Warning to central bank to preserve Thai foreign exchange reserves for a 2023 economic storm

[webfact]

Dr Kobsak Pootrakool Senior Vice President of Bangkok Bank and formerly Minister at the Prime Minister’s Office 

 

by Joseph O' Connor

Many analysts believe that there is a strong geopolitical impetus in the current policy being pursued by the Federal Reserve in Washington DC which may mean further tough medicine being dished out which is negatively impacting emerging economies.

 

Thailand’s economy has been protected from this to a great extent, by its stable financial system and healthy foreign exchange reserve buffer. In the last few months, however, this has been falling and may be needed in 2023 as economic turmoil across the world, driven by the war in Ukraine and rising US-Chinese tensions may be only beginning.

A former minister at the Prime Minister’s Office and now a senior Vice President with Bangkok Bank, Dr Kobsak Pootrakool, has urged the central bank to preserve Thailand’s Foreign Exchange Reserves and let the baht float on the market as he predicts 2023 will see a deterioration of economic conditions caused by geopolitical tensions and set in motion by the US Federal Reserve tightening of monetary policy which has just begun to make an impact and already caused severe problems for countries such as Laos, Pakistan, Bangladesh, Sri Lanka and economies in central America.

 

Dr Kobsak’s warning comes as the country’s foreign exchange reserves fell by $13.2 billion from September 2nd to September 30th alone and came with confirmation last week that the Bank of Thailand had intervened in foreign exchange markets in response to volatility and a depreciating Thai baht.

 

Full story: https://www.thaiexaminer.com/thai-news-foreigners/2022/10/06/warning-on-foreign-exchange-reserves/

 

-- © Copyright Thai Examiner 2022-10-07

 

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[nigelforbes]

BOT's Foreign Currency Reserves report below, just for info. THB/USD was 36.46 on 2 September, on 30 September it was 37.879 (which only accounts for some of the fall)

 

https://www.bot.or.th/App/BTWS_STAT/statistics/BOTWEBSTAT.aspx?reportID=94&language=ENG

[VinnieK]

A storm is coming alright.

Just walk around any city and observe...many shops shuttered for good and very little foot traffic.

Obviously Covid had a major impact but online shopping is where the rot begun.

A lot of this commercial real estate is on someone's balance sheet (banks)

Many hotels are still closed or struggling.

Again..many are "assets" on bank balance sheets.

Walk into any bank branch..quieter than any time in the past....granted, digital transactions are partly to blame.

Used car lots packed with cars.

Draw your conclusions.

 

 

[RichardColeman]

Please do not make my £ exchange rate any lower. Besides if all currencies fall against the dollar and the Thail baht goes up, that's just more tourism out the window. 

[sammieuk1]

The old fabled foreign currency reserve is out for airing but how is it still there with a million marauding generals sniffing about ???? 

[nigelforbes]

32 minutes ago, VinnieK said:

A storm is coming alright.

Just walk around any city and observe...many shops shuttered for good and very little foot traffic.

Obviously Covid had a major impact but online shopping is where the rot begun.

A lot of this commercial real estate is on someone's balance sheet (banks)

Many hotels are still closed or struggling.

Again..many are "assets" on bank balance sheets.

Walk into any bank branch..quieter than any time in the past....granted, digital transactions are partly to blame.

Used car lots packed with cars.

Draw your conclusions.

 

 

One significant feature of Thailand that I have seen repeatedly over the past 30 years is the ability of the population, the economy and the government to adapt to changing circumstances, they do it quietly and without fanfare. When tourism from one country drops off, for whatever reason, a new country is found and pursued, pretty soon it's citizens are flavor of the month. Two years ago it was the Chinese, before that the Russians, before that the Arabs, a long long time ago it was Brits. Today it's Indians, next month it may be the Welsh, who knows.

 

And when one source of employment dries up, people shift en-masse to something new, the fail safe is to retreat to the villages and resume farming over again. Over 95% of new business start ups fail every year in Thailand, closed shops and businesses is nothing new, it's just an opportunity for somebody else.

 

As for the banks balance sheets....they are plenty strong, plenty, the rules are all set in their favour so they should be.

 

[VinnieK]

@NigelForbes

Plenty strong no more imo.

All these repo'ed cars are liabilities.

Collapsing commercial real estate is a liability.

Non-performing consumer and credit card loans are liabilities.

Wars, rumours of wars, high energy prices, dead-ish tourism don't help.

It was in the news a few weeks ago that Thais are indebted to the highest degree ever.

All this mess will end up in the banks' front door.

