3 Key Directions

Allow more flexibility regarding the business scope of financial institutions so that the existing players can better compete, innovate, and meet consumer needs. 

For instance, the investment limit on FinTech investment, excluding that in digital assets—currently at no more than 3 percent of the bank’s capital—will be lifted for subsidiaries and affiliates within a banking group.

Expand the Scope of Business for NBFIs​

- Allow e-Money service providers to operate as escrow agents and provide identity verification and authentication services (Identity Provider: IdP in the electronic-Know Your Customer (e-KYC) process).

- Allow Money Transfer (MT) and Money Changer (MC) operators to offer a broader range of services and higher transaction amount limits and provide electronic services that utilizes technologies to improve efficiency and lower costs.

- Plan to revise non-bank MT/MC licenses to allow for broader scope of businesses and services to better serve retail customers and SMEs.

Support the Roles and Functions of SFIs​

Collaborate with other relevant agencies to assist SFIs in closing the gaps unmet by existing market mechanisms or other infrastructures, but not in a manner that encourages them to directly compete with private players or other SFIs. Moreover, support on personnel capacity building and sharing common infrastructure among SFIs will enhance their role in closing such gaps, which should incur the least possible fiscal burden.

Both new and incumbent financial service providers may consult the BOT, on a case-by-case basis, concerning other banking business models (which are not a virtual bank), or other financial businesses under the BOT’s supervision.

Develop End-to-End Digital Processes for Businesses

Develop ‘Smart Financial and Payment Infrastructure for Business’ in collaboration with the relevant public and private entities, to enable end-to-end digital business; link data on business transactions, payments, and tax through an automated straight-through process. This aims to reduce costs, improve efficiency, and create digital footprints to improve access to funding at reasonable costs. In addition, a high-value payment system will be developed to accommodate business and capital market transactions.

Develop Retail Central Bank Digital Currency​

Develop and launch a pilot test for Retail Central Bank Digital Currency (Retail CBDC), a digital form of central bank money. Retail CBDC is an infrastructure that aims to provide open access to more service providers, allowing them to innovate through the implementation of new technologies. The objective of Retail CBDC is to transition Thailand to a digital economy with a safe, efficient, and low-cost option to utilize digital currencies. The pilot test is expected to be launched around the end of 2022.

Develop Standards and Support Interoperability​

Support the development of other necessary digital infrastructures, standards and interoperability of key infrastructures in collaboration with the relevant agencies including:

1. Digital ID infrastructure that is interoperable across different platforms and open to various service providers, enabling them to verify their customers’ identities using reliable data sources at reasonable costs. This will in turn allow customers to verify their identity to use financial services conveniently and securely. The initiative includes verification and authentication of corporate digital IDs through the National Digital ID (NDID) infrastructure, in collaboration with the Department of Business Development and Electronic Transactions Development Agency (ETDA).

2. Digital signature infrastructure that is low-cost, user friendly, and universal to various product designs, for example ready-to-use platforms and digital financial contracts used in digital lending and digital debt-restructuring.

Promote Digital Literacy​

Promote digital literacy and encourage public and private sectors to prioritize using digital payments over cash and cheques by collaborating among public agencies, industries and financial sector. A working group on promoting digital literacy and payments is an example of an integrated effort to create understanding and promote the use of digital payments as a national-level agenda, to ensure concerted and consistent communications and efforts that result in tangible outcomes.

Develop credit guarantee mechanisms to meet various funding needs, by collaborating with other public agencies to establish a General Credit Guarantee Facility (GCGF). The GCGF aims to provide better access to funding sources for businesses, especially SMEs. The design will accommodate different stages in their business cycle, those facing liquidity problems as affected by a financial crisis, and those seeking infrastructure financing. Key characteristics of the GCGF are the following:

1. It can guarantee loans issued by financial institutions and NBFIs.

2. In addition to loans, the facility covers various types of funding that are more suitable for start-ups, medium-sized enterprises who are ready to enter the capital market, and large corporates that seek to form joint ventures or issue debts or equities.

3. It can provide support for investments in line with the country’s long term strategic directions and economic development plans. The enhancement of credit guarantee mechanisms, especially in assessing credit risk of a debtor or the guaranteed project, can ensure that risks are effectively managed, and the guaranteed fees are risk-based consistent with the debtor or the project.

Promote database connectivity and the effective utilization of micro-level data for analytics and development of financial innovations and services. A collaboration among private and public agencies will be set up to develop mechanisms, infrastructure and legal framework amendments to facilitate the linkage of micro-level data from various agencies and form big data comprising both financial and non-financial data (e.g. behavioral data on money transfers and payments). Such extensive database will be useful for conducting comprehensive data analytics, supporting public policy initiatives, and developing financial innovations and services. For example, a data-driven, risk-based models using the borrower’s behavior and debt serviceability data can help determine interest rates for thin-file borrowers and SMEs with insufficient credit history, thus allowing them to have better access to formal lending.

