Banks pushed to be more competitive
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New foreign counterparts will be invited to step in
The Bank of Thailand is whipping up competition in the industry to toughen up local players so that they can cope with the Asean Economic Community.
“From 2013-14, we will invite new foreign banks to step in. We are relatively confident that our banks are strong in our area and should strengthen more by enhancing competition,” Krirk Vanikkul, BOT deputy governor for Financial Institutions Stability, said yesterday.
Under Phase 2 of the central bank’s Financial Sector Master Plan, the BOT is accepting applications from last Tuesday until December 30 from foreign banks that want to form banking subsidiaries.
According to the blueprint for the industry, from 2010-11, foreign banks were allowed to prepare for participation and from 2012-13, existing foreign banks were allowed to set up subsidiaries with licences. This year, licences will be awarded to five banks.
Local commercial banks were resilient because they are stuck with traditional banking, mostly lending, and served the real business sector.
“Banks do not create CDOs [collateralised debt obligations] or CDS [credit default swaps] for those who come for speculation. Rivalry is good as it strengthens everyone’s competitiveness,” he said.
The issue presently is household debts. The central bank has asked banks to disclose their interest rates for residential purposes clearly to their customers.
“Partly, they may not understand the rate structure. For example, the first-year rate is zero and the second-year rate is 3 per cent. The rate is floated in the third year.
“Customers do not understand the actual figures. We want banks to point out what is the actual amount per year that customers have to pay throughout the loan period,” he said.
