Bank of Thailand issues consultation paper on virtual bank licensing

BOT is inviting comments and suggestions on the proposed framework by 12 February.

Bank of Thailand (BOT) has issued the consultation paper on virtual bank licensing framework as a guide for new financial service providers, Thailand’s central bank said in a press release.

Through the consultation paper, BOT outlined its expectations for the new players. The players are expected to possess expertise in technology, digital services, and data analytics, it said. 

Alongside the paper’s launch, the BOT also announced that it is open to accepting comments and suggestions on the proposed framework until 12 February. 

The consultation paper outlines the following licensing framework for virtual banks:

1. Virtual banks may provide full-service banking businesses to be flexible and accommodate changing customer needs;
2. Virtual bank applicants must meet appropriate qualifications. These include possessing business models that can sustainably achieve the above objectives, as well as having expertise in technology, digital services, and data;
3. Virtual banks shall comply with the same regulations and supervision as traditional commercial banks. The BOT said that it shall supervise virtual banks in a risk-proportionate manner, placing great importance on robust corporate governance, sound risk culture, IT system continuity, efficient customer support via digital channels, and appropriate outsourcing service;
4. Virtual banks shall go through a restricted phase during the initial years of operation. During this period, virtual banks shall be subject to specified conditions as well as to close monitoring to ensure sustainable business operations without posing systemic risks, the BOT said.

“Virtual banks are to offer financial services with new value proposition through digital channels while having lower staff and bank branch costs. They should better serve specific needs of the customers and offer a full range of products. In particular, they should facilitate the access to financial services at reasonable prices for the underserved and unserved segments of retail and small-and-medium-enterprise (SME) customers,” BOT said in the announcement.

Virtual banks are also expected to “operate in a sustainable manner to ensure responsible innovation, the central bank added.

They are warned against irresponsible lending, giving preferential treatment to related parties, and abusing market position.