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BOT rejects claim that banks have fuelled rise in the baht
Suphannee Pootpisut,
Sarun Kijvasin,
Sucheera Pinijparakarn
The Nation

BANGKOK: -- The Finance Ministry is pointing a finger at commercial banks, accusing them of being behind the steady rise of the baht this year.

Somchai Sujjapongse, director-general of the ministry's Fiscal Policy Office, said in the first quarter a number of commercial banks had raised US$2 billion (Bt59.6 billion), or about half of capital inflows into the local bond market. In the first quarter, global fund bond investments reached Bt140 billion, pushing foreign bond holdings to Bt850 billion or 12.6 per cent of the outstanding value.

"We often hear that the baht is strengthening because of foreign capital flowing into the bond market. But borrowing by financial institutions is also the cause," said Somchai, who added that foreign direct investment worth US$165 million could also be attributed to the baht's appreciation.

Somchai said that by raising overseas funds, Thai banks were able to take advantage of lower interest rates overseas. In addition to gaining a higher margin through re-lending the amount at a higher rate, they could also gain from a stronger baht.

"The Finance Ministry can do nothing about this, but a proper monetary policy could be put in place," he said.

This accusation marks a new episode in the spat between the Finance Ministry and the Bank of Thailand - thought to have been settled following their meeting a week ago.

The Finance Ministry previously blamed the BOT for failing to rein in the currency's appreciation by lowering the policy rate. But the central bank has been adamant that the baht appreciation is in line with market movements, except for a brief period in April when it spiked sharply - hitting Bt28.58 against the US dollar - the highest since the 1997 devaluation. Bank of Thailand governor Prasarn Trairatvorakul said at the time the baht had risen "too quickly", a comment which seemed to stop the trend. The baht has since weakened to around Bt30 to the dollar.

Thai banks, including Bangkok Bank raised US$1.2 billion via the issuance of debentures, with Kasikorn Bank and Siam Commercial Bank each mobilising $500 million late last year. Krung Thai Bank also raised $500 million in the first quarter.

According to the central bank, capital inflows were worth $4.78 billion in the first quarter, $2.74 billion of which went to the central bank, plus $2.1 billion to banks and $1.86 billion to government coffers. Capital outflows in the same period were $1.9 billion.

However, a source at the central bank rebutted this accusation. On the condition of anonymity, the source said foreign funds were hedged against exchange rate risks. This limited a possible forex gain and also limited the exchange rate movement at home. Such fund raising is part of normal business operations, the source said.

"Banks brought in dollars to cope with dollar hedging demand and overseas investment by their clients. Such inflows have thus created almost zero impact on the exchange rate. There have been some speculative activities by banks or bank's clients but such activities have not caused a large impact," the source said.


-- The Nation 2013-05-20

[Thai at Heart]

Now this is exactly what caused the start of the screw up in 97.

Now I see what is going on and why Thaksin might be so pissed off.

If this is true, and the reason that the baht may have appreciated is down to private banks borrowing for their own account. Then it would not be ptp screwing up the country for their own benefit, but some people actively trying to screw the country and ptp.

Edited May 19, 2013 by Thai at Heart

[Robby nz]

Then there was the finance ministry borrowing how many billion on inflation prof bonds without collecting fees and taxes on the deal?

[NeverSure]

Yeah, let's blame someone else. How many fingers do we have available for pointing at someone else?

Obviously someone makes a lot of money during these run-ups, and doesn't lose it when it crashes.

We could start with the clear fact that the government insists on borrowing and spending more money than it has, while having a lousy credit rating (BBB-) and having to pay a high interest rate to attract the money to borrow.

Then we could realize that the BOT can't really lower the policy rate or the government wouldn't be able to borrow the money to pay its bills. So interest rates stay high.

High interest rates attract even more money which drives up the price of the baht as foreign money buys baht every time it comes into Thailand.

But we can't stop because we've made so many populist promises to buy votes.

Then the banks find they can make a lot of money with this foreign money by lending it for all kinds of things like the new car scheme, the new home scheme, and massive home and condo building on speculation throughout Thailand - even to the far reaches of Isaan. That's not to mention all of the massive lending for commercial buildings including big malls.

