BOT lauds banks' higher awareness of risks
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Cites highest loan-loss provision as credit growth slows
Thailand’s commercial banks remain strong and have the world’s highest loan-loss provision, at 140 per cent of non-performing loans (NPLs), while total credit in the commercial-banking system has been growing more slowly in line with the country’s economic slowdown, according to the Bank of Thailand.
Commercial banks’ combined loan-loss provisioning totals Bt360 billion, ahead of the level for their counterparts in both Malaysia and Singapore.
Salinee Wangtal, BOT assistant governor for the Supervision Group, yesterday said Thai banks’ risk awareness was demonstrated by the relatively sharp rise in their loan-loss reserves.
“Banks look at which types of credit show signs of leading to bad debts, and they set aside capital as provision.
“This has been done for the past two years. Recently, banks have been even more aware, out of concern over possible economic changes that could pose higher risks to some types of credit,” she said.
Commercial banks’ high loan-loss provisioning, which has been praised by Moody's Investors Service, reflects their very satisfactory earnings performance and their high awareness, given that such an amount is not then available to them for funding or other purposes, she added.
Salinee insisted, however, that the increased provisioning was down to increased risk awareness in the current economic climate rather than actual signs of higher NPLs.
At the end of August, total NPLs remained steady at 2.24 per cent of outstanding bank lending, close to the level of 2.25 per cent at the end of last year.
Meanwhile, the level of special-mention loans (SMLs) – or potentially week loans – was steady at 2.28 per cent, compared to 2.16 per cent last December.
Auto hire-purchase NPLs stood at 1.78 per cent at the end of August, compared to 1.4 per cent at the end of last year, due to high credit expansion. Most of the rise came from used-car loans, said the assistant governor.
Auto hire-purchase SMLs stood at 6.85 per cent, compared to 6.03 per cent in December.
“Despite auto hire-purchase’s high SML rate, it is quite normal as borrowers sometimes make late repayments,” Salinee said.
There is no concern as yet based on the central bank’s recent inspection of commercial banks’ lending for auto purchases, she said, as some banks have extended more credit in this segment due to competition.
“There could be some flexibility during a period of high competition, but they [some banks] are currently not so flexible and are taking a more cautious approach,” she added.
Following the inspection, the BOT has been gathering data to prepare a market situation report, which will be sent to the banks for their own assessment.
Commercial banks’ credit was 12.2 per cent higher year on year at the end of August – compared to 15 per cent in the same period a year earlier – due to the slowing economy. However, despite the economic slowdown, lending to small and medium-sized enterprises did not slow, posting growth of 15 per cent in the period.
Lending to large companies rose by just 6 per cent year on year, while retail loan growth – that is, lending to individuals – slowed to 15 per cent, she said.
“We feel relieved by such figures. Particularly, slowing retail credit is in line with the economic situation,” Salinee said.
