Thailand
Thailand: BoT report lays out threats to stability
Aside from search-for-yield behaviour and vulnerability in the mortgage loan market, household debt accumulation from auto loans is among the risks to future financial stability, says the latest Monetary Policy Report.
“There are some risks in the financial system that could pose vulnerabilities to financial stability in the future,” the report said. “These risks include an accumulation of household debt, especially for auto and mortgage loans.”
The Bank of Thailand said recently that it might implement new measures to supervise auto loans in a bid to control the country’s elevated household debt.
If an examination team finds that auto lenders are using relaxed loan criteria, the central bank could adopt new measures to control loan quality in the segment, said governor Veerathai Santiprabhob.
The central bank began the examination after discovering several marketing campaigns displaying eased criteria for auto loan approvals, especially cashback and top-up loan incentives.
The central bank’s examination of auto loans is expected to be completed by June after beginning in the first quarter.
Another risk factor posing a threat to future financial stability is search-for-yield behaviour, which persists in the low-interest-rate environment and could lead to underpricing of risks, particularly among savings cooperatives and large corporates.
An additional concern is wavering Chinese demand for Thai condominiums.
The central bank’s Monetary Policy Committee kept the policy interest rate unchanged last month to accommodate the country’s economic growth amid heightened global and domestic uncertainties.
“The committee viewed that the current accommodative monetary policy stance contributed to the continuation of economic growth and was appropriate given the inflation target,” said the Monetary Policy Report. “In addition, given heightened global and domestic uncertainties in the current period, the committee thus voted to keep the policy rate unchanged to assess the clarity of impacts from such uncertainties.”
The seven-member rate-setting panel voted unanimously to maintain the policy interest rate at 1.75% on March 20.
Any policy rate increase will be gradual and follow a data-dependent approach, the report said.
It said the economic growth projection is subject to downside risks amid trade protectionist measures adopted by China and the US, uncertain Brexit negotiations, geopolitical risks and lower-than-expected private investment at home.
Source: https://www.bangkokpost.com/business/finance/1656148/bot-report-lays-out-threats-to-stability