News Column

Banks up to standard

July 4, 2014

By Somruedi Banchongduang, Bangkok Post, Thailand

July 04--Thailand's banking industry is in a healthy state with a strong capital base that meets the new international Basel III regulatory standard. It therefore does not need to issue additional tier-two debentures to replace the tranche due by the end of the year, say bankers.

Siam Commercial Bank (SCB) chief risk officer and senior executive vice-president Yokporn Tantisawetrat said the bank has some bonds that met the former Basel II standard.

Even though the tranche is due by year-end, it is not essential for the bank to float new debentures because it is confident in its solid capital adequacy ratio (CAR) of 16.16%, he said.

All Thai banks have strengthened their CAR to be higher than the requirement.

The Basel III standard requires a CAR of 8.5%, including 6% for tier-one capital and 2.5% for a buffer. It also requires financial institutions to increase ratios to 9.125%, 9.75%, 10.375% and 11% in 2016, 2017, 2018 and 2019, respectively, and boost their tier-one capital to 6.625%, 7.25%, 7.875% and 8.5%.

SCB plans to pay high attention to increasing tier-one capital in accordance with the Basel III requirement.

It will also maintain its tier-two capital base as it may issue new debentures for additional capital. However, any decision will depend on funding need, pricing and market conditions, Mr Yokporn said.

Thanachart Bank executive vice-president Anuwat Luengtawekul agreed that local banks have strong capital. He added that TBank has no worries about the Basel III standard, which requires a higher buffer of 0.625% for tier-one capital by 2016. The bank's capital ratio is 15%, of which 10% is tier one and 5% tier two.

Last month, TBank achieved a tier-two bond sale worth 13 billion baht, oversubscribed from its planned 10 billion baht. It is the first bank to issue additional tier-two debentures to individual high-net-worth investors under the Basel III regulation.

It also plans to issue additional tier-one hybrid bonds worth 7.1 billion baht to replace hybrid bonds. They will be offered to Scotia Bank and Thanachart Capital, the bank's two major shareholders.

Krungthai Bank also succeeded with an issuance of subordinated debentures that raised its tier-two capital to meet the requirements of Basel III. It raised US$700 million, much higher than its earlier plan of $500 million. The bond sale raised the bank's CAR by 1% from 13.5%.


(c)2014 the Bangkok Post (Bangkok, Thailand)

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Source: Bangkok Post (Thailand)

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