Thailand’s banking sector is navigating a period of liquidity surplus with a conservative approach to lending, even as the government urges financial institutions to stimulate economic growth.
Understanding Thailand’s Banking Liquidity Surplus
Insights from the Bank of Thailand
The Bank of Thailand (BoT) has highlighted the substantial liquidity surplus within the country’s banking sector. According to Sakkapop Panyanukul, a BoT assistant governor, banks have maintained a significant cushion of excess liquidity over the last decade.
- Key Indicators:
- High levels of deposits and investments held by commercial banks at the BoT.
- Liquidity levels ranging from 4 to 5 trillion baht ($115.64 to $144.55 billion).
“The banking system has had a lot of excess liquidity over the past 10 years,” said Sakkapop in an article on the BoT’s website.
Conservative Lending Practices
Despite this liquidity surplus, Thai banks remain cautious in extending loans, focusing on borrowers’ repayment capacities.
The Impact of Household Debt on Lending
High Household Debt: A Growth Barrier
Thailand’s high household debt continues to hinder economic growth, especially in the aftermath of the pandemic.
- The government views this as a key obstacle to its economic initiatives.
- Commercial banks are encouraged to expand credit access to stimulate activity while maintaining responsible lending practices.
The Central Bank’s Lending Guidelines
Balancing Credit Expansion and Borrower Protection
Sakkapop emphasized that the central bank’s regulations are designed to balance credit expansion with the protection of borrowers.
- Lending rules encourage banks to set manageable instalments for borrowers.
- However, strict oversight on lending practices has not been imposed.
“The central bank’s responsible lending rules only state that banks must consider setting instalments that are appropriate for the debtors’ living expenses,” noted Sakkapop.
Focus on Long-Term Stability
This approach reflects a strategy aimed at ensuring long-term financial stability while cautiously supporting economic recovery.
Thailand’s banking sector is navigating a challenging landscape, balancing a significant liquidity surplus with cautious lending practices. As the government pushes for credit expansion to stimulate economic growth, the Bank of Thailand remains focused on ensuring responsible lending and maintaining financial stability.
Ref – Thaiger
