BOT directs local, foreign banks to comply with Basel III

In a statement released yesterday, the BOT said Thai banks’ capital was strong enough to comply with the Third Basel Accord on banking standards immediately.
Starting from January 1, local and foreign banks in Thailand must maintain a capital adequacy ratio of at least 8.5 per cent of risk assets, which is unchanged from the current requirement. For Thai banks, Tier 1 capital must be at least 6 per cent, including a minimum 4.5 per cent of common equity.
The Bank for International Settlements based in Basel, Switzerland, drew up the Basel III rules in light of the 2008 financial crisis.
“Though Thai banks were [only] slightly impacted by the financial crisis and their activities are not exposed to the same risks as their peers in crisis-hit countries experienced, the Basel III capital adequacy rule is in line with the BOT’s main supervisory goals – strengthening Thai financial institutions’ capital and risk-management system, as well as demonstrating Thai institutions’ compliance to international standards,” the BOT said.
Thai banks’ capital adequacy ratio now stands at 16 per cent of risk-weighted assets. In the first three quarters of this year, their combined net profits were Bt135 billion. 
Aside from tougher requirements on risk management that will affect the capital adequacy ratio, the Basel Committee on Banking Supervision also drew up tougher requirements on the leverage ratio.
This will affect banks’ activities as well as liquidity-related risk management.
The Thai central bank said it was studying the regulations and analysing their repercussions before applying them to financial institutions in the Kingdom.