In addition, micro-level database must be subject to proper data governance and must not violate data privacy rights. For example, only anonymized and pseudonymized data are available for third parties to access for analytics, with mechanisms or strict security procedures to prevent data leakages.

Actively encourage the introduction of new financial services and products that would help businesses adapt and transition away from activities that are environmentally unsustainable. The BOT will collaborate with financial institutions to develop good practice guidelines including the conduct of scenario analysis as well as climate stress testing

Set disclosure standards so that financial institutions could show their commitments and actions on environmental sustainability in a manner that is clear and consistent with international standards such as those recommended by the Task Force on Climate-related Financial Disclosures (TCFD). The BOT will also collaborate with other regulatory agencies to encourage the adoption of disclosure standards among other financial players as well as non-financial businesses to make environment-related data more widely available in Thailand. The BOT will also consider the possibilities of pushing forth the creation of data platform to facilitate data connectivity and information sharing between different agencies, both within and outside the financial sector, to support the analyses and assessment of climate-related risks and opportunities.

Put in place mechanisms or measures to help alleviate the burden or cost of adjustments for financial institutions and businesses will facilitate a timelier transition. Particularly, the aim is to increase SME’s access to the financing they need to adjust and transition to a more sustainable practice. One example is Singapore’s grant scheme to help reduce the validation expense of green loans application.

Build competencies and skills in the financial sector. The BOT will collaborate and exchange views and experiences with other financial regulators and banking associations to build up the capacity of financial sector personnel so that they are equipped with competencies and skills to utilize the tools, appropriately assess climate-related risks and opportunities, and learn from experiences of experts in the fields, relevant agencies, and international communities.

Ensure responsible retail lending practices that account for borrowers’ repayment ability to prevent over-indebtedness. Under BOT’s supervision, financial institutions and retail credit providers should ensure that their lending practices take due consideration to ensure that borrowers would still have enough disposable income to cover the basic spending needs. Moreover, households should not become overindebted especially from borrowing for unnecessary consumption spending. For instance, the total debt service ratio (DSR) should be a priority consideration, especially when lending to the vulnerable groups. This is also the case for when the borrower could arrange to have the debt service amount deducted from their salary income in advance. The BOT will closely monitor developments in household debt and consider the need for macroprudential measures to help slow down borrowing for unnecessary consumption spending once the economic recovery gains traction.

Promote holistic mechanisms for resolving debt so households can adjust and make a recovery over the longer-term without returning to insolvency. The BOT will collaborate with related agencies to devise a plan that would bring about sustainable solutions for households that owe large amounts of debt to financial service providers or other bodies such as saving cooperatives, governmental employees (e.g. loans benefit for civil servants), and the Student Loan Fund. This includes

- designing repayment plans that are appropriate to borrowers’ ability to service debt over the longer-term, whilst retaining enough disposable income after debt repayments;

- adjusting regulations or loan terms to reduce and ensure fair debt burden such as by applying the repayments to the principal amount first;

- offering terms that incentivize borrowers to continue repaying their debts on time and complete debt repayments earlier such as by reducing the principal owed for those with good repayment track record.

Promote a collection of comprehensive credit data issued by various financial service providers or agencies and utilization of those data to enhance retail credit underwriting. The data should support creditworthy households to have access to credit with risk-based pricing. Those data should also be utilized in tackling insolvency and reducing over indebtedness.

- One possible solution in the short-term is to collaborate with relevant agencies to encourage non-bank retail credit providers and key saving cooperatives to become members of the National Credit Bureau (NCB).

- Over the longer-term, the databases of various agencies should be connected into one large database that financial service providers can leverage to develop and offer financial products that better fit the needs and capabilities of the borrowers. Such data should also be further used in developing a scoring system to promote good financial behavior and credit culture in the financial system.

Review regulations that are currently limiting the service providers’ abilities to adapt, compete, innovate, or serve customers better. Examples,

- include promoting risk-based pricing on retail lending rates before a review to lift the interest rate ceiling for retail loans. As a result, borrowers whose risk levels are below the ceiling rate will face lower interest rates while also expanding credit access to those with higher risk.

- Another revision aims to review the Regulatory Sandbox to improve clarity on the criteria and processing time to reduce burdens on participants. On this front.

Establish an exit mechanism that allow financial service providers facing business challenges or are unable to compete, to cease operations without disrupting the financial system or inflicting large-scale losses to the economic and financial system, depositors, and consumers. The BOT aims to set up conditions and procedures for the service providers to return their licenses or registration certificates and exit in an orderly fashion. In addition, there will be a license/ certification revocation process for the service providers who do not conduct businesses appropriately such as those with prolonged period of inactivity or willful non-compliance.

