The Bank of Thailand (BOT) will soon ask the new government to approve the draft of a revised BOT Act that would authorise the central bank to invest in other foreign financial assets, says Assistant Governor Nitaya Pibulratanagit.

With a widening investment scope, the central bank would be allowed to obtain a higher return with acceptable limited risk from its international reserves of US$60 billion (Bt2.25 trillion), as its investment policy was formerly limited to very secured bonds with low return.

The new investment areas will improve the BOT's profitability, because the central bank must carry the cost of operations in money and foreign-exchange markets.

Nitaya said the central bank had interest expenses from bond issues to absorb liquidity in the market when it buys dollars to stabilise the baht.

But the return from holding dollars is relatively no different from lending interest rates for the baht.

"We don't actually need to seek more income.

"But why do we need to leave a lot of money in the safety cabinet uselessly? Someone asked why we had to keep the money in US government bonds that offered low yields," Nitaya

said.

The central bank will invest in bonds issued by international organisations of which Thailand is not a member, including those in European countries.

In the current BOT Act, the central bank is allowed to invest international reserves only in assets of those organisations that Thailand is a member of.

Nitaya said the BOT also wanted to invest in highly rated bonds issued by foreign private companies under a guideline with certain credit ratings.

Newly issued financial instruments with high yields, including some types of derivatives, would be included in the investment plan.

The investment channel of the BOT is limited by credit-rating criteria and must be approved by the central bank's court of directors.

The definition of other

financial instruments, which are written ambiguously in the current BOT Act, is rewritten in the draft.

Nitaya said the current act, which is riddled with ambiguous wording, had caused many parties to interpret them differently.

She said the central bank would have to clarify the draft of a revised BOT Act and ask the Cabinet and National Legislative Assembly for approval.

Nitaya insisted that the widening investment would be under risk management standards and controlled by credit ratings.

She said the current BOT Act, drafted in 1942, was not up to date enough in the current dynamic financial world.

Deputy Governor Tarisa Watanagase said the central bank would propose to the Finance Ministry that it act soon on the BOT Act, together with the Financial Institutions Business Act.

Earlier, Deputy Prime Minister and Finance MR Pridiyathorn Devakula said he would try to push forward the drafts, including the Deposit Insurance Agency Act, to the final legal process.

Anoma Srisukkasem

 he Nation