Liquidity guaranteed for specialised banks
Written by Writer on Monday, October 13th, 2008
BANKING
Liquidity guaranteed for specialised banks
PARISTA YUTHAMANOP
The Finance Ministry will ensure adequate liquidity in specialised financial institutions amid the global credit crisis, according to Kanit Saengsubhan, the director of the ministry’s Fiscal Policy Research Institute.
The ministry wants to protect small and medium-sized enterprises and grassroots borrowers from adverse external impacts.
The ministry will also reshuffle government and state-enterprise bond issues to ensure the interest rates on long-term financial instruments remain accommodating, he said.
The ministry plans to issue 500 billion baht worth of bonds in the 2009 fiscal year that began on Oct 1 to finance the budget deficit.
”Our concern is rather short-term liquidity, which can be affected by ongoing volatility in the financial markets such as the stock market. In any case, the Bank of Thailand will take care of short-term liquidity,” Dr Kanit said.
”It is not difficult to look after long-term liquidity such as that in three-year, five-year or 10-year bonds. The government and the private sector can reorganise the timeframes of the issues. We also want to make sure that institutions that lend to exporters, SMEs and farmers have adequate liquidity.”
The Bank of Thailand said last week that the excess liquidity in the banking system totalled 1.09 trillion baht as of July, as commercial banks placed 1.4 trillion baht worth of reserve requirement assets with the central bank, 3.7 times the required limit.
The central bank also said there was no sign of a liquidity squeeze in the money market as banks had continued to repay overnight liabilities to the central bank in full.
”The ministry will also look after local liquidity by ensuring that we can meet our budget disbursement target,” Dr Kanit said.
”Local banks have little exposure to the overseas market. Still, we need to be vigilant because there may be unanticipated problems from their foreign counterparties.”
Supachai Sophastienphong, chief economist at Siam City Bank, said the global credit crisis should leave local liquidity intact as the banking system had maintained ample liquidity since after the 1997 economic crisis.
”There is unlikely to be a credit crunch locally. Loan growth now is not as high as the 20-30% as was seen in the pre-crisis period,” he said.
Mr Supachai said loan growth was expected to slow in the second half from 11% in the first half of the year.
The fact that the foreign reserves stood at a relatively high level of 4.3 times external debt of less than three months’ maturity in July showed sound stability of the economy, he added.
Bandid Nijathaworn, the central bank’s deputy governor for Financial Institutions Stability, said the plunge of the stock market did not affect the liquidity significantly last week.
The global economic slowdown, however, will affect banks’ loan growth and asset quality.
However, the local banking system has adopted a prudent asset management policy that could help prevent loans from turning into non-performing loans, he said.
Banks currently are not too cautious to lend, but they may need to maintain their standard, he said.
Bangkok Post