Then of course there is the rice scheme for which the government is upside down about 700 billion baht, backed only by whatever stocks of deteriorating rice there "may" be, wherever it "might" be. In any event, they paid about twice what it was worth when it was fresh, so there's no guessing what they really have now. This will be owed to the government's own Agricultural Bank which can't afford the loan but on which no payments are being made.

So naturally the banks want to "sell bonds" to have money to loan on these huge deals.

It's a lot of fun until the party is over. We should start a pool for guessing when.

[A Member]

Banks also make easy money from anyone who uses an ATM for access to an overseas account as the local fee has gone up from B150 to B180 for the simple privilege of putting your card in their machine and this is in addition to the charge levied by the overseas bank. I have 2 pensions which are paid, by regulations, into an overseas bank and with the need to use ATMs on more than one occasion I pay at least B1,500 a month in bank charges. I could of course use standings orders but it's a lottery as to when the remittance will find it's way into an account as although a TT may take 48 hours the handling at this end takes as long as the bank decides.

[bigbamboo]

It doesn't sound as if the Finance Ministry has it's finger on the pulse does it?

That is a worry.

[Pib]

Banks also make easy money from anyone who uses an ATM for access to an overseas account as the local fee has gone up from B150 to B180 for the simple privilege of putting your card in their machine and this is in addition to the charge levied by the overseas bank. I have 2 pensions which are paid, by regulations, into an overseas bank and with the need to use ATMs on more than one occasion I pay at least B1,500 a month in bank charges. I could of course use standings orders but it's a lottery as to when the remittance will find it's way into an account as although a TT may take 48 hours the handling at this end takes as long as the bank decides.

Stick your card into an AEON ATM if you have any nearby....they do not charge a foreign card fee (i.e., the 150 baht fee).

[moe666]

Again BiG T has targeted the BOT as his new enemy, demonstration coming up

[Pib]

It doesn't sound as if the Finance Ministry has it's finger on the pulse does it?

That is a worry.

They sure don't seem to be doing any thing constructive other than throwing accusations at the BOT. The Finance Ministry could take some actions on their own but they are not.....instead, they just continue throwing public darts at the BOT.

[smedly]

unfortunately in Thailand the needs of the few outweigh the needs of the many

there are a small group of very rich people in Thailand feeding off this strong baht - PT doesn't like it because they are not getting their share and as usual it's the Thai people that are suffering, the governor of the BOT is also on the take I'd guess

I find it amusing when this subject comes up that they constantly compare interest rates with other Asian countries - perhaps they need to take a long hard look at themselves and forget about what others are doing - Japans - Malaysia - Korea etc interest rates should never be mentioned in the same sentence as Thailands economy - they are completely different

[Thai at Heart]

unfortunately in Thailand the needs of the few outweigh the needs of the many

there are a small group of very rich people in Thailand feeding off this strong baht - PT doesn't like it because they are not getting their share and as usual it's the Thai people that are suffering, the governor of the BOT is also on the take I'd guess

I find it amusing when this subject comes up that they constantly compare interest rates with other Asian countries - perhaps they need to take a long hard look at themselves and forget about what others are doing - Japans - Malaysia - Korea etc interest rates should never be mentioned in the same sentence as Thailands economy - they are completely different

Well, this story scares me more than anything else that we read about the issues facing the Thai banking system. It was precisely this type of borrowing that put Thailand in the poop in 97, and should be undertaken very carefully and wisely. I am sure risk systems in banks in Thailand are a lot better than they were in the 90's, but borrowing overseas to avail yourself of a cheaper exchange rate can eventually cause mayhem.

If the inflow really represents half of the total inflow into the capital market, I can understand the logic of some crying that the exchange rate is not at a "true" value, since this does not represent pure investment from overseas, rather banks "importing" money at a lower rate than they can access domestically.

[givenall]

Then there was the finance ministry borrowing how many billion on inflation prof bonds without collecting fees and taxes on the deal?

all temporary, since no one over here really understand the monetary effect for both inflation and currency and they are only interested in their agenda. All I can say that I am looking for ward for $ become 40 bath again

[slapout]

Multi tasking seems to be hard for those in charge of education, flood control, farm product support, fuel support, currency, populist policies, etc. to understand, much less successfully implement.

The results, or some would say 'lack of', would seem to point out the need for 'thinking outside the box', instead of the rote reguration of pipe dreams of people who are only after self benifit.

