Thai central bank to issue 3 virtual bank licences next year: governor

Thailand has 17 conventional commercial banks, so three should be an appropriate number for virtual banks, Sethaput said, noting that Singapore has four virtual banks and 34 conventional banks, while Malaysia has three virtual banks and 42 conventional ones, and in South Korea the ratio is three to 52.

“Three is not too few when compared to the number of existing players. It’s a proper number. If too many [virtual] banks are allowed to open and have to be shut, a lot of people will be affected,” Sethaput said, explaining that this could damage public confidence in virtual banking.

Virtual banks are not required to set up physical branches and offer primarily digital services.

The central bank is currently drafting the selection criteria and regulatory framework for virtual banks. Sethaput said the Bank of Thailand is finalising its licensing standards and they will be considered by the Ministry of Finance later this month. If they are endorsed by the ministry, the central bank will start accepting applications by the end of this year and announce the licensees next year.

A virtual bank will require registered capital of 5 billion baht, so investors must be financially viable and strongly competitive, Sethaput said.

“They have to compete with large banks so they need sufficient registered capital to prevent risks that could lead to a bank closure,” he explained.

Virtual banks often make losses in their first years of operation, Sethaput said, pointing to South Korea’s KakaoBank as an example. It did not become profitable until after three years of operations. Two Australian virtual banks had to shut even though one had registered capital equivalent to 3 billion and the other’s registered capital was equivalent to 5 billion baht, he added.