Thai Central Bank Should Move To Cut Service Fees

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EDITORIAL

Central bank should move to cut service fees

By The Nation

The Bank of Thailand may decide to impose new restrictions to protect customers and small businesses from excessive banking charges

Bankers are squirming in their executive armchairs. The authorities are trying to kill the banks' goose that lays the golden eggs. The powers that be are now looking at ways for the commercial banks to cut service or transfer fees so that customers do not bear too much of a burden.

Last week, following a discussion with the Bank of Thailand, banks agreed to reduce the fees charged on electronic bulk payments, such as direct salary deposits, to a flat rate of Bt12 per transaction. This flat rate will apply to any volume of transaction as of December 15.

At present, banks are charging progressive rates for electronic bulk transactions, beginning at Bt12 for transactions below Bt100,000, Bt40 for transactions between Bt100,000 and Bt500,000, and Bt100 for transactions over Bt500,000.

The Bank of Thailand has estimated that reducing this fee charge will cut into banks' profits by about Bt100 million a year. This amount is insignificant when we take into account the banks' bottom lines. In the first half of this year, the commercial banking system posted profits of Bt60-Bt70 billion.

The problems become more complicated when the authorities try to trim the banks' profits in other service charges, particularly cross-province transactions that involve deposits and withdrawals. The authorities have estimated that the banks earn fee income of around Bt10 billion from these services. This amount is equivalent to 10 per cent of the banks' total fee income. And it also represents 6 per cent of the banks' net profits.

Apparently, the bankers are not happy about this new restriction. The discussion on this issue failed to reach any conclusion. Both sides agreed to meet again before the end of September to try to iron out the differences. The authorities want the banks to reduce the service fee on cross-province transactions by the second quarter of 2011.

By the time the negotiations resume, Prasarn Trairatvorakul will be the new governor of the Bank of Thailand. Tarisa Watanagase, the present governor, who will retire at the end of September, will have to deal with this controversial fee structure in the commercial banks during the waning weeks of her governorship. It appears that the government, particularly Finance Minister Korn Chatikavanij, would like Tarisa to set off some fireworks before Prasarn steps into the position to finalise the issues once and for all.

It is interesting to note that Korn, whatever the reasons behind the political motivation or public interest, was the one who sparked off the banks' current wide interest-rate margin. Korn personally would like the banks to narrow their spread, or margin, between deposit rates and loan rates. Presently the margin is about 4 per cent. In the developed markets, the margin is around 2 per cent or below.

When we look at the rate margin in the Thai banking system, we see that banks make profits largely from small- and medium-sized companies and retail customers. The spread that the banks offer to big corporate customers is very narrow, almost without any profit.

But banks compete head-on, fiercely, to get the top names as their customers. This is simply for prestige, as they don't make much money out of this practice. At the same time, the banks offer the SMEs and retail customers larger margins - mortgage rates, credit card rates, consumer loan rates, etc.

The matter becomes more complicated as the funding costs of the banks are different. Smaller banks, with smaller retail networks and capital bases, tend to have higher funding costs, compared with the larger banks. So they end up charging the spread differently.

It is not certain whether the authorities have the regulatory clout to order the banks to charge a certain interest-rate spread level. Because of this situation, the Thai public is at the mercy of the banks' practice of charging high fees for transactions. Indeed, the banks give the impression that they are "sua non kin" (a tiger not bothered about anything except sleeping and eating). In this matter, the authorities have clearer-cut regulations to demand the banks conform to a certain practice.

A report by Siam Commercial Bank has estimated that if the banks lose 20 to 40 per cent in transaction fees, this will have an impact on their bottom lines of just 2 to 11 per cent, depending on the revenue structure of each bank. Based on these calculations, the SCB report said the larger banks, such as Krung Thai, Bangkok Bank, KBank, Siam Commercial Bank, TMB Bank and Bank of Ayudhya, would be hit harder, compared to smaller banks such as TISCO or Kiatnakin.

We'll have to wait and see how Prasarn, a former president of KBank, will handle this controversial issue when he steps into office on October 1.

-- The Nation 2010-09-18

[Puccini]

The real problem, as I see it, is that banks do not compete against each other when it comes to transaction fees. It seems they all agreed to charge the same fees.

[asiawatcher]

Why stop at the central bank? Pass it down the line to all the banks - they are all bloody crooks! Buy a safe and pay everyone/thing in cash. Screw taxes, VAT, accounting reports, bank charges and all that goes with it. User pays.

[Pib]

Nothing against what the government is trying to do, but if the government wants to put/keep more money in the peoples' pockets maybe the government should also move to cut the VAT, cut fuel taxes, cut vehicle taxes, and other selected govt fees/taxes...that is, fees/taxes they set and control.

[whybother]

Nothing against what the government is trying to do, but if the government wants to put/keep more money in the peoples' pockets maybe the government should also move to cut the VAT, cut fuel taxes, cut vehicle taxes, and other selected govt fees/taxes...that is, fees/taxes they set and control.

