Executive vice-president Ariya Tiranaprakit said the move was aimed at making Basel III Tier 2 instruments more accessible to investors and facilitating financial institutions' rollover of tens billions of baht worth of debentures, with a call option period due this year.
At present, the securities watchdog allows only securities companies to act as underwriters for banks' subordinated debt sales in order to prevent conflicts of interest.
The imminent relaxed regulations come after requests from banks so they could sell the Basel III-compliant Tier 2 subordinated notes to retail investors in addition to institutional and high-net-worth investors and boost demand to absorb the huge supply from the redemption of billions worth of the debt instrument in the coming years.
The rollover of the subordinated notes does not threaten Thai banks' financial position since their capital adequacy ratio is fairly high, far higher than the central bank's minimum requirement of 8.5% of risk-weighted assets. But it will lower banks' ability to lend if they fail to issue the debt instrument to replace maturing notes.
With its subordination risk and the non-payment risk under the non-viability loss absorption clause, the tier-subordinated note is barred by the Bank of
The highest amount of Basel III-compliant Tier 2 subordinated securities is
So far this year, four banks have already issued the Tier 2 subordinated note.
(c)2014 the Bangkok Post (Bangkok, Thailand)
Visit the Bangkok Post (Bangkok, Thailand) at www.bangkokpost.com
Distributed by MCT Information Services