RETAIL BANKING | Cesar Tordesillas, Thailand

Thai banks say liquidity is sufficient

Thai banks are cool to Finance Minister Kittiratt Na-Ranong's advice to recapitalise as many of them have built up reserves aggressively in the past year.


Following Krungthai Bank's plan to raise capital for the first time in 13 years, Kittiratt urged local banks to increase their registered capital in preparation for strong loan demand, particularly ahead of the blooming of the Asean Economic Community in

Most Thai bankers said they have sufficient liquidity to cover any risk and fund loan expansion.

Of major banks' capital, Tier 1 - consisting of common shares and retained earnings - is now above 10 per cent. The banking industry's average CAR, the ratio of lower-quality assets to risk-weighted assets, is 11-12 per cent. At above 10 per cent, Tier-1 capital is higher than the Basel III requirement, which will be implemented next year. Basel III will require banks to hold 4.5 per cent of common equity, up from 2 per cent under Basel II, and 6 per cent of Tier-1 capital, up from 4 per cent, to risk-weighted assets.

The industry average for Tier 1 is 9 per cent.

KTB's capital mobilisation will increase its Tier-1 ratio to 10.83 per cent from 7.92 per cent at the end of this year. Its CAR will rise to 15.82 per cent from 12.91 per cent.

Anuwat Luengtaweekul, chief financial officer of Thanachart Bank, said the bank has no plan to increase its capital and believes its capital can serve growing loan demand as well as the activities related to the AEC.

TBank's CAR is 14 per cent, its Tier-1 ratio is 9 per cent and Tier-2 ratio is 5 per cent.

Thai banks' capital is sufficient for lending activities including the expected activities from the AEC, he added.

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