(Unofficial translation)* 12 June B.E. 2543 To Managers All International Banking Facilities No.BOT.FPG.(11)C. 1319/2543 Re: The Scope of Operation of International Banking Facilities In accordance with the new Notification of the Bank of Thailand Re: Rules, Procedures, and Conditions Relating to Operation of International Banking Facilities by Commercial Banks dated 9 June B.E. 2543, the essence of the amended statement is as follows: 1. International banking facilities may hold assets denominated in baht in Thailand as direct or indirect investment in common stocks, preferred stocks or warrants of juristic persons registered in Thailand as a result of debt restructuring in accordance with the Bank of Thailand's regulations. 2. International banking facilities may invest directly or indirectly in common stocks, preferred stocks or warrants of juristic persons registered abroad as a result of debt restructuring in accordance with the Bank of Thailand's regulations. Please be informed and observed. Regards, (Mrs. Tarisa Watanagase) Assistant Governor, Financial Institutions Policy Group for GovernorEnc: The Notification of the Bank of Thailand Re: Rules, procedures, and conditions relating to operation of international banking facilities by commercial banksFinancial Institutions Policy DepartmentTel: 283-6877, 283-5878Note [ ] Clarification will be made on………….at……………… [ X ] Any clarification is not available.________________________________________________________* This translation is for convenience of those who are not familiar with Thai language. For official purpose, only Thai texts are relevant. Unofficial Translation) Notification of the Bank of Thailand to operation of international banking facilities by commercial banks __________________ In accordance with the Notification of the Ministry of Finance Re: The Operation of international banking facilities by commercial banks, dated 16 September B.E.2535, and by virtue of the provisions of Section 9 bis of the Commercial Banking Act B.E.2505 as amended by the Commercial Banking Act (No.2) B.E.2522, the Bank of Thailand hereby issues the following regulations: Article 1. The Notification of the Bank of Thailand Re: Rules, procedures and conditions relating to operation of international banking facilities by commercial banks, dated 9 December B.E.2542 shall be repealed. Article 2. A commercial bank licensed to operate international banking facilities shall separate the activities of the international banking facilities from other commercial banking activities as if they were separate juristic entities in terms of assets, documentation, records and accounting, etc. Article 3. A commercial bank licensed to operate international banking facilities shall separate the facilities for off-shore lending from the facilities for domestic lending. Article 4. No international banking facilities for off-shore lending of any commercial bank shall transfer their funds to the international banking facilities for domestic lending of the same bank, or lend to or deposit funds with any international banking facilities for domestic lending of other commercial banks. Article 5. No international banking facilities for off-shore lending of any commercial bank shall repay with respect to any contingent liabilities resulting from any aval, bill acceptance or debt guarantee on behalf of the international banking facilities for domestic lending of the same bank or other commercial banks. Article 6. In the operation of international banking facilities, (1) deposits and borrowed funds shall come from sources outside Thailand; (2) the repayment of deposits, borrowed funds and the payment of interest by the international banking facilities shall be done outside Thailand; The disbursement and the repayment of borrowed funds and the payment of interest thereof by the international banking facilities for off-shore lending shall be done outside Thailand, and if such repayment of borrowed funds and payment of interest is done by any person other than the borrower, such any person shall also reside abroad; The provisions in (1) and (2) shall not apply to the case that the Ministry of Finance, the Bank of Thailand, the Exchange Equalization Fund or other international banking facilities are the counterpart. (3) each loan disbursement made for domestic lending by an international banking facilities shall be in an amount not less than 2,000,000 U.S. dollars or the equivalent amount in other currencies, except for the disbursement by financial institutions, or for the last disbursement, or in case the amount already disbursed has an outstanding balance not less than 2,000,000 U.S. dollars or the equivalent amount in other currencies, or in case the lending is granted in accordance with debt restructuring according to the Bank of Thailand's regulations. Each loan disbursement made for domestic lending by an international banking facilities to an exporter whose export income is more than half of total income of the previous accounting period or to a customer whose more than half of income is from selling or servicing to an exporter of which export income is more than half of total income of the previous accounting period shall be in an amount not less than 500,000 U.S. dollars or the equivalent amount in other currencies, except for the last disbursement, or in case the amount already disbursed has an outstanding balance not less than 500,000 U.S. dollars or the equivalent amount in other currencies. (4) in any transactions between international banking facilities and customers, the international banking facilities shall obtain the real names, addresses and information of their customers, and in the process of making documents or evidence concerning customers, the international banking facilities shall prepare such documents or evidence according to true facts; (5) no acceptance of deposits which use a check as a means of disbursement is allowed; (6) in accepting bills, giving aval or guaranteeing any debt repayment on behalf of other international banking facilities, the type of facilities of such other international banking facilities which the activities are for shall be clearly specified; (7) revenues obtained from the operation of international banking facilities shall be in foreign currencies, except for the revenues generated from the international banking facilities for off-shore lending denominated in baht