Prasarn issued with priority list
8/07/2010

PM, Korn seek upgrade in financial products

The incoming central bank governor has been set the target by the government of ensuring fair prices for and boosting the quality of financial services available to the public.


Prasarn Trairatvorakul, president of the Thai Bankers’ Association and Bank of Thailand governor-designate, addresses a seminar at the Imperial Queen’s Park Hotel in Bangkok yesterday. The seminar was attended by Prime Minister Abhisit Vejjajiva.
SOMCHAI POOMLARD

Prasarn Trairatvorakul said Prime Minister Abhisit Vejjajiva and Finance Minister Korn Chatikavanij wanted to see an improvement in the products made available to the public by financial institutions, both in terms of quality and pricing.

Mr Prasarn, currently the president of Kasikornbank, will succeed Tarisa Watanagase as the 22nd governor of the Bank of Thailand on Oct 1 after he received the approval of the cabinet on Tuesday.

Mr Prasarn yesterday played down concerns over financial institutions engaging in unfair practices.

''The interest spread [the margin between loan and deposit rates] in the Thai banking sector is considered moderate based on economic and financial system development,'' he said on the sidelines of a seminar held by Krungthep Turakij newspaper and the Thai Health Promotion Foundation.

The average margin, officially called the net interest margin (NIM), of the banking industry in Thailand was 3.2% to 3.3% last year, which was higher than in the financial markets of developed countries but lower than that of developing countries.

Generally, the interest margin for large businesses is considerably lower than for smaller businesses because large businesses have clear credit information which reduces the risk of financial institutions and alternative means to mobilise funds such as the issue of bonds.

As a result, the improvement of credit information of small businesses will be a vital policy for the government to undertake to help lessen the spread in the long run, he said.

Mr Prasarn said he had no fears about political interference in the central bank given its structure and operating system.

Ms Tarisa said the current margin of the Thai banking system is 2.78%, which is considered not too high compared with the rate of 2.8% to 2.9% in neighbouring countries.

However, the Bank of Thailand has a plan to lower the margin based on a master plan for the country's financial system from this year to 2014.

She said if the bad debts in the banking system incurred from the 1997 financial crisis fall significantly, the operating costs of the banks will also come down.

More competition in the system will also eventually bring down service fees in the banking system.

The master plan calls for the Bank of Thailand to allow two more foreign bank branches in the country and an upgrade of some foreign bank branches to be fully-fledged commercial banks.

Mr Prasarn said he remains positive about the country's economy for this year and expects growth of 4% to 6% based on a projection from the Kasikorn Research Center.

Momentum gains from promising gross domestic product growth in the first half of the year will further support the Thai economy.

Global economic uncertainty mainly in the US and the Europe will be another key risk factor for the economy, he said.

''Thai economic growth next year would be lower than this year due to base effect, and it would be concerned rather than this year as a result of higher external risk," the upcoming central bank governor said.

With improving economy, the central bank is possible to lift its policy rate to 2% by the end of this year starting from August from the current level at 1.25%. However, it would be gradually increased in line with economic environments both globally and locally.

The Bank of Thailand has managed the country's foreign exchange position on a firm basis for the past five years.

The baht has moved with less volatility than the currency of several regional countries.

But it has appreciated against the dollar and the euro because of specific economic problems in the US and Europe leading to a weakeing of their currencies, Mr Prasarn said.

bangkokpost.com


Prasarn Trairatvorakul said Prime Minister Abhisit Vejjajiva and Finance Minister Korn Chatikavanij wanted to see an improvement in the products made available to the public by financial institutions, both in terms of quality and pricing.


Mr Prasarn said he had no fears about political interference in the central bank given its structure and operating system.