Wednesday, August 6, 2008

BoT warns Thai financial institutions to brace for global financial volatily

BANGKOK, Aug 7 (TNA) – Bank of Thailand (BoT) Deputy Governor Bandid Nijathaworn on Wednesday warned local financial institutions to brace for global financial volatilities in the second half of this year.

Speaking after a meeting with executives of 21 foreign financial institutions, he said they had assessed the external environment and projected the global financial market would remain uncertain in the second half of the year due to an increase in oil prices and inflation rates.

He said the local financial institutions should pay more attention to liquidity and credit risks for their business performance.

Mr. Bandid predicted that loans extended by commercial banks in the second half of the year would increase at a slower pace with the debt quality likely to deteriorate.

In the first half of the year, bank loans had grown by 10 per cent while non-performing loans reduced to 6.4 per cent. Commercial banks earned combined net profits of Bt57 billion.

Mr. Bandid said that the international executives asked him about the progress of Thailand's second financial master plan, which is set to be implemented next year.

Under the plan, foreign banks will be given a greater opportunity to run businesses in Thailand. They will be allowed to increase the number of their branches and automatic teller machines.

At the same time, the central bank will encourage commercial banks to become larger through voluntary mergers and acquisitions, and to reduce state-owned stakes in commercial banks.

"According to our assessment, (Thailand's) domestic financial institutions remain very stable and their fundamentals are strong enough to face external volatilities.

"But they must realise the global financial environment remains uncertain," Mr. Bandid said. "It may become a constraint for business performance in the future." (TNA)

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