Banks' subordinated bonds for refinancing: BOT

A Bank of Thailand official denied the reports that large-sized banks issued subordinated bonds to avoid higher deposit surcharges.

Krirk Vanikkul, a deputy governor, said that these bonds are to refinance hybrid bonds and increase their tier-2 capital ahead of the implementation of the Basel III measures.

There were reports that banks opted to raise funds through the bonds, so that they would not need to shoulder a higher surcharge to be slapped on deposits. Pending an executive decree on the Financial Institutions Development Fund’s debt, banks are expected to pay a higher rate on deposit base, to help repay the FIDF interest burden.

Krirk added that the size of subordinated debts will depend on the maturity of hybrid bonds.