Commercial banks ready for revised law on loan guarantees
Commercial banks are ready to comply with the revised law related to loan guarantees in the Civil and Commercial Code even though it will have an impact on their credit-approval processes and guarantors' liability.
Boontuck Wungcharoen, chairman of the Thai Bankers’ Association, said yesterday that the TBA did not raise the issue of the revised law at a meeting on Monday between the military’s ruling National Council for Peace and Order and 25 businesspeople.
The TBA has discussed with the Council of State the expected impacts of the law after it goes into effect on February 11. Boontuck believes that the commercial banks will be unable to avoid these impacts, including the possibility that loan approvals will be delayed.
"It is hard to say whether loan approvals will be delayed much, because the matter has been discussed in the National Legislative Assembly, of which I am a member. However, the revised law is not expected to influence lending growth, which will depend on the growth of the economy," he said.
Commercial banks must improve their loan-approval processes in order to reduce the impacts of the new legislation on existing borrowers who have guarantors.
The TBA last month proposed to the central bank two amendments related to loan guarantees in the Civil and Commercial Code. One was that banks could undertake debt restructuring without requiring permission from the relevant guarantor, which could reduce the negative impacts of the new code on borrowers. Second, when borrowers and guarantors allow banks to sell their assets by auction, this process should be approved by the Legal Execution Department in order to make it transparent.
While those proposals have not been included in the legislation, the TBA expects the Bank of Thailand to negotiate with the Finance Ministry on implementation of the new law.
At the meeting on Monday, Boontuck informed Prime Minister General Prayut Chan-o-cha that the commercial banks had strong enough capital to support the economy. However, there are many factors that could help the banks become more competitive, such as a new electronics law and a Commercial Collateral Act allowing banks to count receivables as collateral for mortgages.
These proposed laws are under consideration by the Cabinet, and Boontuck believes that if implemented, they would help sustain economic growth for the long term.
Prayut also asked the banks to tone down their promotions of personal loan products while the level of household debt is high, Boontuck said.
He said the economy was likely to grow slowly while the military-led government is concentrating on infrastructure investment.
But eventually, he believes, Thailand will be able to achieve sustainable growth and escape the "middle-income trap".
For now, however, volatility in the financial markets will be a risk for the Thai economy, after the end of quantitative easing in the United States.
Boontuck is also the chief executive officer of TMB Bank, which yesterday officially launched a new mobile application, "TMB Touch".
Boontuck said his bank targeted the number of mobile-banking users to grow by 30 per cent a year.
