Thai banks strong enough to weather pandemic

Thailand’s central bank Governor said last week that the Kingdom’s commercial banks are well-positioned to weather the financial effects of the coronavirus pandemic, which is expected to cause a rise in nonperforming loans.

Outgoing Bank of Thailand Governor Veerathai Santiprabhob said the central bank has been working closely with commercial banks to ensure they have sufficient provisions to cover more than the expected amount of nonperforming loans.

Those loans that can’t be repaid are primarily the result of the government’s decision to impose a lockdown in March to stop the coronavirus spread, forcing all but essential businesses to close. Companies and workers have suffered losses, in some cases, severe losses. Although the economy is reopening and restarting, social distancing measures will remain in place for the foreseeable future.

Those social distancing measures are also affecting the profitability of many kinds of businesses, such as restaurants. Those enterprises may not be able to pay back their loans to commercial banks in the short term.

To try and ease the burden, the central bank has reduced its policy rate to 0.5 percent, the lowest rate in its history.

Veerathai said the local financial system is not fragile compared to several other countries. Because the country’s commercial banks are resilient, the Bank of Thailand could also employ more financial measures through financial institutions to support the economy and help restart growth, he said.

“The role of the central bank may not be new, but Covid-19 has forced the bank to push its monetary policies aggressively and quickly,” Veerathai said.

Although the banking sector is strong enough to withstand the pandemic’s economic fallout, the central bank is forecasting that the economy will suffer a contraction this year, similar to many other countries.

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