Rules eased on foreign investment in financial sector

The Ministry of Commerce issued regulations last week to make it easier for foreign businesses to invest in banking and insurance in the Kingdom as it further liberalizes the financial sector, while the Securities and Exchange Commission tightened rules on insider trading by company directors in a bid to better protect investors.

Under the new regulations passed by the Business Development Department at the Ministry of Commerce last week, foreign investors will no longer be required to apply for licenses from the Department to invest in or start businesses in banking and insurance. The new regulations will come into effect as soon as they are officially published in the Royal Gazette.

The four categories that will see freer investment are banking, representative offices of banks, life insurance and non-life insurance. Insurance is a sector that has seen strong growth in recent years and has begun attracting more foreign players.

Thailand began liberalizing its banking and financial sectors mainly out of necessity in the aftermath of the 1997 economic crisis. The shaky situation of many Thai banks at that time essentially forced regulators to begin opening up the sector to foreign investment and ownership. Since then, they have been slowly but steadily easing rules to allow for even greater participation by foreign entities while encouraging Thai banks and institutions to increase their competitiveness.

Pongpun Gearaviriyapun, director-general of the Business Development Department said the four categories had previously been on what is known as List 3 under the Foreign Business Act. List 3 are businesses in which Thai enterprises are not considered ready to compete, and so foreigners wishing to engage in those businesses must seek a foreign business license from the Department.

The Cabinet agreed earlier that these four businesses should be removed from List 3.

Meanwhile, the Securities and Exchange Commission announced that rules will be changed this year that will require any directors of listed companies to be automatically disqualified from their positions if they have been found to have been involved in insider trading. As of now, a board could vote to allow a director to retain his position despite the finding.

Rapee Sucharitkul, secretary-general of the Securities and Exchange Commission (SEC), announced the plan yesterday as the regulator unveiled its three-year strategy to toughen regulations and enforcement to enhance investor protection.

She added that strengthening rules and regulations is necessary. In 2018, the SEC and other financial regulatory organizations will be evaluated under the International Monetary Fund’s and World Bank’s Financial Sector Assessment Program.

In a 2013 report, the World Bank wrote that “Thailand [is] a regional leader in corporate governance with a relatively comprehensive framework and has achieved high levels of compliance in a number of key areas. Corporate governance reforms implemented in Thailand have enhanced investor trust and protected investors’ rights, especially non-majority shareholders, increased board professionalism and promoted high levels of corporate transparency.”