Central bank assures Thai banking system remains resilient despite S&P downgrade
The Bank of Thailand (BoT) says Thailand’s banking system has undergone regular stress testing and remains resilient, with a high level of capital buffers to help it weather risks and uncertainties, despite the downgrade by S&P Global Ratings of four of Thailand’s commercial banks. .
S&P downgraded Siam Commercial Bank and Kasikorn Bank from BBB+ to BBB, and Krungthai Bank and TMB Thanachart Bank from BBB to BBB-.
The rating agency said systemic risk for Thai banks had increased and high borrower indebtedness, amid rising household debt, was likely to persist longer than expected. Its base case also predicts that bad debts, held by Thai banks, will reach 5% over the next 24 months, up from 3% currently, which would be the highest since the 2008 global financial crisis.
According to the Central Bank’s Deputy Governor for Financial Institutions Stability, Ronadol Numnonda, the capital adequacy ratio of the Thai banking system stands at 20% and banks have increased provisioning against bad debts by 430 billion baht over the past two years of the COVID-19 pandemic.
The total provision stands at 890 billion baht, equivalent to 1.6 times the amount of non-performing loans, which is enough to withstand uncertainties, he said.
Debt relief measures, introduced by the central bank during the pandemic, helped bring down the number of debtors under the financial relief package to 14% of total loans at the end of 2021, from a peak of 30% during the outbreak of infections. in July 2020, Ronadol said.
He said the recovery of the Thai economy will help improve borrowers’ incomes and debt service, as well as the quality of loans.