Santiprabhob, Veerathai, 2002, Lessons Learned from Thailand’s Experience with Financial Sector Restructuring, November (mimeo).
Prepared by Andrea Schaechter.
There is a single branch limit for foreign branches.
The Ministry of Finance also has a 49.8 percent stake in Thai Military Bank with the Thai military as the other big shareholder. Nevertheless, this bank is classified by the BOT as a private bank, a classification that is followed in this paper.
The Hcrfindahl-Hirschmann Index (HHI), a measure for market concentration, which is calculated as the sum of squares of each bank’s market shares, is 1.3 for the locally incorporated banks. An HHI of less than 1 indicates a market with no concentration, between 1 and 1.8 moderately concentration, and above 1.8 high concentration.
The current majority foreign ownership of four banks is a result of Emergency Decrees and limited to a 10-ycar period.
The following sections deal with locally incorporated banks only.
For more details on progress in debt process see Chapter V.
To raise capital in the aftermath of the crisis without diluting ownership five banks issued hybrid capital instruments, so-called SLIPS (Stapled Limited Interest Preferred Securities) and CAPS (Capital Augmented Preferred Securities). The ratio of those instruments to tier I capital is on average more than 50 percent.
Rising interest rates would also raise the funding costs for the unprovisioned part of NPLs that banks continue to carry on their books.
In 2002, the BOT revised the regulation on net foreign exchange position in line with BIS standards. Banks must not maintain a net foreign exchange position of an individual currency exceeding 15 percent of total capital, and the aggregate position must not exceed 20 percent of total capital.
An attempt to quantify contingent liabilities is undertaken in Chapter III.
The SME Bank’s high level of NPLs is a legacy of its predecessor, the SIFC, which had a disappointing history of performances. The bank has since been recapitalized, risk management and corporate governance have been strengthened, and business activities have more than doubled.