Financial institutions have essential roles in the financial markets as main players in the Foreign Exchange market, money market, and bond market. They may engage in the markets to adjust their own liquidity status, facilitate transactions of clients, seek return for investment portfolios, or to comply with rules and regulations stipulated by the Bank of Thailand (BOT).
As the current economic structure becomes much more complex and connected a great deal with global economies, exchange rate tends to be more volatile. Financial institutions should encourage clients to hedge against foreign exchange risks rather than waiting for the BOT to take care of the baht.
In case of excessive baht volatility that jeopardizes the overall economy or should there be any sign of baht speculation by so-called ‘hot money’, the BOT stands ready to step in the FX market and take appropriate actions as necessary. The BOT takes into consideration the Nominal Effective Exchange Rate (NEER), which comprises currencies of key trading partners and competitors, not just the US Dollar. In any case, the BOT ensures that its actions in the market do not contradict the country’s economic fundamentals, which would otherwise lead to further imbalances.
In addition to usual Foreign Exchange Regulations that financial institutions must comply, the BOT has also imposed Measure to Prevent Thai Baht Speculation, which it could consider tweaking the intensity of measures to suit market situation at times by informing financial institutions through Financial Markets Notification/Circular Letter
Regarding the bond market, financial institutions participate in the primary market as bidders at Debt Securities Auction arranged by the BOT. Details of the debt securities will be provided at predetermined Auction Schedule.
Financial institutions may propose to be the BOT’s primary dealers, which will be the BOT’s counterparties in government debt securities trading transactions for the monetary policy implementation purposes. The BOT will select qualified financial institutions to be its Bilateral Repo Primary Dealers and Outright Primary Dealers. The BOT will periodically evaluate performance of the primary dealers to stimulate competition and enhance efficiency in monetary policy transmission.
In a bid to maintain financial stability and ensure effective monetary policy implementation, the BOT conducts Open Market Operations (OMOs), the most actively used Monetary Policy Instruments, to keep short-term interest rate in the money market in line with the policy interest rate set by the Monetary Policy Committee.
To widen and deepen the country’s money market, the BOT has developed the Bangkok Interbank Offered Rate (BIBOR) and the Private Bilateral Repo and joined hands with the Ministry of Finance and other relevant agencies on debt market development initiatives such as the development of government debt issuance in the primary market, improvement of liquidity and efficiency in the secondary market, and development of settlement infrastructure for debt securities market.
Financial institutions are obliged to submit various types of data to the BOT, including financial markets data. The BOT has developed Data Management System-DMS to accommodate data submission from financial institutions.
Moreover, the BOT has set up Financial Market Communication Center to release notifications and circulars and acts as a hot line communicate hub with financial institutions on issues regarding rules and regulations of the Financial Market Group and to coordinate with other groups in the BOT.
Financial Institutions can reach the Financial Market Communication Center at Tel: 02-2836727, or Fax: 02-2836009, or E-mail: FMOG_comm@bot.or.th
Interesting issues for financial institutions regarding the financial markets:
- Weekly Movement of Primary Bond Market
- Operational Notices
- Auction Result