or from businesses under Article 15; Article 7. International banking facilities may accept transfers of assets, debts or other business resulting from the operation of the business of the same nature from other units of the same commercial bank. Such transfer shall be completed within 3 months, commencing from the first day of the operation of the international banking facilities unless permitted otherwise by the Bank of Thailand. The international banking facilities shall inform the relevant debtors of such acceptance of transfer stated in the first paragraph not less than 15 days before the date of acceptance. Article 8. International banking facilities may hold assets denominated in baht in Thailand as follows: (1) assets which shall be maintained as liquid assets under Section 11ter; (2) assets reserved for its administrative expenses not more than 200 million bahts in value. These assets shall be in the following forms: 1) premises for the business of the bank or for its own officers and employees including office equipment subject to deduction of depreciation as approved by the Bank of Thailand; 2) Thai Government securities or securities guaranteed by Thai Government in respect of both the repayment of principals and the payment of interest. The value of assets shall be calculated at cost or market value whichever is lower; 3) non-convertible debentures, certificates of deposits, or debt instruments issued by juristic persons or financial institutions established under the Thai laws and offered for sale in Thailand. The value of assets shall be calculated at cost or market value whichever is lower; 4) cash or deposits accounts in baht at financial institutions in Thailand; 5) advance payment for its own officers, prepaid operating expenses and deposits. (3) assets issued by a financial institution due to the Note Exchange Program of suspended finance companies or finance and securities companies; (4) government bonds issued under special cases; (5) direct or indirect investment in common stocks, preferred stocks or warrants of juristic persons registered in Thailand which are made according to debt restructuring in accordance with the Bank of Thailand's regulations. Article 9. International banking facilities may exchange baht for foreign currencies or exchange foreign currencies for baht in the following cases: (1) exchange its baht income after tax at the end of an accounting period for the purpose of remitting such income to other units of the commercial bank incorporated abroad that owns the international banking facilities but such units shall also be located abroad; (2) exchange baht obtained from the sale of assets under Article 8or the sale of assets acquired as a result of debt settlement for the purpose of transaction under Article 11; (3) exchange foreign currencies for the purpose of maintaining as administrative expenses as specified under Article 8 or as liquid assets under Section 11 ter and exchange baht from the reduction of the total amount of liquid assets required to be maintained under Section 11 ter for the purpose of being used under Article 11, including entering into hedging agreements to the extent of the amount of such liquid assets; (4) exchange foreign currencies in compliance with the Note Exchange Program of suspended finance companies or finance and securities companies and exchange baht for the purpose of being used under Article 11; The exchange of baht or foreign currencies under the first paragraph shall be permitted only with an authorized bank under the law on foreign exchange control within the scope of business other than the international banking facilities. Article 10. Assets acquired, as a result of debt settlement, from the international banking facilities for off-shore lending or from the international banking facilities for domestic lending shall be considered as assets of such international banking facilities, as the case may be. In case that the assets acquired, as a result of a debt settlement, are in baht, such assets shall not be included as part of baht assets that the international banking facilities may hold as specified under Article 8. Baht assets under the first paragraph shall be exchanged for foreign currencies to be used in the transactions which the international banking facilities is allowed to do as specified under Article 11. Article 11. Income after tax at the end of an accounting period or foreign currencies exchanged from baht in Article 9 shall be treated as funds from abroad which can be used in any transaction the international banking facilities is allowed to do in accordance herewith and with the Notification of the Ministry of Finance in respect of the operation of international banking facilities by commercial banks. However, these funds can not be used for baht lending by the international banking facilities for off-shore lending. Article 12. In remitting income or loss after tax at the end of an accounting period to the commercial bank that owns the international banking facilities, the international banking facilities shall notify the Bank of Thailand of such action within 30 days from the date of remitting. Article 13. International banking facilities for off-shore lending may open non-interest bearing accounts with other units, in Thailand, of the commercial bank that owns the international banking facilities as an alternative to open nostro accounts with commercial banks abroad. At the end of any day, there shall be no outstanding balance in such accounts. Article 14 International banking facilities may invest directly or indirectly in common stocks, preferred stocks or warrants of juristic persons registered abroad which are made according to debt restructuring in accordance with the Bank of Thailand's regulations. Article 15. In addition to undertaking business specified in the Notification of the Ministry of Finance in respect of the operation of international banking facilities by commercial banks, international banking facilities may also undertake other related businesses of international banking facilities as follows: (1) providing information, financial data, and general economic information; (2) preparing or analysing investment projects; (3) acting as advisers for business takeovers, acquisitions, or mergers; (4) acting as financial advisers; (5) arranging or underwriting debt instruments denominated in foreign currencies issued