I believe they're looking at increasing the VAT.

[slapout]

The banking system appears to set fees with collusion between banks, who are competing for a market share. The banks as well as communication groups, petrel stations, farm suppliers and product buyers, transport, construction, etc, etc. seem to have had a free hand as far as what the consumer pays, for some time. The real world has a term for this type of activity, 'price fixing'.

The government does need income to carry on what they do best, thus a cut to the pork barrel/trough is probably not a realistic suggestion. On the other hand, excessive profits/price gouging/fixing if corrected, will give relief to a majority of consumers and rather quickly. I have mentioned several times on TV, the excessive charges for fuel in Thailand vs world oil pric, refining charge, etc, the banks are well on their way to follow or lead the charge as are many of the large suppliers/manufacturers using a similar method of pricing.

Look at the profit picture for many of the Thai companies, during the economic downturn, vs years past, and a picture may be drawn.

[Pib]

Nothing against what the government is trying to do, but if the government wants to put/keep more money in the peoples' pockets maybe the government should also move to cut the VAT, cut fuel taxes, cut vehicle taxes, and other selected govt fees/taxes...that is, fees/taxes they set and control.

I believe they're looking at increasing the VAT.

They could be, but only a few months ago the govt announced the VAT would stay at 7% until 2012. Apparently, under the law the govt has to review and determine if he VAT should be lowered/raised/or stay the same every two years. Nothing really prevents them from doing a more frequent review if the situation warrants, but apparently they are forced by law to relook every two years.

[monkfish]

Anyone have an idea what Thai Banks charge for receiving international transfers as it's never ever listed on my Bank statements

From my calculations its about 800THB My foreign bank charges 10THB for the transfer service.

Also the exchange rate is never listed just receive a bunch of THB very unprofessional I would say and loads of room for scamming.

[whybother]

Anyone have an idea what Thai Banks charge for receiving international transfers as it's never ever listed on my Bank statements

From my calculations its about 800THB My foreign bank charges 10THB for the transfer service.

Also the exchange rate is never listed just receive a bunch of THB very unprofessional I would say and loads of room for scamming.

Usually one side will charge the transfer fee which is presumably split between the two because the person transferring the money can choose where the fee is paid.

I transfer money from Australia and the fee is $A22 (about 600 baht). I don't see any fee in my Thai account.

The exchange rates are usually listed on the relevant bank's websites. Crappy rates, definite scamming, but they are open with what the rates are.

[monkfish]

Anyone have an idea what Thai Banks charge for receiving international transfers as it's never ever listed on my Bank statements

From my calculations its about 800THB My foreign bank charges 10THB for the transfer service.

Also the exchange rate is never listed just receive a bunch of THB very unprofessional I would say and loads of room for scamming.

Usually one side will charge the transfer fee which is presumably split between the two because the person transferring the money can choose where the fee is paid.

I transfer money from Australia and the fee is $A22 (about 600 baht). I don't see any fee in my Thai account.

The exchange rates are usually listed on the relevant bank's websites. Crappy rates, definite scamming, but they are open with what the rates are.

I can do the same i.e. choose where the fee is paid if I choose sender pays all fees my bank lists all the fees separately including there charge plus Thai Bank fees.

This equates to home bank charge Sfr.4 and Thai Bank charges Sfr. 70.

If I let the Thai Bank charge i.e receiver pays all charges then I have no idea what is charged.

[IMA_FARANG]

Anyone have an idea what Thai Banks charge for receiving international transfers as it's never ever listed on my Bank statements

From my calculations its about 800THB My foreign bank charges 10THB for the transfer service.

Also the exchange rate is never listed just receive a bunch of THB very unprofessional I would say and loads of room for scamming.

As I said before I have a joint account in Bangkok Bank with my Thai partner. I transfer money monthly for her and her family's living expenses. My U.S. bank sends it by swift tansfer to Bangkok Bank in New York...which is then transferred to my account in Bangkok.

I have never paid a fee for that transfer in Thailand. My U.S. bank was charging me $30 per transfer...but I just went above their minimum required balance (savings and checking accounts combined)...and now I am a prefered customer...so they are waiving all fees on transfers as long as I keep above their minimum balance. (I expect to transfer a large amount next month, so I will have to go back to paying fees again unless I find another way to transfer money).

The rate I recieve in Bangkok is the bank rate the bank quotes for dollar/baht exchanges at the cashier on the day the money is credited to my account in Bangkok. And yes, it's easy to figure the rate as the entry in the bank book shows both the dollar amount and the Thai Baht recieved.

My Thai partner has an ATM card, which she uses to withdraw the money from the account. So, at the presnt time, the only fee I am paying is the ATM card fee in Thailand.

Yes the interest rates in Thailand banks are cr_p...but it's the only wasy I have to get money to my family easily.

Incidentally the interest rate in a savings account in a U.S. bank these days is also cr_p.

Edited September 18, 2010 by IMA_FARANG