The Bank of Thailand has confidence in commercial banks' discipline in terms of credit extension, while household credit and property loans remain at normal levels to support growth, a central bank official said.
The comment came after international credit rating agency Moody’s Investors Service showed concern over Thailand’s rising household and property credit growth.
Krirk Vanikkul, the BOT’s deputy governor for Financial Institutions Stability, said the BOT kept a watch on such issues and always warned commercial banks to take caution on their credit extension. The BOT believes credit-extension discipline remains at a relatively good level.
“The warning was given on concerns over too-high household credit, and we are being careful about that. We have to let businesses grow naturally and see that commercial banks exercise discipline in extending credit,” he said.
Aside from commercial banks, other types of financial institutions, which are not under the central bank’s supervision, also extend household loans.
According to Moody’s report issued last week, Thailand faces two major risks: a rise in the ratio of household debt to gross domestic product (GDP) from 64 per cent in the first quarter of 2011 to 79 per cent in the second quarter of 2013; and increased property prices. Household and property loans combined amount to 35 per cent of total loans, up from 30 per cent in 2009.
However, Krirk explained that it was usual to see rises in both type of credit, as it reflected the country’s growing wealth. He said the credit rating agency made comments on the situation but did not change its outlook for Thailand.
“Moody’s gave a warning but did not change Thailand’s outlook and this is seen as [a result of] our good supervision. [Commercial banks] set aside very high provisions,” he said.
In response to a rise in the ratio of commercial banks’ credit to deposits, including bills of exchange, to 95.7 per cent in August, Krirk said such a rise was usual, and not too sharp, for a country where demand remained high for investment.
He said this reflected the fact that commercial banks’ credit-extension mechanisms were functioning well.
Salinee Wangtal, BOT assistant governor for the bank’s Supervision Group, said the increase in the ratio of credit to deposits including B/Es remained stable, and that meant credit was stable too.
Recently, retail credit growth started to slow down, and this was in line with the economic situation, while large enterprises might see some slowdowns as they turned to raise more capital through debenture issues.
After satisfactory third-quarter profit growth, Krirk expected the fourth-quarter earnings performance to be satisfactory as well, given there is no burden to set aside provisions, which remain very high.
In the third quarter of this year, nine commercial banks set aside a combined Bt16.46 billion in provisions, up 58 per cent from the same period a year before.
For the first nine months of 2013, the banks set aside Bt54.06 billion in provisions, up 86 per cent from the same period of last year. Such an increase in provisioning comes after an increase in risks to Thailand's economic growth.
As of September 2013, the capital adequacy ratio stayed at 14.2 per cent. First tier capital stood at 11 per cent. The figures are for nine commercial banks: Bangkok Bank, Kasikornbank, Krungthai Bank, Siam Commercial Bank, Thanachart Bank, Tisco Bank, TMB Bank, Kiatnakin Bank and Land and Houses Bank.