BOT ponders ‘debt warehousing’ to help creditors, debtors through virus crisis
The Bank of Thailand (BOT) is consulting with capital market agencies, the Thai Bankers’ Association and private funds on a new initiative to manage debt.
The idea is to create a “debt warehousing” fund to manage debts owed to financial institutions, BOT Deputy Governor Ronadol Numnonda explained.
The aim is to limit the damage from borrowers unable to make repayments due to the impact of Covid-19.
Their debt will be “warehoused”, or suspended until the virus situation improves, when debtors will be able to buy back their debt and businesses, he said.
The scheme would incorporate a guarantee facility and mechanism to ensure debtors were not forced to sell assets at unreasonably low prices, as happened during the 1997 financial crisis. Under the new scheme, both creditor and debtor would have to agree on prices of any assets sold to pay off the debt, according to Ronadol.
The new scheme is expected to be ready by the end of this year, once participants source the necessary funding. The BOT or bodies such as asset management companies might take the leading role in setting up debt warehousing, he added.
Thailand’s small businesses have suffered severe impacts from the pandemic. Despite signs of recovery, those in the tourism sector continue to suffer as countries around the world impose new lockdowns. However, hopes for the tourism industry were given a boost in recent days by Pfizer and Moderna’s breakthroughs in vaccine development.
