Separate or explain — BoT sets tough Virtual Bank licence rules

The Bank of Thailand has clarified that all three applicants for Virtual Bank licences will be assessed under the Finance Ministry notification setting out the rules, procedures and conditions for applying for and obtaining a licence to operate a branchless commercial bank, or Virtual Bank, which was issued on February 20, 2024.

Chayawadee Chai-anant, Assistant Governor for Corporate Relations and spokesperson for the Bank of Thailand, said the notification requires any applicant seeking to establish a Virtual Bank to place all financial businesses under its control that hold financial business licences within the same business group.

These must be separated from non-financial, or real-sector, businesses so that risks arising from financial businesses can be supervised effectively and so that the Virtual Bank does not inappropriately provide benefits, or create conflicts of interest, for affiliated companies in both the financial and non-financial sectors.

Examples include extending credit beyond the permitted scope, or conducting transactions with pricing or terms more favourable than would normally apply.

In this regard, applicants may take a number of approaches to comply with the objectives of the Finance Ministry notification, including:

(1) Transferring only their financial businesses, which does not necessarily mean transferring the entire business, so that they come under the same business group as the Virtual Bank.

(2) Reducing their shareholding in a financial business so that they no longer have control over it.

(3) Surrendering licences for financial businesses that are not significant.

(4) Taking any other action that is consistent with the objectives of the notification.

(5) Applying for a licence without restructuring the business, while providing reasons of necessity for consideration.

She said all Virtual Bank applicants will be required to submit supporting documents and evidence to both the Bank of Thailand and the Finance Ministry, which will jointly consider whether they are suitable to receive a Virtual Bank licence.