FAQs: Banking and Finance
Banking and Financial
Laws, Contracts, Institutional Finance, Financial Workouts and
Restructuring
Q:
What are the types
of banking/financial institutions in Thailand?
A: Commercial
banks (including Thai and foreign bank branches), government banks,
quasi-governmental financial institutions, securities companies,
finance and credit foncier companies, finance and securities companies,
Small and Medium Enterprise Development Bank of Thailand (SME
Bank) and Industrial Finance Corporation of Thailand (IFCT).
Q:
What are the regulatory authorities?
A: For commercial banks
and financial institutions - Bank of Thailand ("BOT")
and the Ministry of Finance ("MOF")
For securities-related businesses
- Securities & Exchange Commission and the Stock Exchange
of Thailand
For insurance companies - Ministry
of Commerce
For industrial development - Ministry
of Industry
Q:
Are there any shareholder restrictions
on commercial banks? If so, what are they?
A: Yes.
1. Single shareholders,
other than government agencies, state enterprises or the Financial
Institutions Development Fund, may own no more than 5% of a
Thai commercial bank's outstanding shares. The MOF, upon the
recommendation of the BOT, may grant exception with additional
conditions placed.
2. Foreigners are permitted to own 100% of Thai banks and finance
companies. This is only permitted for a maximum ten-year period
from the date of acquisition. New capital invested after the
ten-year period must be provided by domestic investors, unless
the amount of foreign shareholding is less than 49% of the total
shares. A total of four (out of thirteen) Thai commercial banks
are now majority-owned by foreign banks.
Q:
What are the licensing regulations
of commercial banks?
A: Until
1996, there was a moratorium on the granting of new banking licenses.
This has been relaxed since then. At present, there are 13 Thai
commercial banks and 18 foreign-based banks with full branch status.
Since 1993, offshore banking licenses were issued to various local
and foreign institutions through the establishment of Bangkok
International Banking Facilities (BIBFs). At present, there are
31 BIBF licenses granted by the BOT to 9 Thai banks, 15 IBF foreign
banks with Thai branches, and 7 foreign banks without branches
in Thailand.
Q:
What are other noteworthy restrictions on commercial banks?
A:
1. Capital Adequacy - commercial banks follow the capital
adequacy rules of the Bank of International Settlements (BIS).
2. Investment Limitations:
(a) Commercial
banks are not allowed to purchase or hold shares in any other
commercial bank, except those acquired as a result of debt settlement
or a guarantee for credits granted. These shares must be disposed
of within 6 months from the date of acquisition. Exceptions are
granted in conjunction with the government's efforts to solve
present financial problems. Commercial banks may be allowed to
hold more than 49% of the shares of other financial institutions
up to 10 years, with possibility of further extensions.
(b) Commercial
banks are not allowed to hold more than 10% of a limited company's
shares.
(c) Commercial
banks' total share investments must not exceed 20% of their total
capital funds.
3. Ownership of real estate
- commercial banks are not allowed to own real estate without
BOT's approval, except for:
(a) their
normal business operation;
(b) where
property has been acquired on debt settlement or via public auction
of property mortgaged to the bank, provided such property is disposed
of within 5 years from the date of acquisition.
(June
30, 2003)
The
above is intended to provide general information only. The contents
do not constitute legal advice and should not be relied upon as
such. If legal advice or other expert assistance is required,
the services of competent professionals should be sought.
For
further information, please contact Mrs.
Cynthia Pornavalai, Partner & Head
of Banking and Finance Group (cynthia.p@tillekeandgibbins.com).
