long-term rate. For example, Bibor for a six-month loan is 3.2 per cent.
Commercial banks claim that the higher cost is a result of the government’s taxing banks to help pay off the Bt1.4-trillion debt of the Financial Institutions Development Fund, a legacy of the 1997 financial crisis in which the government had to bail out the banks. Taxpayers have been servicing the massive debt ever since, while most banks have enjoyed good financial performance.
Besides, the new fee is only 0.07 percentage point higher than old rate of 0.4 per cent, so it should not add much cost to banks, Chakkrit argued.
State-owned banks raised the same issue to justify their rate hike, but the government has not yet started collecting the fee from the state-run banks.
The Bank of Thailand should be doing something, he said.
“Why does the central bank allow these banks to charge an unjustifiably high rate?” he asked.
The central bank also has been facing rising borrowing costs in the Bibor market.
“We’ll no longer go to the Bibor market but instead we’ll issue three-to-six-month treasury bills,” Chakkrit said.
Or the ministry may sell 10-to-30-year bonds to minimise the cost of funds, he said.