Friday, August 14, 2020

State-banks’ contributions to specialised financial institutions cut to 0.125% for two years

Jul 01. 2020
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By The Nation

In its meeting on Tuesday (June 30), the Cabinet approved the Finance Ministry’s proposal to cut down on state-owned banks’ contribution to specialised financial institutions’ (SFIs) development fund due to the impact the Covid-19 crisis has had on SFIs’ financial standing. 

Government spokesperson Narumon Pinyonsinwat said the Cabinet had agreed to reduce contributions to SFI development funds in order to ease the burden on state-owned banks such as the Bank for Agriculture and Agricultural Cooperatives (BAAC), the Government Savings Bank, the Government Housing Bank and the Islamic Bank of Thailand. 

Currently, these banks pay 0.25 per cent of their deposit base annually to the SFI fund. 

According to the Cabinet’s decision on Tuesday, their contribution will be reduced to 0.125 per cent for this year and next, before they return to paying 0.25 per cent in 2022. 

In its proposal, the Finance Ministry cited the impact of Covid-19 on state-run banks, and this new rate will ease their financial costs. It will also be in line with the central bank’s decision to halve commercial banks’ contribution to the Financial Institutions Development Fund. 

The Bank of Thailand and the Finance Ministry are closely monitoring bad debts in the financial system, which have the potential of rising due to the severe impact the virus has had on the country.

The banks’ contribution is designed to save taxpayers from bearing the cost of government rescue financial institutions should a crisis take place in the future as it did during the 1997 financial crisis.

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