ASEAN KEY DESTINATIONS
Thai banks can meet new regulations
Bankers and regulators in Thailand believe they can easily comply with new international capital requirements designed to prevent a repeat of the 2008 crisis.
Average tier-one capital for Thai banks, primarily representing equity, stands at 13 percent of risk assets, a level nearly double the new 7 percent target set yesterday by the Basel Committee on Banking Supervision.
The target includes a requirement for banks to hold core tier-one capital of 4.5 percent of their assets and an additional 2.5 percent reserve.
Thailand's tier-one capital is three times higher than US banks and comes mostly from common equity, a Bank of Thailand official said.
It remains uncertain when the central bank will require Thai banks to comply with the new "Basel III" rules as several issues are unresolved.
Thanomsak Chotikaprakai, chief financial officer at TMB Bank, said regardless, local banks should take steps to prepare for implementation.
"It's too early to say what the impact locally will be as the regulations have not yet been finalised. But everyone is certainly following the issue and considering the potential impact on business operations," he said.
Changes in the rules can have a profound impact on bank operations by raising or lowering the amount of regulatory capital required for different types of loans in accordance to potential risk.
The Basel II rules, which local banks have implemented only recently, adds to the capital calculations by forcing banks to account for issues such as operating risk in addition to market and credit risk. Local banks are to begin using the "internal ratings-based" approach set under Basel II next year.
Usanee Liurut, an analyst at Asia Plus Securities, said Thai banks currently maintain a capital ratio overall of 14 percent to 15 percent of assets, well above the regulatory minimum of 8.5%, counting both tier-one and tier-two capital.
She said local bank assets are mostly "traditional" assets such as loans rather than more sophisticated derivative securities, and would only be slightly affected by the new rules.
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