BOT chair calls for reform of banking laws, lending oversight and capital allocation

Bank of Thailand (BOT) board chairman Somchai Sujjapongse has called for structural reform across Thailand’s financial system, arguing that banking laws, regulatory practices and the allocation of capital must change to support productive businesses and strengthen economic growth.

In a letter to the media reviewing nearly 18 months in office, Somchai linked stalled legal changes, restricted access to credit and weaknesses in policy evaluation to wider problems in how the financial system serves the real economy.

Somchai urged BOT Governor Vitai Ratanakorn to pursue legislative changes and firmer bank supervision, alongside cooperation with ministries, lenders and other regulators.

Somchai presses for broader review of banking laws

Somchai reported that a legal review requested by the BOT board in June 2025 had produced a proposal to amend just one section of the Financial Institution Business Act. The review also covered the Bank of Thailand Act and Currency Act.

 

Since taking office on June 2, 2025, Somchai has advocated modernising laws to accommodate financial technology and remove policy obstacles. His priorities also include efficiency, transparency, governance, clearer communication, staff understanding of the real economy and grassroots communities, and sound management of international reserves.

Somchai criticised an internal review that concluded broader legislative changes were unnecessary. He described concerns about political pressure as reflecting insufficient confidence in the parliamentary system.

A broader review should involve the Finance Ministry, Office of the Council of State, Office of the National Economic and Social Development Council and stakeholders, Somchai argued, with reasons for and against amendments presented to the board.

Somchai acknowledged that his chairmanship gives him no policymaking authority within the Monetary Policy Committee, Financial Institutions Policy Committee or Payment Systems Committee, all chaired by the governor. His recommendations are not binding on those committees.

PIER finds productive SMEs struggle to access bank credit

Research cited by Somchai found that, among the most efficient 30% of businesses, only about one in five small and medium-sized enterprises (SMEs) had commercial bank loans, compared with more than 60% of large companies.

Published by the Puey Ungphakorn Institute for Economic Research (PIER) on August 21, 2026, the study combined corporate financial statements from 1999–2024 with BOT loan-level data. More than 80% of approximately 700,000 companies in the 2024 database had no recorded commercial bank loans, although institutional credit accounted for over half of formal external financing.

Somchai highlighted nearly 17 consecutive quarters of contracting commercial bank lending to SMEs, a situation he described as unique within the Association of Southeast Asian Nations (ASEAN).

PIER found that more than 75% of business lending in 2025 went to about 15,000 large companies. Roughly two-fifths of that large-company lending was concentrated in 25 major corporate groups, known as SiCorp, comprising about 1,000 businesses. Around 110,000 SMEs shared approximately 25% of total lending.

Among highly efficient firms, PIER found small businesses facing interest rates of about 7.8%, against 3.9% for large companies. Separate end-2025 figures put the SME non-performing loan ratio at about 9.0%, compared with 1.3% for large businesses.

After accounting for borrower risk and business characteristics, PIER’s model still found smaller firms paying above predicted rates and large businesses below them. However, the model did not capture all bank-specific costs or strategies, so the unexplained gap alone did not establish unfair pricing.

PIER’s broader analysis showed average economic growth slowing from 5.3% in 2000–2007 to 3.7% in 2010–2019 and 2.4% in 2021–2025.

Between 2013 and 2024, PIER found return on assets falling from 8.3% to 6.3%, despite profit margins rising from 6.7% to 7.1%. Revenue per baht of assets declined from THB1.24 to THB0.88, with weaker asset utilisation across manufacturing, traditional and modern services, and property.

Declining efficiency within existing firms was the largest negative contributor in PIER’s analysis, followed by weak new entrants. Capital reallocation failed to improve overall efficiency, while the exit of inefficient firms provided limited benefits.

Somchai urges tighter scrutiny of bank lending

Somchai proposed random inspections of rejected SME applications at banks with unusually high refusal rates. He accused the BOT of excessive deference towards lenders and urged greater use of existing supervisory powers.

While acknowledging SMEs’ credit risks, weak productivity and inadequate financial information, Somchai questioned whether blanket sector exclusions, prolonged assessments and excessive conditions also prevented viable businesses from borrowing. He called for better assessment of firms’ ability to generate cash, while maintaining credit quality and protecting depositors.

Somchai argued that bank profits were not translating sufficiently into productive financing, describing some SME pricing as excessive and favourable large-company rates as a form of subsidy.

Banks’ preference for large-business lending, bonds and equities also drew Somchai’s criticism. He proposed considering additional costs for banks earning returns on surplus liquidity through the BOT’s repurchase, or repo, market.

Somchai criticised delays to Your Data/Open Data, Data Bureau and SME Credit Portal. SMEs Credit Boost and SMEs Secure+ were necessary, he argued, but their lending totals could not establish that the wider contraction had been resolved.

Cooperation should involve the finance, industry and commerce ministries, banks, specialised financial institutions, the Thai Credit Guarantee Corporation, Office of Small and Medium Enterprises Promotion, Department of Business Development, Securities and Exchange Commission and Stock Exchange of Thailand, Somchai proposed.

PIER’s researchers recommended better use of credit records, alternative data and verified trade information; government or trading-partner guarantees priced according to risk; rates reflecting borrower risk; greater competition and funding options; and monitoring unusually low rates that could conceal financial vulnerabilities.

Somchai calls for clearer evidence of policy results

Somchai gave Vitai an overall passing assessment but questioned the effectiveness of some measures. He recognised stronger attention to growth while maintaining stability, clearer communication and targeted responses to debt, SME credit and illicit funds.

Somchai nevertheless urged greater willingness to pursue legal changes, address banks’ lending practices and prioritise problems the BOT already had tools to tackle.

Somchai questioned figures presented by the governor on October 29, 2026. Compared with January, the BOT reported declines of more than 57% in the value of cash withdrawals covered by its measures and more than 85% in relevant physical-gold withdrawal transactions.

Somchai asked whether transactions below reporting thresholds had increased through splitting, known as structuring. Previous Anti-Money Laundering Office cases demonstrate that structuring occurs, but do not establish that it caused these particular declines.

Falling transactions above reporting thresholds do not establish an equivalent reduction in all cash withdrawals or illicit money. The BOT’s reported gold decline also requires clarification on whether it measures transaction numbers, weight or value.

Somchai pledged to report on progress again after completing two years as chairman. 

Source: Thansettakij, Bangkokbiznews