Just received from the chamber of Commerce,
it is a bit long, but well, it's their new rules...
money transfers and so on... Here we Go :
Bangkok Bank's Global Payment Services Newsflash
Bangkok Bank has issued several updates on the Bank of Thailand's (BOT)
reserve requirement on short-term capital inflows since December 18, 2006.
We are pleased to summarize all the related issues and the impact on the
operation of your THB account with us as of December 29, 2006 in this
newsflash and also attach a list of frequently asked questions which we
hope will help you better understand the BOT regulations.
Please disregard all the previous issues and refer to this issue for your
reference.
1. Reserve Requirement on Short Term Capital Inflows
In order to curb short-term capital inflows and limit Thai Baht speculation,
the BOT announced on December 18, 2006 that all financial institutions in
Thailand must withhold 30% of all foreign currencies which are brought into
Thailand and converted into Thai Baht and remit the required reserves in
foreign currencies to the BOT. After one year, customers whose foreign
currencies have been withheld can request for refunds without interest by
submitting related evidence to prove that the funds have been in Thailand
for at least one year. Should any customers wish to repatriate their funds
earlier than one year, they would be refunded only two-thirds of the amount.
Relaxation Procedures
On December 19, 2006, the BOT relaxed the reserve requirement to exclude
investment in the equities markets and foreign direct investment after a
sharp sell-off in the Thai stock market.
The BOT made further clarifications on December 22, 2006 on what is or is
not exempted from the reserve requirement ruling as follows:
Exemptions:
Foreign currencies sold to commercial banks in Thailand in exchange for THB
for the following transactions are exempt from the 30 percent foreign
currency reserve requirement:
a. Foreign exchange transactions related to current account activities
including transactions related to exchange of goods, services, income,
transfers and aid.
b. Inflows for equity investment in companies listed in the Stock Exchange
of Thailand and Market for Alternative Investment (excluding mutual funds
and warrants), investment in the Thai Futures Exchange (TFEX), and
investment in the Agricultural Futures Exchange of Thailand (AFET).
c. Foreign direct investment defined as investments by non-residents in
resident entities where the investor owns at least 10 percent of the equity
capital and has managerial power.
d. Investment in real estate such as land and condominiums (excluding real
estate mutual funds).
e. Foreign currency borrowings transacted prior to 19 December 2006.
f. Currency swap transactions associated with rolling over existing exchange
rate hedging contracts with the original financial institution.
g. Foreign currencies sold in exchange for THB amounting to less than 20,000
US dollar or equivalent.
h. Foreign exchange sold in exchange for THB by clients or authorized
money changers in the form of travellers' cheques and bank notes.
j. Foreign currencies sold in exchange for THB by (a) foreign embassies,
foreign consulates, specialized agencies of the United Nations,
international organizations/ institutions incorporated in Thailand; and (b)
Thai embassies, Thai consulates or other Thai government entities located
outside Thailand.
k. Foreign currency borrowings of government entities.
Non-exemptions:
Foreign currencies sold to commercial banks in Thailand in exchange for THB
for the following transactions are subject to the 30 percent foreign
currency reserve requirement:
a. Investments in debt securities transacted from 19 December 2006 onwards.
b. Foreign currency borrowings transacted from 19 December 2006 onwards.
c. Foreign currencies sold in exchange for THB for purposes other than
those exempted above.
Impact of the Reserve Requirement on the Operation of THB account
The reserve requirement will apply when your institution ( non-resident THB
account holder ) sells foreign currencies in exchange for THB with
commercial banks in Thailand. This rule does not apply to your THB/FX
transaction done with banks outside Thailand. Your institution can buy THB
from banks outside Thailand, and can sell THB against foreign currencies
with banks in Thailand without any restriction.
2. Other related rules on non-resident THB accounts
Along with the reserve requirement, the BOT also required financial
institutions in Thailand to observe the following rules related to the
operation of non-resident THB accounts:
2.1. Deposits from Resident account to Non-resident Account
Any THB deposits into Non-Resident THB Accounts by a resident (individuals
or companies registered in Thailand) for the settlement of goods, payment of
service fees or overseas investment to be evidenced by satisfactory
supporting documents in compliance with the Bank of Thailand are to be
converted into foreign currency and remitted out on the same day.
Impact of the Deposits from Resident account to non-resident account rule on
the Operation of your THB account
The above rule will impact your non-resident THB account only when your
institution expects a resident (individual or company registered in
Thailand) to pay to your non-resident THB account with Bangkok Bank for the
settlement of goods, payment of service fees or overseas investment. In such
cases, we need to receive your instruction to convert the THB funds
received from a resident account into foreign currency on the same day
before we can accept such funds into your non-resident THB account.
