Commercial banks compete for deposits amid liquidity squeeze
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Facing a liquidity squeeze, banks continued to compete for deposits last quarter, with four big banks raising their 12-month rates to 2.45 per cent on average from 2.40 per cent in the previous quarter.
Commercial banks’ capital base to risk assets edged up to 16.2 per cent in August and credit to deposits including bills of exchange remained at a high 95.5 per cent, indicating their tightening liquidity, according to the Bank of Thailand.
The third quarter saw some rate rises for major depositors at some banks, while the average minimum lending rate (MLR) was stable at 7 per cent at four big banks.
As of October 22, the average 12-month deposit rate and MLR remained unchanged at 2.45 per cent and 7 per cent.
The capital base to risk assets figure of 16.2 per cent was much higher than the legal requirement, reflecting the banking system’s financial strength.
Deposits of other depository corporations expanded 8 per cent year-on-year in September, but contracted 8.2 per cent month-on-month.
“The slowdown came partly from depositors turning to invest in other assets like equities and bonds even though the competition in deposit mobilisation remained,” the central bank said in its report.
Yields on medium- to long-term government bonds bounced around from July-September on the high possibility of the US starting tapering of asset purchases in September.
However, yields dropped as foreign investors returned to medium- to long-term government bonds after the Federal Open Market Committee unexpectedly decided to maintain the bond purchases at its September 17-18 meeting.
From October 1-22, medium- to long-term government bond yields fell in line with US treasuries on concerns over the US’ fiscal problems including the federal government’s shutdown and negotiations over the US debt ceiling extension.
