Banks’ capital buffers deemed sufficient

26-Aug-2020 Intellasia | BangkokPost | 6:02 AM Print This Post

Local banks do not need capital increases thanks to a solid base, with the industry not expecting to beef up capital reserves for two years.

Sarut Ratanaporn, co-president at Siam Commercial Bank (SCB), said the bank is operating a capital management plan until 2022 and is scheduled to submit the plan to the Bank of Thailand in September as required by the regulator.

SCB has no issues in terms of capital management, said Sarut.

“Under our capital management plan, the bank also assesses a scenario where the pandemic results in our capital buffer being used up,” he said.

Previously, Piti Tantakasem, chief executive at the merged TMB-Thanachart Bank, said under the capital management plan for 2021-22, the bank forecasts capital could be reduced by almost 2 percent to around 17 percent from the existing 18.95%.

This scenario would not significantly impact the bank’s capital adequacy ratio (CAR) and the bank will not need to raise capital for the next two years, said Piti.

There is still uncertainty about whether a second wave of coronavirus infections could occur here following a loosening of lockdown measures.

SCB plans to monitor the situation closely and continues to maintain a strong financial status, said Sarut.

SCB submitted the updated stress test for this year to the Bank of Thailand in July.

With an existing solid capital base, its ratio is sufficient to maintain existing business operations amid the outbreak this year.

As of June this year, SCB’s CAR ratio stood at 18.1%, with 17 percent contributed from its tier-one capital base and tier-two capital at 1.1%, far above the central bank’s minimum capital requirement at 8.5%.

For business operations in the second half, SCB is still chiefly focusing on helping customers with debt restructuring.

The bank will extend debt relief measures, which are scheduled to expire in October, to the end of the year and offers clients’ assistance on a case-by-case basis, said Sarut.

The Bank of Thailand recently reaffirmed the country’s commercial banking industry has a strong capital base to cope with the pandemic’s impact.

The overall banking sector has maintained a solid CAR at 19.2%, with profit and liquidity remaining buoyant.

The government, the central bank and financial institutions have provided borrowers with debt relief measures such as lowering the ceiling for personal loan and credit card interest payments and debt restructuring to reduce monthly instalment payments, as well as rescheduling payment plans.

Kattiya Indaravijaya, chief executive at Kasikornbank (KBank), said although the bank has a strong capital base, KBank will continue strengthening it in line with profitability to prepare for uncertainties.

The bank’s CAR is at 18.1%, of which 15.4 percent is tier-one capital.

Krungthai Bank president Payong Srivanich said the bank plans to set aside additional loan-loss reserves for the remainder of this year to uphold a strong capital buffer in preparation for a sluggish economy, while continuing to help customers restructure their debts.


Category: Thailand

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