The rule also applies when you send Bangkok Bank checks issued by Thai
residents for collection. Previously, we were able to deposit proceeds of
such checks accompanied by supporting documents evidencing the source of
funds into your non-resident THB account after funds were confirmed
cleared. We are now required to convert THB proceeds of these checks and
remit to the sending bank in foreign currencies.
Please note that this rule has no impact on:
a) transfers from your non-resident THB account to another non-resident
THB account or vice versa.
For example:
When your bank (a non-resident THB account) send us MT202 payment in THB to
pay to the account of another non-resident THB account (account of another
foreign financial institutions) with Bangkok Bank or with another bank in
Thailand, this rule does not apply.
b) transfers from your non-resident THB account to a resident THB account.
For example:
When your bank send us MT103 instructions in THB to debit your account and
pay to beneficiary's accounts (Thai individuals or companies registered in
Thailand) with Bangkok Bank or with another bank in Thailand, this rule
does not apply.
c) receipts of funds from a non-resident THB account to your non-resident
THB account with Bangkok Bank or vice versa.
2. 2. Limit on Day-end Credit balance on Non-resident THB Account
The Bank of Thailand (BOT) will allow day-end credit balances of
non-resident THB accounts to exceed THB 300 million until January 8, 2007
only.
Impact of the Day-end Credit balance limit on the Operation of your THB
account
After January 8, 2007, your institution is required to ensure that the
day-end credit balances in all the non-resident THB accounts with all
commercial banks in Thailand do not exceed THB 300 million. (This includes
all non-resident THB accounts of all types i.e. current accounts, savings
accounts and fixed accounts of one non-resident entity in each location. For
example, all non-resident accounts of ABC Bank, Singapore with all
commercial banks in Thailand is counted as one non-resident entity, ABC
Bank, Hong Kong is considered as another non-resident entity). Otherwise,
the Bank of Thailand may require your institution to sell THB against
foreign currency at a penalty rate to be determined by the BOT on a case by
case basis.
3. Procedures for foreign investors who wish to buy THB against foreign
currencies to invest in Thailand's equities markets
Although the BOT exempted foreign investment in the Thai equities markets
from the 30% reserve requirement, it required that funds destined for the
equities markets should be deposited in the Special Non-resident Baht
Account for Securities( SNS) to be opened with custodian banks in Thailand.
On December 22, the BOT announced the procedures for commercial banks in
Thailand on how to handle foreign investment into the Thai equities markets
as follows:
a. Commercial banks in Thailand, which sell THB against foreign currencies
to non-residents for equity investment in companies listed in the Stock
Exchange of Thailand and Market for Alternative Investment (excluding mutual
funds and warrants), investment in the Thai Futures Exchange (TFEX), and
investment in the Agricultural Futures Exchange of Thailand (AFET), must
deposit those THB funds into SNS accounts before making payment for such
equity investments.
b. Commercial banks must deposit sale proceeds of the above equity
investments of non-residents into the SNS accounts only. These sale proceeds
can either be converted and remitted into foreign currencies or be used for
reinvestment in the equity market as listed above only. Funds in the SNS
account cannot be used to pay for other type of investments or
transferred to other non-resident THB accounts.
c.. Commercial banks in Thailand must arrange for non-residents, who wish
to transfer THB from their non-resident THB account to SNS accounts for
equity investment without being subject to the 30% reserve requirement, to
transfer THB funds into SNS accounts before January 8, 2007.
d. From 8 January 2007 onwards, balances in the SNS accounts shall not
exceed 300 million baht. The BOT will continue to review the
appropriateness of this limit. (This day-end limit on credit balance for SNS
account does not include the day-end limit on credit balance for
non-resident THB account)
Impact of the SNS account
These rules will concern clients who invest in Thailand's equities markets
only. We suggest that clients who invest in the Thai equities markets
contact their custodian banks in Thailand to confirm details of the above
arrangements for SNS accounts.
We will continue to send updates to our clients when new information becomes
available and wish our Thai Baht clearing clients a very Happy New Year.
For any further clarification on the above, please contact our Relationship
Management Unit at telephone number (662) 685 7276, 685 7289 and 685 7290 or
email: relationship.mgt@bbl.co.th
Relationship Management
Global Payment Services Dept.
December 29, 2006
<<FAQ-Reserve Requirement.doc>>
This email message is intended for the exclusive use of Bangkok Bank's
clients only. All information is believed to be accurate, but Bangkok Bank
makes no representation or warranty to any person as to the accuracy or
completeness of the material contained and enclosed herein. Unless
specifically indicated, this email does not constitute formal advice or
commitment by the sender or Bangkok Bank