Financial institutions are vital elements that facilitate the country’s financial system to function smoothly. They act as financial intermediaries, collecting deposits and allocating funds to the real sector, settling payment of goods and services, managing risks, and providing financial information to consumers. Therefore, it is essential to ensure that financial institutions operate in transparent and effective manners with good governance and proper risk management system to prevent any loss on depositors’ money.
Financial Institutions under the Bank of Thailand’s supervision
By virtues of the Financial Institutions Business Act B.E. 2551, the Act Amending the Emergency Decree on Asset Management Company B.E. 2541 B.E. 2550, and other legislations such as Revolutionary Council Order No. 58, the BOT is responsible for supervising and examining financial institutions including Thai commercial banks/ retail banks/ foreign bank’s subsidiaries/ foreign bank branches/ finance companies/ credit foncier companies/ asset management companies and certain Non-bank financial operators, namely credit card companies and personal loan companies.
In addition, the BOT has been assigned by the Ministry of Finance to examine Specialized Financial Institutions under the supervision of the ministry including the Government Housing Bank, the Government Savings Bank, the Bank of Agriculture and Agricultural Cooperatives, the Islamic Bank of Thailand, and the Small and Medium Enterprise Development Bank of Thailand. The BOT is also authorized by the Credit Information Business Act to supervise the National Credit Bureau.
Financial Institutions Supervision Principles
The BOT implements financial institutions supervision policy under the five following principles
1. To ensure that financial institutions operate with cautious and develop solid risk management system The BOT sets requirement to ensure that financial institutions have adequate quality capital that meets international standard to cope with risks and potential losses from their businesses. The BOT also sets regulations for financial institutions to manage credit risk, liquidity risk, operation risk, market risk, and comply with accounting standard. Moreover, the bank also applies the consolidated supervision concept that suits risk profiles of financial institutions.
2. To promote efficiency of financial institutions The BOT encourages fair level of competition and ensures that supervision activities and regulations do not obstruct business and efficiency development. In this regard, the BOT has conducted Financial Institutions Development Plan, granted financial business licenses, and set clear business scope of financial institutions etc.
3. To ensure good governance at financial institutions The BOT ensures that directors, management, and staffs of financial institutions perform their duties with honest. The bank emphasizes on roles and responsibilities of directors, board structure, internal control and internal audit, as well as information disclosures and transparency.
4. To ensure financial institutions treat clients and the public fairly and disclose adequate information The BOT has market conduct regulations to supervise financial institutions on both financial and cross-selling businesses to protect financial consumers, promote accessibility to financial services, and ensure fairness to all concerned parties. The BOT focuses on protecting financial consumers’ basic rights including the right to receive accurate information, the right to choose financial products and services freely, the right to file complaints, and the right to be compensated in case of losses.
5. To support macro prudential measures The BOT uses regulations on financial institution as one of the instruments to tackle economic imbalances. For instance, it tightened rules governing credit card business such as setting minimum income requirement of card holders, credit limit, and minimum monthly repayment to curb household debt.
Committees and Groups concerning financial institutions policy and supervision
The BOT’s key committees responsible for determining policies involving financial institutions supervision include:
- Financial Institutions Policy Committee (FIPC) is responsible for setting prudential policy, regulations and supervisory practices to ensure the safety and soundness of financial institutions. The FIPC determines policies concerning financial institutions, policies on the launch and closure of financial institutions’ branches, financial ratio requirement that financial institutions must comply with under financial institution business legislations, and provides opinions or recommendations concerning the establishment of new financial institutions. The FIPC also tracks the BOT’s performance as the provider of banking facilities to financial institutions and its supervision roles.
- Payment Systems Committee (PSC) is responsible for setting policies involving payment system under the supervision of the BOT and interbank clearing system to ensure safety, soundness and efficiency. The PSC also tracks the BOT’s operations in establishing or supporting the establishment of a payment system.
The BOT’s Financial Institution Policy and Supervision Groups comprise of:
- Financial Institutions Policy Group is empowered to formulate development policies and strategies for the financial institution and payment systems. The group issues rules and regulations to ensure soundness of financial institutions and payment system as well as supervises, analyzes, and tracks operations of financial businesses.
- Supervision Group is authorized to supervise, examine, analyze, and track performances and risk management systems of individual financial institutions as well as consider various permission requests from financial institutions. In case any financial institution runs into financial and operating difficulties or violates any legislation, the group will stipulate measures for the troubled institutions to fix their problems within specific timeframe.
Cooperation with other supervisory agencies
Due to the tighter linkage between domestic and external monetary systems as well as wider scope and more sophisticated financial transactions amid streams of financial innovations and globalization, the BOT has managed to connect with other supervisory agencies, both locally and abroad, to enhance effectiveness in its supervision practices. Among external agencies the BOT cooperate with are the Securities and Exchange Commission, the Stock Exchange of Thailand, the Deposit Protection Agency, Office of Insurance Commission, central banks and regulators of other countries. The forms of cooperation vary including medium- and high-ranking executive discussions, staffs exchange, and information exchange etc.
Useful information for the general public:
- Interest rate
- Financial institutions holidays
- Names, addresses, and websites of financial institutions
- Thailand’s financial landscape
- The Financial Sector Master Plan Phase II
- BOT Roles and Responsibilities
- Financial institutions supervision in practices
- Credit card
- Payment system services