Thailand: BoT targets key areas for better stability

• Dec 25, 2018

Inaccessibility to financial sources at a reasonable price for some small and medium-sized enterprises (SMEs) and search-for-yield behaviours by savings and credit cooperatives are areas that the Bank of Thailand is keen to see improvements to reinforce financial stability. 
Some SMEs cannot access bank loans at a fair rate because they have not adapted to digitalisation, said central bank governor Veerathai Santiprabhob. 
Information-based lending is an instrument that allows SMEs to better access financial resources at more reasonable prices, he said. This new lending practice is under the central bank’s consideration and is expected to be implemented next year. 
To make information-based lending standards viable, the Bank of Thailand is revamping a series of regulations to allow financial institutions to adopt information- based lending for SMEs. 
The new lending standard, which will use alternative data in addition to income to assess risks, will ease restrictions on credit lines for operator-owned SMEs and regulations on debt-servicing ability for SMEs. 
Lenders typically use a revenue-based lending approach. 
For savings and credit cooperatives, the central bank requires collaboration from several parties to strengthen their corporate governance, he said. 
The National Legislative Assembly has approved amendments to the Cooperatives Act. 
Mr Veerathai said search-for-yield behaviour has been detected in savings and credit cooperatives and this leads to financial fragility. 
The two issues are under the central bank’s three-year plan until 2019, of which 65% has been carried out, particularly in digital payments. 
The central bank is satisfied with the country’s digital payment development, which moves at a faster pace than expected. 
Digital banking has been adopted by consumers and competition has intensified so much that banks scrapped mobile banking transaction fees in the first quarter of this year, earlier than the central bank’s prediction for the third quarter of next year. 
“The success in digital payment has only been in the consumer segment. The commercial segment is progressing slower than targeted partly due to taxation concerns,” he said. 
“The central bank needs to foster better understanding among business operators and encourage them to use digital payments more.” 
The central bank’s data analytics development is another area under the three-year strategic plan that have made strides. 
With improving data analytics, measures to deal with financial fragility in a timely manner can be implemented. 

Source: https://www.bangkokpost.com/business/news/1600134/bot-targets-key-areas-for-better-stability