Nod to foreign bank expansion

The Bank of Thailand said it was not worried about possible impacts from the euro-zone debt crisis on Thailand's second phase of the Financial Sector Master Plan, which includes permission for upgrading foreign banks with a branch in the country into a subsidiary.

The central bank yesterday announced guidelines permitting foreign banks currently operating a branch in Thailand to become a subsidiary that can have a maximum of 20 branches and 20 off-premise ATMs across the country. The Ministry of Finance approved the notification, which also took effect yesterday.

"We do not set a target on how many [branches will apply to be a subsidiary]. We open an opportunity for them to set footprint in Thailand. Even more, we focus on those with strong financial status," said Tongurai Limpiti, the central bank's assistant governor.

FOOTHOLD

The policy aims to increase competition and enhance the efficiency of Thailand's financial system while allowing foreign bank branches to get a foothold in Thailand before the Asean Economic Community materialises in 2015, she said.

"Whoever comes first will gain an opportunity to do business first," she said.

Currently, there are 15 foreign bank branches and one subsidiary of a foreign bank in Thailand. Of these, five are European banks, three are US banks, and three Japanese. Most foreign bank branches provide wholesale services to corporate customers.

"This move could benefit investors who invest in Thailand. It will increase channels for financial services [of foreign banks] to customers. Foreign banks could serve their customers wherever it is close to them, instead of only in Bangkok," Tongurai said.

Based on the guideline, the applicant must be a foreign bank that already has a branch in Thailand, has a strong financial standing with good operating performance and has expertise in international finance, Tongurai said.

The branch must maintain capital adequacy ratio of no less than 12 per cent and non-performing loans must not exceed 3.5 per cent. It must also have a good rating under the BOT's rating assessment and have a good risk-management system.

Upon commencement of the operation, the subsidiary must have paid-up capital of no less than Bt10 billion.

The applicant must be a foreign bank that is licensed in a country that already has, or has the potential to have, good relations with Thailand in the areas of finance, trade and investment.

It is expected to take no more than five months for the central bank to complete the review process of the application, which can be submitted between January 4, 2012 and December 28, 2012, Tongurai said. Operations can commence within one year after approval.