Thai central bank asks lenders to bolster capital buffer to weather coronavirus risk

By Orathai Sriring

 

FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva

 

BANGKOK (Reuters) - Thailand's central bank has asked commercial banks to prepare capital management plans for the next 1-3 years, as the widespread impact of the coronavirus on businesses and individuals could affect lenders' asset quality.

 

The plans should take into account the outlook for the economy and the ability of debtors to do business after the outbreak has eased, Bank of Thailand Governor Veerathai Santiprabhob said in a statement on Friday.

 

The BOT also asked lenders not to pay interim dividends for 2020 and not to buy back shares in order to maintain strong capital levels to support businesses.

 

Analysts say the announcement is likely to hurt bank shares and suggested the virus impact might be worse than initially expected.

 

In a statement on Saturday, the governor said the COVID-19 outbreak had severely hit the Thai economy and the outlook remained highly uncertain.

 

The latest request to lenders is to "not let banks drop their guard", he said.

 

"Maintaining immunity for the economy and financial system is no less important than maintaining immunity for the health of each Thai person," Veerathai said.

 

Lenders' capital levels are important buffers to aid in the economic recovery, he said.

 

The central bank has recently said the economy could shrink more than forecast this year. In March, it predicted a contraction of 5.3% for 2020 and is set to review the projection at a policy meeting on Wednesday.

 

(Reporting by Orathai Sriring; Editing by Shri Navaratnam)

 

-- © Copyright Reuters 2020-06-22

 

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Thai banks adhere to Basel III standards for Capital Adequacy, the percentage of funds that must be kept available in liquid form to meet bad debt. The current position of Thai banks is no better or worse than most other banks around the world albeit BOT added an extra 2.5% to the Basel III levels. 

 

https://www.ceicdata.com/en/indicator/thailand/capital-adequacy-ratio