In a banking crisis, the govt will provide unlimited liquidity but savers (and the baht) will get the shaft 

 

 

 

[nigelforbes]

39 minutes ago, VinnieK said:

@NigelForbes

Plenty strong no more imo.

All these repo'ed cars are liabilities.

Collapsing commercial real estate is a liability.

Non-performing consumer and credit card loans are liabilities.

Wars, rumours of wars, high energy prices, dead-ish tourism don't help.

It was in the news a few weeks ago that Thais are indebted to the highest degree ever.

All this mess will end up in the banks' front door.

In a banking crisis, the govt will provide unlimited liquidity but savers (and the baht) will get the shaft 

 

 

 

The amount outstanding on Consumer Loans is a fixed amount whilst the value of GDP has fallen, that is why the ratio has increased and made it appear that Consumer Loans are increasing....they are not.

 

NPL's are under 3%, an internationally accepted level that is acceptable in finance terms. Level 2  loans or "Watched Loans" are at 6%, also an acceptable level.

 

"Wars, rumours of wars, high energy prices, dead-ish tourism"...is just noise, nothing really to do with Foriegn Currency Reserve values.

 

"Savers will get the shaft" - savers usually get the shaft, this is not new, it's the way banks work.

 

[VinnieK]

9 minutes ago, nigelforbes said:

The amount outstanding on Consumer Loans is a fixed amount whilst the value of GDP has fallen, that is why the ratio has increased and made it appear that Consumer Loans are increasing....they are not.

 

NPL's are under 3%, an internationally accepted level that is acceptable in finance terms. Level 2  loans or "Watched Loans" are at 6%, also an acceptable level.

 

"Wars, rumours of wars, high energy prices, dead-ish tourism"...is just noise, nothing really to do with Foriegn Currency Reserve values.

 

"Savers will get the shaft" - savers usually get the shaft, this is not new, it's the way banks work.

 

You mentioned the official figures re: non performing loans and such.

I believe they are much higher. Central banks and gooberments routinely cook the books....'for the greater good' 

In any case, I put more credibility on what I observe on my peregrinations around town than any govt figures.

The economic  situation is terrible imo and a monstrous storm is coming 

 

[nigelforbes]

13 minutes ago, VinnieK said:

You mentioned the official figures re: non performing loans and such.

I believe they are much higher. Central banks and gooberments routinely cook the books....'for the greater good' 

In any case, I put more credibility on what I observe on my peregrinations around town than any govt figures.

The economic  situation is terrible imo and a monstrous storm is coming 

 

If you trust neither governments, central banks or individual banks, I can't help you any further in this debate.

[IAMHERE]

World Wide Recession and affects of Russia invasion of the Ukrine is gonna tank tourism. So Thailand hopefully can replace tourism for a couple more years.

Oh, and as an aside; I predict the price of bananas will fall drastically next year.

[Bangkok Barry]

3 hours ago, nigelforbes said:

One significant feature of Thailand that I have seen repeatedly over the past 30 years is the ability of the population, the economy and the government to adapt to changing circumstances, they do it quietly and without fanfare. When tourism from one country drops off, for whatever reason, a new country is found and pursued, pretty soon it's citizens are flavor of the month. Two years ago it was the Chinese, before that the Russians, before that the Arabs, a long long time ago it was Brits. Today it's Indians, next month it may be the Welsh, who knows.

 

And when one source of employment dries up, people shift en-masse to something new, the fail safe is to retreat to the villages and resume farming over again. Over 95% of new business start ups fail every year in Thailand, closed shops and businesses is nothing new, it's just an opportunity for somebody else.

 

As for the banks balance sheets....they are plenty strong, plenty, the rules are all set in their favour so they should be.

 

That's why they call it Teflon Thailand. Nothing at all damages the economy to any significant extent. Coups, street riots? Nothing. When there were street riots they became a tourist attraction.

[Cake Monster]

6 hours ago, webfact said:

Dr Kobsak’s warning comes as the country’s foreign exchange reserves fell by $13.2 billion from September 2nd to September 30th alone and came with confirmation last week that the Bank of Thailand had intervened in foreign exchange markets in response to volatility and a depreciating Thai baht.

There is no mention of the total amount kept in Foreign Reserves so the figure of $13.2 could either be 90 % of the Total or 1 %.

I do not know the official number for the amount kept as Foreign Reserves, but there is certainly a very marked upturn in the amount of Capital outflows from the Country, and with Covid, the Reserve may well be severely depleted from a few Years ago.

[herfiehandbag]

4 hours ago, sammieuk1 said:

The old fabled foreign currency reserve is out for airing but how is it still there with a million marauding generals sniffing about ???? 

Whilst a stache of money may exist, it is probably "spoken for".

