'Graft threatens growth'

Following discussions yesterday with Fitch Ratings, Kittiratt agreed with the agency that lowering corruption in the public sector could boost the Thai economy, while saying that the government will improve the standard of living of civil servants to lower the possibility of corruption. “Most people see corruption as coming only from politicians. Actually, we have to tackle corruption from [state] officials working with people, too,” he said.

After discussing the government’s one-and-a-half year administration with Fitch Ratings, he explained the country’s future direction, particularly the Bt2-trillion infrastructure project that aims at long-term economic growth.

“The government does not intend any injection [of funds]. Tourism generates income for Thailand and also plays a vital part in the country’s economic balance,” Kittiratt said. 

The government will attempt to accelerate its expenditure to boost the economy, he said. 

Meanwhile, the global credit rating agency, Moody’s Investors Service, recently surveyed Thai commercial banks for its evaluation report to be launched soon, even as the Bank of Thailand expressed confidence in the high provisions and strong capital base of Thai banks.

Ruchukorn Siriyodhin, the BOT’s assistant governor for Financial Institutions Policy Group, said that Moody’s, in the past two weeks, had met the Thai central bank and asked for information pertaining to commercial banks in Thailand. 

Moody’s is expected to launch a Thai financial institutions report soon.

“Usually, Moody’s releases reports twice a year. The March report concerns countries. The August/September report relates to banks. There may not be particular concerns this time, given general questions,” Ruchukorn said.

Thai commercial banks have a strong capital base with high provision for doubtful debts and periodic stress tests, she said. The stress tests take the easing of the US stimulus into account. 

The BOT has informed all commercial banks to prepare credit valuation adjustment risk (CVA risk) for derivatives transactions, based on Basel III or Basel III CVA requirements, according to a BOT source who did not want to be named. 

It was insufficient for damages that may arise from over-the-counter derivatives if commercial banks hold capital adequacy for credit default risks only,” he said. 

The CVA risk report will be made with information at the end of June, September and December 2013.

In response to Moody’s concerns about the assets of commercial banks in Asia and the downgrading of three Singaporean banks’ outlook, Ruchukorn said that commercial banks in Singapore differed from those in Thailand. Singaporean banks earn income from a broader base, while Thai banks generate domestic income, she said.