Bangkok Bank hopes broader use of Yuan as settlement currency not too far off

Chartsiri Sophonpanich, president of the Thailand’s largest bank, yesterday said the yuan would eventually play a crucial role in Asia, and the People’s Bank of China was now attempting to make it a settlement currency so as to provide more convenience to traders.
Bangkok Bank at present uses its branches in Shanghai, Beijing, Xiamen and Shenzhen to provide yuan-denominated loans for trade finance between Thai and Chinese customers.
Chartsiri said the Chinese government is developing the financial infrastructure in order to facilitate wider use of the currency in the future.
However, use of the yuan as a settlement currency in Thailand’s cross-border trade with its neighbours could take a while to take off, as the Bank of Thailand is attempting to make the baht the settlement unit for Thai traders engaging in such commerce, he said.
Meanwhile, Chartsiri said his bank was attaching greater importance to retail banking in Thailand in a bid to boost the segment’s contribution to lending from the current level of 15 per cent.
“We are concentrating on housing loans and credit cards, because we believe retail lending has potential to grow and this lending will not present a risk if we set suitable conditions,” he said.
The bank also plans to develop new products to add to the retail loan port
 folio, he added.
With Bangkok Bank’s corporate lending continuing to grow, it might not be possible to lift the proportion of retail loans above 15 per cent soon, he said, adding that the goal is to do so in the next few years.
The proportion of retail lending at other major banks is much higher than at Bangkok Bank, in the region of 30-35 per cent.
Chartsiri acknowledged that the bank had to build brand awareness among local consumers if it wanted to expand its retail loan portfolio.
In a recent meeting with analysts, Bangkok Bank executives said the institution’s retail image was not sufficiently high to induce customer awareness.

RELUCTANCE TO INTERNATIONALISE YUAN
Sompop Manarungsan, president of the Panyapiwat Institute of Technology, said the Chinese authorities were reluctant to internationalise the yuan out of fear that it could appreciate sharply, which would affect the country’s export competitiveness.
To promote the yuan, they also need to allow the free movement of capital, he said, adding that this would require the Chinese to adopt a floating exchange rate, which could open the currency up to attacks by speculators.
“Currently, the People’s Bank of China only has bilateral agreements with other central banks such as the Bank of Thailand, but this strategy will not have much effect,” said Sompop.
They must embrace multilateral agreements in order to truly promote the yuan, he said.
Chinese policy-makers instead currently promote dollarisation, as they have vast reserves of US currency and invest these assets throughout the world, he added.