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TUESDAY, June 06, 2023
No threat to Thailand from US, Europe banking woes: BOT

No threat to Thailand from US, Europe banking woes: BOT

MONDAY, March 20, 2023

The impact of the banking collapse in the US and Europe on Thailand would be minimal, as the country's banking and mutual funds are less exposed to those banks, the Bank of Thailand (BOT) said.

The statement was made in response to reports of turmoil involving US regional banks, which forced the US Federal Reserve to announce urgent measures to calm the markets.

Meanwhile, Credit Suisse, the second-largest Swiss bank, also faced liquidity issues, which compelled the Swiss National Bank to open the door for UBS to acquire Credit Suisse.

Suwannee Jesadasak, BOT senior director of Financial Institutions Policy and Supervision Department, said in the BOT daily statement on Monday that the the central bank is closely monitoring the situation. It estimates that the impact of the US and Europe's banking woes on the Thai financial system is limited due to the low level of transactions and investment exposure.

Meanwhile, the BOT has imposed strict international standards to supervise capital and liquidity criteria for all bank sizes in Thailand, whereas the US will only place major large commercial banks under strict supervision, leaving small and medium-sized banks with less stringent regulations.

The BOT emphasised the fundamental strengths of Thai banks. According to a 2022 report, Thai banks’ capital-to-risk-assets ratio was 9.4%, which is higher than the minimum requirement of 8.5%. The majority of the capital was Common Equity Tier 1 (CET1).

Liquidity Coverage Ratio (LCR) was 197.3%, while the non-performing loan (NPL) ratio was 2.73%.

The NPL coverage ratio reached 171.9%, a higher level than during the global financial crisis of 2008.

Besides, it retains a credit and deposit customer base spread across retail groups, business sectors, and small and medium enterprises.

Overall, Suwannee said that the global financial outlook was of concern, and that investors should exercise greater caution. Banking stock prices are highly volatile, while banking sector hedging prices have increased.

Although, the impact on Thailand’s banking is limited but the BOT vowed to continue monitoring the situation closely.