State banks could see capital adequacy ratios decline, BOT warns
Play
ALTHOUGH the state-run specialised financial institutions (SFIs) have high coverage ratios, their capital adequacy ratios (CARs) could decline from supporting more policy-loan projects.
This is the first year that the SFIs will be regulated by the Bank of Thailand, after being transferred from the Fiscal Policy Office of the Ministry of Finance, which continues to represent the state as the shareholder. The State Enterprise Policy Office (Sepo), meanwhile, is in charge of policy guidance.
Tongurai Limpiti, deputy BOT governor for financial institutions’ stability, said all of the SFIs except the Small and Medium Enterprise Development Bank of Thailand (SME Bank) and Islamic Bank of Thailand had strong capital, so the central bank was not worried about their ability to comply with the regulations.
The BIS capital ratio of the SFIs averages 11 per cent, higher than the BOT requirement of 8.5 per cent.
“We use Basel II as the framework to regulate SFIs, unlike commercial banks, which are under Basel III,” she said.
The BOT has had several discussions with the FPO and Sepo over the role of state banks, and the central bank will not strictly regulate the SFIs because they are obligated to perform in line with the assignments given them by policymakers.
However, BOT has pointed out to the FPO and Sepo that the CAR ratios of the SFIs could decline if they keep lending at the current pace under the government’s low-interest policy-loan projects.
She said the two offices were told that the BOT should oversee SFIs in five key risk areas, namely credit, markets, liquidity, operations and legal issues.
In the legal area, some of the business of SFIs involved organisations such as the Securities and Exchange Commission and the Office of the Insurance Commission.
She said the BOT would concentrate on credit risk and operational risks. Credit risk should have good analysis to comply with the type of transactions undertaken, while the state-owned banks should comply with good governance in their operations.
She said the BOT has no concern over liquidity risk.
BOT Governor Veerathai Santiprabhob last week noted that SFIs had different missions and several roles, and some could accept deposits but some could not. Some of the state banks have a role in supporting government policies, so the central bank will help them manage risk and makes sure regulations do not pose any barrier to those operations.
