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Published on September 11, 2007

Deputy government spokesman Chodechai Suwanaporn said a meeting of 40 financial experts yesterday called on the Bank of Thailand (BOT) to clarify the future of the financial system, including non-bank companies. The BOT was also asked to consider the structure of the money and capital markets, he said.

"It [phase II of the financial master plan] is a stand-alone master plan that does not concern itself with the development of capital markets, microfinance and non-bank companies. The BOT should be thinking both vertically and horizontally; otherwise, the plan will be only a banking master plan," he said.

It was agreed at the meeting that financial institutions needed a deep understanding of the financial landscape, a picture of the financial system in the future, so that they could efficiently adjust to the changing environment amid expected fierce competition. This applies in particular to smaller institutions.

BOT Deputy Governor Bandid Nijathaworn said financial institutions wanted to know about both the demand and supply sides of the financial landscape. On the demand side, they want to know the likely levels of demand for loans and savings among small- and medium-sized enterprises (SMEs) and the household sector, because corporations can access global financial sources more easily.

On the supply side, financial institutions want to know how they can expand their businesses, how many players there will be in the system and how the central bank will bridge the gap. This will improve their understanding of the likely future, so they can know how to adjust themselves, he said.

"The plan does not draw a picture of the entire financial system," said Siam Commercial Bank director Jada Wattanasiritham. "It should depict not only commercial banks, but also the whole system and the global financial system, which will encourage local financial institutions to adjust themselves."

The financial experts suggested that in an expected atmosphere of fierce competition, increasing financial products and different demands, the central bank should include risk-management systems in its plan.

Chodechai said even though the current system had made progress in this regard, there should be an effort to ameliorate future risk-management systems.

If the capital market is not strengthened, the banking system will face all of the risks alone, and this will create a problem similar to that in 1997, he said, adding that the central bank should not be proposing a stand-alone plan.

Bandid said the BOT was asked to consider consistency within the capital market instead of emphasising commercial banks alone. Such consistency would help improve risk-management tools like securitisation.

Moreover, the meeting recommended the BOT's master plan encourage wider access to funding for SMEs and the household sector, which currently have only limited channels.

Bandid said the meeting wanted financial institutions to have an efficient information system, so that they could distinguish their groups of customers. It recommended regulations be revised to broaden access to their services.

Anoma Srisukkasem,

 Somruedi Banchongduang

 The Nation