BOT to fine-tune banking system to smooth the path for lending

A bank's compliance with Bank for International Standard or Basel II and its liquidity are not obstacles to credit approval, BOT deputy governor Bandid Nijathaworn said.

Mortgage insurance companies will be allowed to be set up, evaluating acceptable risk for mortgages in line with the BOT's financial master plan to develop infrastructure and credit information system to facilitate banks' risk management.

The Export-Import Bank of Thailand or EXIM Bank and Small Business Credit Guarantee Corporation (SBCG) will be encouraged to provide credit guarantees for the export sector and small and medium-sized enterprises. This will share credit risk with the banks, fostering loan growth.

"This will help the banks to transfer risk or share risk, which is very important for new lending," Bandid said.

The two agencies must have enough capital to expand their businesses to serve market demand, he said, and they should readjust insurance products to fit customers' demand, set appropriate prices and speed up services. Banks will be urged to cooperate closely with their existing customers to ensure continuity of fund flows, taking care of them in advance with lines of credit, conditional loan and restructuring.

"During the economic slowdown next year, we want to see the banking system strengthening, continuing credit expansion and making credit-risk management more efficient.

"The three issues should occur simultaneously to enable the system to function and give loans," said Bandid.

He said liquidity, capital and credit risk were crucial factors in banks' loan approvals.

The banking system is solid, with sufficient capital-adequacy ratio and low non-performing loans, and can operate normally, unlike the US banking system, he said.

Liquidity in the system is adequate for credit expansion, with excess reserve of Bt1.1 trillion, he added, and the capital-adequacy ratio was 15.7 per cent as of November, higher than the requirement of 8.5 per cent.

Capital is enough to support new lending despite banks' compliance with Basel II, which will lessen their capital only by 1.8 per cent to about 14 per cent, he said, and this could help credit expansion over the next few years.

"It does not affect the banks' ability to provide loans, except that the loans will grow 1.6 times from the current figure," said Bandid.