Bank of Thailand greenlights new JV AMC with expanded access for non-banks to tackle bad debt
The Bank of Thailand approves new guidelines allowing non-banks to invest in asset management joint ventures to manage bad debt and support economic recovery.
Rung Mallikamas, Deputy Governor for Financial Institutions Stability at the Bank of Thailand (BOT), revealed that the BOT has approved new guidelines to promote the establishment of joint ventures (JVs) between financial institutions (commercial banks or specialised financial institutions) and asset management companies. This initiative is aimed at supporting the recovery of the economy from the COVID-19 crisis, with the initial phase of establishment concluding in 2024.
Given the ongoing economic uncertainties, both internal and external, that could impact business and household income recovery, particularly for vulnerable groups, the quality of loans may deteriorate. Financial institutions will therefore need a more flexible mechanism to handle non-performing assets (NPAs) that may rise in the future.
The BOT will now allow commercial banks, specialised financial institutions, and non-banks to temporarily invest in asset management companies or legal entities involved in asset management within joint ventures. This measure will allow a two-year period for setting up the joint ventures, with a 15-year operating period. The JV must assist in restructuring the debt of non-performing borrowers transferred to them, considering the benefits to the borrower and aligning with their repayment ability.
Additionally, the BOT will expand the scope of existing joint ventures for specialised financial institutions to accommodate non-performing assets from commercial banks and Non-banks. Previously, such assets could only be transferred from specialised financial institutions.
The BOT hopes that these measures will provide financial institutions with more tools to manage non-performing assets efficiently and better utilise existing resources to support borrowers in recovery. Through joint ventures, borrowers will have access to continued assistance, enabling them to maintain their livelihoods or businesses, which will further aid the recovery of the Thai economy.
