State banks must play their part: Banthoon
Kasikornbank president and chief executive officer Banthoon Lamsam yesterday reiterated commercial banks' willingness to assist in covering the Bt1.14-trillion debt of the Financial Institutions Development Fund (FIDF), as long as state-owned banks were r
The veteran banker said that though all banks had to raise deposits, commercial and state-run banks fell under different laws and regulators. His comments followed a statement by the Thai Bankers Association that commercial banks would be prepared to pay extra fees to cover the FIDF debt, provided other related parties also contributed to the effort.
The government, the Bank of Thailand and the Finance Ministry all have the same duty, namely to sustain the financial system and oversee competition in the banking industry, Banthoon said.
“The debt in the past was created by three parties – politicians who wanted to accelerate economic growth, the central bank, which lacked control, and commercial banks, which were unconscious about [the implications of unrestrained] lending,” he added.
Even though commercial banks are expected to pass on the extra cost of a deposit-fee hike to customers, in accordance with the market mechanism, in practice they have to beat state-owned banks on pricing, which means the added cost might not in fact be passed on in full to customers, he said.
The increase in the levy on deposits would make it more difficult for commercial banks to attract deposits than state-run counterparts, which would definitely impact on their profitability and stock prices, he added.
Kosit Panpiemras, executive chairman of Bangkok Bank, said that in his view, if the FIDF debt were allowed to drag on for 30 years, the financial system would be in a worse shape as a result. Unlike their state-run counterparts, commercial banks are being asked to pay an additional premium, but if they had to do so for 30 years, the financial system would become distorted by the wider gap between commercial and state-run institutions, he said.
The additional deposit premium that commercial banks are being required to pay has the objective of servicing debt, not protecting deposits, so the new premium should also be extended to state-run banks, which are currently not required to pay anything to the Deposit Protection Agency, he said.
Tawatchai Sudtikitpisan, CEO and president of Kiatnakin Bank, said state-owned banks were larger and had lower funding costs than commercial banks. If the latter were asked to pay the higher premium alone, it would damage competition.
The Bank of Thailand will hold a videoconference with bankers on Monday to finalise the additional fee to be collected from deposits, and the premium to be collected from sales of bills of exchange.