We might be seeing history in the making, a country making the same mistakes, listening to the same people, without having to overcome a generation gap.

[Thai at Heart]

Then there was the finance ministry borrowing how many billion on inflation prof bonds without collecting fees and taxes on the deal?

all temporary, since no one over here really understand the monetary effect for both inflation and currency and they are only interested in their agenda. All I can say that I am looking for ward for $ become 40 bath again

The BOT gets it, that is why they are digging their heels in so much about dropping the interest rate, but if these leechy banks are borrowing USD at less than 1% and lending them out at something akin to the domestic Thai baht interest rates, then this really really stinks.

[NeverSure]

Let's see. If I were one of the very privileged and wealthy people in Thailand, sitting on a huge pile of baht, would I want it high or low?

If I were in Dubai with huge pile of foreign currency, and hoping to be pardoned and return to Thailand, when I arrived and exchanged into baht, would I want the baht high or low?

Who is keeping the baht high as long as possible?

Who is saying it is too high, and calling for measures to lower it?

Does any of them care about the people or the country?

Edited May 20, 2013 by NeverSure

[khunken]

Let's see. If I were one of the very privileged and wealthy people in Thailand, sitting on a huge pile of baht, would I want it high or low?

If I were in Dubai with huge pile of foreign currency, and hoping to be pardoned and return to Thailand, when I arrived and exchanged into baht, would I want the baht high or low?

Who is keeping the baht high as long as possible?

Who is saying it is too high, and calling for measures to lower it?

Does any of them care about the people or the country?

Well, it's obvious that Mr T would prefer a weaker Baht for selfish reasons.

In any case, the current exchange rate, apart from a spike some weeks ago, hasn't moved since 1st March. I monitor the rate on a weekly basis and the mid point was 29.79 on 1st March. On Friday is was 29.78.

This is all about PTP henchmen having a go at the BOT. Personally I'm more concerned with inflation here.

The prices of various food items such as chicken, pork, various vegetables & fruit has gone skywards recently - all in my local wet market.

Edited May 20, 2013 by khunken

[12DrinkMore]

Banks also make easy money from anyone who uses an ATM for access to an overseas account as the local fee has gone up from B150 to B180 for the simple privilege of putting your card in their machine and this is in addition to the charge levied by the overseas bank. I have 2 pensions which are paid, by regulations, into an overseas bank and with the need to use ATMs on more than one occasion I pay at least B1,500 a month in bank charges. I could of course use standings orders but it's a lottery as to when the remittance will find it's way into an account as although a TT may take 48 hours the handling at this end takes as long as the bank decides.

If you are retired in Thailand using an ATM to drawn cash on foreign accounts is not going to be the cheapest way.

Open an account here and transfer in one lump enough money for a few months' expenses or even a year's expenses.

[NeverSure]

Banks also make easy money from anyone who uses an ATM for access to an overseas account as the local fee has gone up from B150 to B180 for the simple privilege of putting your card in their machine and this is in addition to the charge levied by the overseas bank. I have 2 pensions which are paid, by regulations, into an overseas bank and with the need to use ATMs on more than one occasion I pay at least B1,500 a month in bank charges. I could of course use standings orders but it's a lottery as to when the remittance will find it's way into an account as although a TT may take 48 hours the handling at this end takes as long as the bank decides.

This is so far off topic and so irrelevant I just have to ask how you even typed it?

[timewilltell]

What happens when the ludicrous qualitative easing that's going on stops and the foreign countries up their interest rates - presumably all this money flows the other way then?

[Anon999]

Banks also make easy money from anyone who uses an ATM for access to an overseas account as the local fee has gone up from B150 to B180 for the simple privilege of putting your card in their machine and this is in addition to the charge levied by the overseas bank. I have 2 pensions which are paid, by regulations, into an overseas bank and with the need to use ATMs on more than one occasion I pay at least B1,500 a month in bank charges. I could of course use standings orders but it's a lottery as to when the remittance will find it's way into an account as although a TT may take 48 hours the handling at this end takes as long as the bank decides.

Why you do it the most expensive is a mystery? Transfer the money from your offshore account to a FX Trader and you can have it in your Thai current account same day and no charges either end. You get the rate they tell you.

[Thai at Heart]

Let's see. If I were one of the very privileged and wealthy people in Thailand, sitting on a huge pile of baht, would I want it high or low?

