Tuesday, August 11, 2020

Bank of Thailand introduces measures to mitigate non-resident short-term speculation

Jul 12. 2019
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By The Nation

The Bank of Thailand (BOT) has decided to enhance measures to mitigate impact of short-term speculative flows and increase the reporting requirements for non-residents’ holdings of debt securities, BOT’s Assistant Governor for Financial Markets Operations Group Vachira Arromdee said on Friday.

The details of the measures are as follows.

1) Enhance “Measures to Prevent Thai Baht Speculation” by reducing the limit on the outstanding balance of Non-resident Baht Account (NRBA) and Non-resident Baht Account for Securities (NRBS) from Bt300 million per non-resident to Bt200 million per non-resident with effect from July 22. For NRBA and/or NRBS with outstanding balances at the end of the day higher than Bt200 million per non-resident, financial institutions are required to notify the corresponding non-resident account holders to comply with these changes by reducing the outstanding balances within the effective date.

NRBA holders who are non-financial corporates with underlying trade and investment in Thailand, and have opened accounts directly with Thai financial institutions, may submit requests to the BOT for waivers of this outstanding balance limit, which will be considered on a case-by-case basis.

2) Enhance the reporting requirements for non-residents’ holdings of debt securities issued in Thailand where the names of end beneficiaries shall be reported for all non-residents’ holdings of Thai debt securities. This measure will help enhance the BOT’s surveillance of non-residents’ investment behaviours and will come into effect as of the July 2019 reporting period.

The BOT will continue to closely monitor the Thai baht movements as well as non-resident behaviours, and stand ready to use additional measures if undesirable speculative behaviours persist.

Vachira added that the measures address the heightened volatility in global financial market due to various factors, such as trade tensions between the US and major trading partners, the global economic slowdown, and the shift towards a more accommodative monetary policy stance amongst major central banks. These developments have increasingly led capital flows to return to Emerging Market Economies. 

With a relatively more positive outlook on the Thai baht, investors have increased their positions in Thai baht and Thai securities, in part for short-term speculative purposes.

The Bank of Thailand (BOT) has been closely monitoring the Thai baht as well as non-residents’ capital flow movements, and is concerned about the rapid appreciation of the Thai baht relative to its regional peers, as it could lead to unfavorable macroeconomic repercussions.

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