Appropriate supervision of commercial banks’ financial business groups, especially those undergone organizational restructuring as part of the effort to leverage new technologies and digital infrastructure. These include FinTech or e-commerce platforms that are connected to financial services.

Enhance Governance and Risk Management​

Enhanced supervision of corporate governance and risks of financial business groups, using risk-based approach and considering their significance to the respective commercial banks and their financial business group. Specifically, attention would be paid to roles of boards of directors of holding companies that are also parent companies with regards to risks oversight and prevention of any conflict of interest. Another area of focus is supervision of evolving IT/cyber risks undertaken by firms within the financial business groups which seek to capture opportunities presented by new technology and digital channels. The IT/cyber risk supervision framework for NBFIs would correspond with their risk profile and would be under the same standard that financial institutions comply to.

Supervise the Financial Business Groups​

Supervise transactions within financial business groups as well as between commercial banks and their respective business groups. The oversight will monitor, for instance, funding or loan provision by commercial banks; shared distribution channels such as branches, digital and other sales channels; shared system; and customer data utilization to prevent the transmission of risks between the two entities. The goals are to address threats to the stability of both the business groups and deposit-taking commercial banks, as well as to prevent conflict of interest or unfair treatment of consumers.

Collaborate with Relevant Supervisory Authorities​

Collaborate with relevant supervisory authorities to (i) to develop framework for supervising and monitoring new dimensions of risks associated with financial business groups, which have implications on the financial system stability; and (ii) to outline appropriate consumer protection framework.

Extend the regulatory purview to include non-bank FIs (NBFIs) and their business groups that provide a wide range of financial services and are systemically important. This is intended to mitigate transmission of risks and prevent abuse of market power that could lead to significant adverse impact on the financial system and consumers at large.

Assess Risks to Regulate NBFIs​

Assess risk and systemic importance of NBFIs and their business groups offering diverse financial services. The evaluation will consider:

1. their sizes;

2. interconnectedness and potential risk spillovers to other sectors in the financial system, for example, through large scale bond issuance that can pose risks to the public;

3. the significance of the service providers, both in terms of the degree of substitutability and their potential abuse of market power. For instance, a major creditor in a certain segment or a platform provider with many active users may be regarded as important players; and

4. complexity of potential threats such as those associated with business groups with complicated structure or high volume of complex transactions.

Supervise NBFIs and Their Business Group Offering Diverse Financial Services​

More vigilant supervision of systemically important NBFIs, with particular focus on the prudence dimension. These include corporate governance, risk management, maintenance of capital buffer, and preventative measures and contingency plans for stress period designed to mitigate adverse impacts on the financial system and consumers. Consolidated supervision of systematically important NBFIs’ business groups with diverse financial services would also be considered to (i) ensure prudence and limit risk transmissions within group that could potentially undermine stability of the overall business group or significantly important NBFIs within group as well as to (ii) prevent the abuse of market power, conflict of interest, and unfair treatment of consumers. The consolidated approach is consistent with those adopted or under considerations of supervisory agencies in China, the US, and Europe.

Apply activity-based supervision of major retail lenders in terms of consumer protection and macroprudential policy associated with household debt. A supervision guideline for the currently unregulated non-bank retail lenders with high volume of transactions and rapid growth will be issued such as hire-purchase and leasing companies, so they will be under the same supervisory framework as that of commercial banks and regulated non-bank retail lenders.

Apply Risk-Based Approach for IT Supervision​

Regulate NBFIs under the supervision of the BOT with a standardized framework for IT/cyber risk supervision and appropriate risk management that suits their risk profiles. The supervision aims to elevate NBFIs’ preparation for increasing IT/cyber risks and limit spillovers to other sectors. At the same time, excessive regulatory burden and costs for the NBFIs would be avoided by (i) allowing them to demonstrate or prove their ability to manage IT/cyber risks through self-assessment exercises and (ii) collaboration with other regulatory authorities to lessen compliance cost and burdens of complying to multiple IT/cyber regulations, for instance, accepting single report submission instead of requesting multiple submissions to each regulatory agency.

Build IT/Cyber Talents​

Facilitate IT/cyber capacity building by building human capital on IT/cyber will be leveraged on close collaboration among key financial agencies, e.g. Thailand Banking Sector CERT (TB-CERT), to raise IT/cyber risk awareness among boards and high-level executives of financial institutions. Moreover, the BOT will cooperate with other national agencies such as National Cyber Security Agency (NCSA) to further strengthen IT/cyber expertise and develop a talent pool for the financial sector.