If I were in Dubai with huge pile of foreign currency, and hoping to be pardoned and return to Thailand, when I arrived and exchanged into baht, would I want the baht high or low?

Who is keeping the baht high as long as possible?

Who is saying it is too high, and calling for measures to lower it?

Does any of them care about the people or the country?

Well, it's obvious that Mr T would prefer a weaker Baht for selfish reasons.

In any case, the current exchange rate, apart from a spike some weeks ago, hasn't moved since 1st March. I monitor the rate on a weekly basis and the mid point was 29.79 on 1st March. On Friday is was 29.78.

This is all about PTP henchmen having a go at the BOT. Personally I'm more concerned with inflation here.

The prices of various food items such as chicken, pork, various vegetables & fruit has gone skywards recently - all in my local wet market.

If the banks are engaging in carry lending, better to research who owns these institutions and where there political bias lands before cussing Thaksin.

[Thai at Heart]

What happens when the ludicrous qualitative easing that's going on stops and the foreign countries up their interest rates - presumably all this money flows the other way then?

Exactly, and the country rides it one way and the other. I would rather the bot have some space to stimulate the economy than be in this position with interest rates at 0.5%.

[A Member]

Banks also make easy money from anyone who uses an ATM for access to an overseas account as the local fee has gone up from B150 to B180 for the simple privilege of putting your card in their machine and this is in addition to the charge levied by the overseas bank. I have 2 pensions which are paid, by regulations, into an overseas bank and with the need to use ATMs on more than one occasion I pay at least B1,500 a month in bank charges. I could of course use standings orders but it's a lottery as to when the remittance will find it's way into an account as although a TT may take 48 hours the handling at this end takes as long as the bank decides.

Stick your card into an AEON ATM if you have any nearby....they do not charge a foreign card fee (i.e., the 150 baht fee).

Thanks very much for that, unfortunately I'm sure there are none in my area but it's worth a good look.

[Thongkorn]

All the Thai Government says is,"its not the Baht that's strong,The Problem is in Europe, But if Europe cannot buy Thai goods how does Thailand Economy keep going.

[rubl]

Another topic today has the Deputy Prime Minister/Finance Minister Kittiratt Na-Ranong saying this year’s exports should also expand by 7.5 per cent. Imagine how much more the expansion could be with the Baht dropping a wee bit

[Thai at Heart]

All the Thai Government says is,"its not the Baht that's strong,The Problem is in Europe, But if Europe cannot buy Thai goods how does Thailand Economy keep going.

That depends very much what you are selling. On another thread, exports are predicted to be up 7% for the year. Let's see if it pans out.

[davidstipek]

Banks also make easy money from anyone who uses an ATM for access to an overseas account as the local fee has gone up from B150 to B180 for the simple privilege of putting your card in their machine and this is in addition to the charge levied by the overseas bank. I have 2 pensions which are paid, by regulations, into an overseas bank and with the need to use ATMs on more than one occasion I pay at least B1,500 a month in bank charges. I could of course use standings orders but it's a lottery as to when the remittance will find it's way into an account as although a TT may take 48 hours the handling at this end takes as long as the bank decides.

If you are retired in Thailand using an ATM to drawn cash on foreign accounts is not going to be the cheapest way.

Open an account here and transfer in one lump enough money for a few months' expenses or even a year's expenses.

Actually if you are retired, look to see if there is an overseas branch of "Bank Of Bangkok" in your Country (most have at least one). I am retired my SSI is deposited by US Treasury Electronicly every month. at Midnight on payment date. The second it is accepted at Bank of Bangkok in New York City, it showes up here. I get an Electronic Message stating Amount in USD minus a $5.00 fee and it conversion to Baht and at what rate it was deposited. I have no delay in getting funds here it is all ASAP! For everyones Knolledge... Bank Of Bangkok is Recognised (my spelling has gone to shit...sorry) by Social Security Admin. as a legal depository of SSI funds. Account must be in American Benificeraries name, cannot be joint. cannot have any ATM Cards attached, and you must show Passport when withdrawing or when withdrawls are made.

All of this is fine as funds are safe from any scams. New York is telling you what was received from SSI and total of Deposit. If you go to get passbook updated... matches message on your Cell Phone! And only fee is $5.00 to accept and convert, period!!

Edited May 25, 2013 by davidstipek