Thu, Feb 05, 2009 - Page 11 News List

Thailand may increase access for foreign banks

RESTRICTIONS Foreign ownership of Thai banks is capped at 49 percent and domestic bank lending this year may expand by less than half of last year’s pace

BLOOMBERG

Thailand may increase access for foreign banks to boost competition in financial services and the government will ask the market regulator how rules can be eased.

The government has “struggled” to achieve “proper competition” in the banking sector, depriving consumers of quality services and reasonable prices, Thai Finance Minister Korn Chatikavanij told the American Chamber of Commerce in Thailand and the US Chamber of Commerce in Washington via a video link late on Tuesday.

“The obvious question to ask at this time is how could we possibly enhance the role of the international banking community in order to create a more competitive environment here in the banking sector,” Korn said. “Competition will be enhanced faster as a result of increased involvement of the international banking community.”

Thai Prime Minister Abhisit Vejjajiva has called for greater foreign involvement in Thailand’s economy, which the government forecasts may grow no more than 2 percent this year as exports and investment decline.

Foreign ownership of Thai banks is capped at 49 percent and domestic bank lending this year may expand by less than half of last year’s pace.

Thailand’s central bank regulates banking in Southeast Asia’s largest economy and would have to change its rules to allow foreign banks greater access.

The country’s banks are seeking a 54 billion baht (US$1.54 billion) state aid package designed to help them restart lending to businesses and lift the economy out of a probable recession.

Bank of Nova Scotia, Canada’s No. 3 bank by assets, yesterday said it doubled its stake to 49 percent in Thanachart Bank, Thailand’s biggest auto finance company. The Netherlands’ ING Groep NV has a 26 percent stake in TMB Bank Pcl and Malaysia’s Bumiputra-Commerce Holdings Bhd has a 42 percent share in BankThai Pcl.

The Thai Finance Ministry gave Bumiputra-Commerce approval in October to lift its stake in BankThai above the 49 percent foreign ownership limit.

Operations of foreign banks in Thailand, including Citigroup Inc and HSBC Holdings Plc, are limited by central bank regulations.

The country’s commercial banks have stopped short of fully passing on Bank of Thailand rate cuts, lowering loan and deposit rates by as much as 1 percentage point.

Lending this year could expand by less than half the 13 percent pace posted last year by Bangkok Bank Pcl, the country’s largest, the Thai Bankers’ Association said.

The Bank of Thailand has said it may continue easing monetary policy after cutting its benchmark interest rate to 2 percent in two reductions totaling 1.75 percentage points since Dec. 3.

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