The Bank of Thailand has a vast coverage of duties and responsibilities such as maintaining stability of the economy, the financial system, the payment system, foreign exchange transactions, and financial institutions supervision. Specific set of legislations are drafted to authorize the Bank of Thailand to perform its various roles effectively. Laws related with the BOT’s direct responsibilities include:
Bank of Thailand Act: This act sets out objectives, work scope, and organization structure of the BOT in accordance with the international central banking standard.
Currency Act: This act lays out the BOT’s roles in managing international reserves and maintaining currency reserve to ensure the stability and confidence in the baht. It also describes the BOT’s duties in designing, printing, issuing, managing banknotes so that there are adequate quality banknotes in circulation.
Exchange Control Act: The act sets out the BOT’s roles in controlling and restricting currency exchange or other operations in which concerning foreign currency transactions.
Financial Institutions Businesses Act: This act authorizes the BOT to supervise financial institutions, ensuring they have risk management capability and their board, management, and staffs comply with good governance rules so as to limit any risks that may cause damage to the general public’s deposits.
Royal Decree on electronic payment service supervision: This decree empowers the BOT to set regulations, methods, service condition, as well as promoting electronic payment service. The e-payment service facilitates more convenience personal spending and at the same time enhances competitiveness of the business sector and service quality of the public sector.
Besides the aforementioned legislations, there also are laws governing issues that are not under direct supervision of the BOT but yet link with the central bank in some way. These laws include:
Deposit Protection Agency Act: The prime objective of this act is to ensure that deposits at financial institutions are protected. Financial institutions are required to contribute to the agency in proportion to their deposit base. The agency will use the contributed fund to repay depositors in case any financial institution bankrupts and the authority revokes its bank license.
Credit Information Business Act : This law paves way for financial institutions to access data on financial status and credit record of clients, allowing them to figure out how much debt the client already has with other financial institutions and help them assess financial risk of their clients more accurately. The access to these crucial information will not only help limiting probability of new nonperforming loans but will also strengthen financial status of financial institution and the overall banking system.
Emergency Decree on Thai Asset Management Corp: This decree facilitates the establishment and operations of Thai Asset Management Corp., which was set up to manage sub-standard assets purchased from financial institutions, restructure debt and organizations under its management in order to rehabilitate the country’s economy.
Emergency Decree on the authorization of the Ministry of Finance to borrow fund to aid the Financial Institutions Development Fund: This legislation allows the Ministry of Finance to raise funds from the financial market via government bond issuance to finance the operations of the Financial Institutions Development Fund (FIDF), which provided financial assistance to troubled financial institutions in the wake of the 1997 financial crisis.
Emergency Decree on management revision of the Ministry of Finance’s debt occurred from aiding the Financial Institutions Development Fund: The decree essentially transferred the obligation to pay interest of the debt occurred from bailing out troubled banks during the 1997 financial crisis from the Ministry of Finance to the FIDF. Principle repayment obligation remains with the Bank of Thailand but the decree paves way for the central bank to call up contribution from existing financial institutions to help shouldering the burden of principle and interest payment.
Emergency Decree on provision of financial aid to people suffered from the flood: This law empowers the BOT to temporarily lend fund to financial institutions, which will re-lend at special low rate to people suffered from the devastating flood in 2011 and was in dire need of financial assistance. The aid played a significant role in reviving the country’s economy.
Other than the legislations listed above, there also are other rules, regulations, and measures that are issued by either the Bank of Thailand or other agencies. They can be found from the following sources:
- BOT Notifications/Circulars
- The Securities and Exchange Commission
- The Consumer Protection Board
- Credit Information Protection Committee