Thailand
Thailand: Central bank mulls auto loan curbs
The Bank of Thailand could implement new measures to supervise auto loans in a bid to control the country’s elevated household debt.
If the central bank’s examination team finds auto lenders are using relaxed loan criteria, it could adopt new measures to control the loan quality of this business segment, said governor Veerathai Santiprabhob.
The central bank began the examination after finding several marketing campaigns displaying eased criteria for auto loan approvals, especially cashback and top-up loan incentives.
Somchai Lertlarpwasin, senior director of the financial institutions strategy department, said the central bank’s examination of auto loans is expected to be completed by June after beginning in the first quarter.
Auto loans rose 12.6% year-on-year last year, up from 8.4% in 2017, according to central bank data.
Non-performing loans in the auto segment increased to 1.66% year-on-year in 2018, up from 1.6% logged in the previous year.
Such campaigns are similar to those of mortgage loans, where the central bank has issued a new loan-to-value (LTV) regulation to control asset quality in the property sector.
The new LTV regulation for housing loans became effective on Monday.
The new measures call for a minimum down payment for third and subsequent mortgages of 30% of the home price, while the minimum down payment for a second housing loan is 10-20%, depending on how long a borrower has made payments on the first mortgage.
“New LTV regulations for mortgages, which came into effect on Monday, will not have an impact on first-time homebuyers who have real housing loan demand,” said Mr Veerathai.
“This will help control asset quality of the housing loan segment and the country’s household debt.”
Thailand’s household debt rose to 12.8 trillion baht in last year’s final quarter, up from 12.5 trillion registered in the third quarter, according to central bank data.
The latest household debt figure stands at 78.2% of GDP on a seasonally adjusted basis.
The central bank has been closely monitoring the household debt situation as debt burdens will take a toll on consumers’ purchasing power and long-term economic growth, said Mr Veerathai.
The central bank also tightened regulations governing unsecured financing, covering both credit cards and personal loans, from last year as instruments for controlling elevated household debt.
Predee Daochai, chairman of the Thai Bankers Association and Kasikornbank president, said the debt-to-service ratio of a bank’s loan product should be no more than 40% of total monthly income of a borrower.
Source: https://www.bangkokpost.com/business/finance/1654912/central-bank-mulls-auto-loan-curbs