[hotchilli]

7 hours ago, webfact said:

Dr Kobsak’s warning comes as the country’s foreign exchange reserves fell by $13.2 billion from September 2nd to September 30th alone and came with confirmation last week that the Bank of Thailand had intervened in foreign exchange markets in response to volatility and a depreciating Thai baht.

They still have reserves?

[AnotherFarang8]

Thailand’s central bank is doing the right thing in the current situation (same as many other countries), unloading soon to be worthless western currency reserves to support purchasing power of baht, alleviating inflation pain for people of Thailand.

Next obvious thing to do would be to default on its usd debt and start its finances from scratch in the new multi-polar world. Thailand can and will be self-sufficient with a strong and respected currency.

[RubbaJohnny]

9 hours ago, VinnieK said:

but savers (and the baht) will get the shaft 

Will our 800k visa money be safe. 

If the bank fails what happens to vis deposits?

[nigelforbes]

1 minute ago, RubbaJohnny said:

Will our 800k visa money be safe. 

If the bank fails what happens to vis deposits?

Yes, each persons account is insured up to 1 mill. 

[xtrnuno41]

Mmmm, does this fit in with what i red some years ago.?

Thai Banks lowered  guaranty on bank accounts when falling down.

Meaning if you have more then 1 mB on bankaccount you loose it, only 1 mB back.

I wonder how the rich do it to protect.

More and more im wondering if there are some bad forces working.

Ever since year 2000, it looks like a bad moon is rising and fast.

So many events which brake down existing system to something else.    

But that is only my opinion. But it just doesnt add up.

[nigelforbes]

2 minutes ago, xtrnuno41 said:

Mmmm, does this fit in with what i red some years ago.?

Thai Banks lowered  guaranty on bank accounts when falling down.

Meaning if you have more then 1 mB on bankaccount you loose it, only 1 mB back.

I wonder how the rich do it to protect.

More and more im wondering if there are some bad forces working.

Ever since year 2000, it looks like a bad moon is rising and fast.

So many events which brake down existing system to something else.    

But that is only my opinion. But it just doesnt add up.

The deposit insurance fund is operated by the DPA which is independent of government. The DPA takes a fee from all member banks and this forms the basis of the insurance policy. The scheme was started originally in order to give consumers more confidence in the Thai banking system following the 97 crash, for that reason the amount of coverage was very high to start with, over THB 10 mill. As time dragged on and the balance sheets of the banks stabilized and became much stronger, the need to insure high amounts fell away. The total amount of coverage has been reduced year on year for many years, there is no longer any need for it and almost everyone agrees. As things stand presently, if a bank went bust, the dpa scheme would reimburse over 95% of account holders ALL their money, this is because the average balance is well below 1 mill.

 

https://www.dpa.or.th/en/articles/view/list-of-insured-financial-institutions

[xtrnuno41]

22 hours ago, nigelforbes said:

The deposit insurance fund is operated by the DPA which is independent of government. The DPA takes a fee from all member banks and this forms the basis of the insurance policy. The scheme was started originally in order to give consumers more confidence in the Thai banking system following the 97 crash, for that reason the amount of coverage was very high to start with, over THB 10 mill. As time dragged on and the balance sheets of the banks stabilized and became much stronger, the need to insure high amounts fell away. The total amount of coverage has been reduced year on year for many years, there is no longer any need for it and almost everyone agrees. As things stand presently, if a bank went bust, the dpa scheme would reimburse over 95% of account holders ALL their money, this is because the average balance is well below 1 mill.

 

https://www.dpa.or.th/en/articles/view/list-of-insured-financial-institutions

I dont think, they can easily think like that and still if you do have (had) more in the bank, then you loose.

2008 showed again, it can happen easily. Just in a jiffy time. Lots of well known banks down the drain.

Recent a very power full investment bank (Blackrock) took a hit of 1,7 TRILLION DOLLARS in 6 months.

With that hit, I didnt red anything about the effect on other banks as they are all connected somehow.

Changes after 2008 working?

Crypto currency took two dives as someone(?) was playing with it. It must be.

That can only be big companies with loads of money, to influence and for them then profitable way. They found the way.

So how solid banks are? Of course after 2008 they made changes, but Thailand says 1 million baht, protected.   

Maybe lots of accounts are below 1 million, but there will be people who have more and then loose.

Banks play with your money, but arent there when all goes wrong. Then CEO's, which have quit an income, run and leaving you behind with...nothing. And those CEO's always find another job and start again.

The system we are working with, is a Ponzi scheme. If you are on the top or close to it, you do well.  

It is thriving on more and more people on earth and we are with too many nowadays.