The Bank of Thailand will push its second financial master plan next year to encourage competition and liberalisation in the industry, newly appointed Governor Tarisa Watanagase said yesterday.

In addition, the central bank will relax foreign-exchange regulations in order to facilitate Thai businesses wishing to invest abroad and is revising its current narrow inflation target of zero to 3.5 per cent in order to strengthen the efficiency of monetary policy management.

Tarisa said the BOT would enhance the efficiency of financial institutions and competition in the banking system. It will allow banks to undertake more types of business and eliminate obstacles that affect competitiveness.

"We will open up the sector eventually under planned schedules, in order to make more room for the banks to adjust themselves," Tarisa said in her first formal press conference as governor.

The new master plan will allow more Thai and foreign players to enter the industry and widen opportunities for foreigners to work in Thai financial institutions.

"We have to liberalise the financial sector because it will increase competition and benefit consumers, with good service at low cost. Globalisation will also put pressure on us to open up the industry." The draft of the Financial Institutions Business Act will lift the ceiling of foreign shareholders to 49 per cent, from the current limit of 25 per cent. It is awaiting Finance Ministry approval.  The central bank achieved its goal in the first financial master plan to reduce types and numbers of the financial institutions to make the banking system orderly under the concept of the single-presence rule. This caused mergers and acquisitions in the industry during the past few years, as some financial institutions were forced to close down or become non-banking companies.

Tarisa said the second master plan would not contain specifics about mergers or indicate the proper number of financial institutions.

The new financial master plan is one of five supervision measures the new governor plans to implement. The others are: strengthening the banking sector by following the international banking standard of Basel II and accounting standard IAS39; encouraging good governance among banks; supporting efficiency of risk management; and providing financial knowledge to customers.

The governor also said the central bank had kept inflation targeting as its monetary policy target. But it is reviewing whether to narrow the target and time frame or adopt the headline inflation rate as the target - instead of core inflation.

Tarisa said the bank continued to adopt a managed-float regime in its foreign-exchange policy by allowing the function of market mechanisms.

But it will help stabilise the baht when it is too volatile.

She said businesses wanting foreign-currency deposit accounts would have to submit fewer documents. They will be encouraged to invest abroad under relaxed foreign-exchange regulations.

Anoma Srisukkasem

The Nation