Banks shift to crisis mode, boost reserves and step up support for vulnerable customers

Thailand’s banking sector is moving deeper into crisis-response mode as prolonged global uncertainty and rising energy prices place fresh pressure on businesses, prompting lenders to shift their role from straightforward credit providers to active supporters helping customers stay afloat.

With the global economy clouded by prolonged conflict and higher energy costs, Thai businesses are facing a new round of challenges affecting costs, operations and competitiveness. As risks become more widespread and harder to assess, commercial banks are increasingly repositioning themselves as “supporters”, working more closely with clients to help them navigate an environment with no clear end in sight.

Chartsiri Sophonpanich, president of Bangkok Bank (BBL), said the bank is placing particular emphasis on strengthening customer liquidity, especially through additional credit facilities such as liquidity lines and working capital lines. He said such support is both necessary and appropriate at a time like this, allowing businesses to keep moving forward despite mounting challenges.

On emergency preparedness, he said the bank’s existing Business Continuity Plan (BCP) remains sufficient to cope with current conditions. Even though risks and the severity of the situation appear to be rising, the bank believes its existing framework is still effective enough to support both operations and customers without requiring immediate revision.

Bangkok Bank also has no policy to slow investment at this stage. It will continue with its business expansion plans while maintaining customer support under its existing framework.

In terms of risk management and reserves, Chartsiri said no one can predict the future with precision, but the bank remains confident that its advance preparations, including capital strength and loan-loss reserves, are solid enough to absorb unexpected shocks. Bangkok Bank’s coverage ratio currently stands at 180%, a high level that helps reinforce confidence in its ability to withstand uncertainty. He said the bank has consistently strengthened its reserves over time to prepare for future volatility.

Customer assistance is being handled on a case-by-case basis, with bank teams speaking directly with clients to assess what each business genuinely needs, whether extra working capital or other forms of support suited to its particular situation.

“The bank’s main direction is to help support customers through this difficult period,” Chartsiri said, adding that requests for assistance remain at manageable levels for now. Still, he acknowledged that customers and businesses are increasingly concerned about rising energy costs, which are having a broad impact, and said the bank must help as much as possible.

Payong Srivanich, chairman of the Thai Bankers’ Association and CEO of Krung Thai Bank (KTB), said banks already have BCP frameworks in place to cope with the current uncertainty, and these remain effective to a certain degree.

However, he said the challenge this time cannot be addressed through financial measures or capital support alone. Helping customers and entrepreneurs now requires much deeper engagement, extending into business models, sales behaviour and how each enterprise adapts.

Banks still have an important role in supporting customers, he said, but that support will need to become more flexible and more specific. It is no longer just about adding liquidity or extending credit lines, but also about helping clients work out how they can continue selling, how they can adapt their business model and how they can survive — all of which are central to stabilising the wider economy in a period like this.

“In practice, the measures will have to go deeper and last longer. They may need more time and more detailed work, depending on how clear the situation becomes in the period ahead,” Payong said.

He said the real-economy impact is not uniform. Some businesses are still able to continue by using extra liquidity to absorb higher costs, such as transport expenses and rising energy prices. But many others are no longer able to move forward and have instead chosen to suspend operations or close down altogether.

That picture, he said, reflects the diverse nature of the crisis facing entrepreneurs. Outcomes depend heavily on each business’s original strength and its ability to adapt. Some are cutting production, reducing operational scale or suspending some activities in order to lower costs.

What is especially worrying, he said, is that while many operators understand what is happening around them, they still cannot clearly assess how severe the situation may become or how long it may last. That uncertainty is making long-term planning difficult, leaving many businesses to focus simply on surviving day by day.

A crucial unknown remains the duration of the war or broader crisis. If conditions drag on, cost pressures will deepen and could leave some businesses unable to recover. If the situation eases quickly, the chances of recovery will naturally improve. As a result, decisions over whether and how to support customers must be based on an assessment of the broader environment, not just a borrower’s current condition.

There are also signs that debt stress is beginning to spread. Changes in repayment behaviour have already started to emerge and the trend is expected to continue, meaning banks will need to keep preparing response measures on an ongoing basis.

Strategically, Payong said banks themselves may need to adjust their business plans, whether through tighter cost control, delaying some investments or revisiting the order of priority for various projects.

Loan-loss provisioning is also likely to rise, with banks expected to gradually add to reserves in line with conditions in order to protect against risks from increasingly vulnerable customers. These can broadly be divided into two groups: those that were already fragile and have now been hit harder, and those that were previously strong but have become vulnerable after being struck by fresh negative pressures.

This suggests the current crisis is no longer affecting only the same old risk groups. It is spreading into new segments, broadening the risk base of the financial system and forcing banks to prepare for a much wider field of vulnerability.