outside Thailand; in case that the issuer of the instruments is a resident, the international banking facilities of a commercial bank incorporated abroad shall undertake such activities jointly with the facilities of a commercial bank incorporated in Thailand; (6) purchasing or accepting transfer of loans denominated in foreign currencies under the following criteria: 1) international banking facilities may purchase or accept transfer of loans denominated in foreign currencies from financial institutions registered in Thailand or abroad or Asset Management Corporation. Each loan disbursement which is domestic lending that an international banking facilities can purchase or accept transfer shall be in an amount not less than 2,000,000 U.S. dollars or the equivalent amount in other currencies, except for the disbursement by financial institutions, or the last disbursement, or in case the amount already disbursed has an outstanding balance not less than 2,000,000 U.S. dollars or the equivalent amount in other currencies. Each loan disbursement made for domestic lending that an international banking facilities purchases or accepts transfer is an exporter whose export income is more than half of total income of the previous accounting period or a customer whose more than half of income is from selling or servicing to an exporter of which export income is more than half of total income of the previous accounting period shall be in an amount not less than 500,000 U.S. dollars or the equivalent amount in other currencies, except for the last disbursement, or in case the amount already disbursed has an outstanding balance not less than 500,000 U.S. dollars or the equivalent amount in other currencies. 2) purchasing or accepting transfer of loans shall be without recourse. International banking facilities shall maintain all status of the loans including loan classifications, period of interest and principal overdue. 3) in purchasing or accepting transfer of loans, international banking facilities shall strictly observe all regulations related to lending. (7) guaranteeing domestic lending from Thai commercial banks or overseas financial institutions shall be in an amount not less than 2,000,000 U.S. dollars or the equivalent amount in other currencies, except for guaranteeing an exporter whose export income is more than half of total income of the previous accounting period or a customer whose more than half of income is from selling or servicing to an exporter of which export income is more than half of total income of the previous accounting period, the amount shall not be less than 500,000 U.S. dollars or the equivalent amount in other currencies. (8) discounting export related instruments denominated in foreign currencies shall be done only for the case that the seller of the goods is an exporter domiciled or registered in Thailand under the following criteria; 1) discounting export-bills under letter of credit and under D/A or D/P 2) discounting promissory notes originated from export which is issued from the following documents; 2.1) letter of credits denominated in foreign currencies; 2.2) purchase agreements or purchasing orders; 2.3) warehouse receipts and bills of lading or pledged receipts of commercial banks as an evidence that exporter has goods ready to be exported kept in a credible warehouse; (9) Opening letters of credit denominated in foreign currencies shall be done only the case that the buyer of the goods, according to agreements of the letters of credit, domiciled or registered in Thailand. Such letters of credit shall be in an amount not less than 2,000,000 U.S.dollars or the equivalent amount in other currencies except for the case that the buyer is an importer of goods for manufacturing for export whose export income is more than half of total income of the previous accounting period or an importer whose more than half of income is from selling or servicing to an exporter of which export income is more than half of total income of the previous accounting period, the amount shall not be less than 500,000 U.S.dollars or the equivalent amount in other currencies. (10) lending by making a trust receipt contract denominated in foreign currencies for the buyer domiciled or registered in Thailand in case with or without a letter of credit. The lending amount shall be not less than 2,000,000 U.S.dollars or the equivalent amount in other currencies, except for the case that the buyer is an importer of goods for manufacturing for export whose export income is more than half of total income of the previous accounting period or an importer whose more than half of income is from selling or servicing to an exporter of which export income is more than half of total income of the previous accounting period, the amount shall not be less than 500,000 U.S.dollars or the equivalent amount in other currencies. (11) Regulations on hire purchase and leasing business are as follows: 1) In this Notification "Leasee" means hire purchaser and leasing debtor. "Installment" means the amount that the leasee must pay to international banking facilities in each assigned period. The installment also includes interest and principal according to the hire purchase or leasing contract. "Rent" means the amount according to the leasing contract. "Debt Restructuring" means a troubled debt which is restructured according to the Bank of Thailand's Regulations on Debt Restructuring. "Hire Purchase: means the hire purchase according to the Civil and Commercial Code. "Leasing" means the asset leased, as used in the industrial, agricultural, commercial, and other service business. The leasee is bound to maintain and repair the leased properties. However, the leasee alone may not terminate the contract before the maturity date, but he/she has the right to buy or rent those properties at the agreed price. 2) International banking facilities may hire-purchase or lease the properties which have been transferred from the debtor or the guarantor in accordance with the debt restructuring contract 3) The rescission of the hire-purchase or leasing contract shall come into effect when the leasee is not capable of paying the rent or installment for two consecutive periods or the leasee is in breach of one or more of the material parts of the contract. However, if international banking facilities wish to terminate the contract, they must notify the leasee in writing, giving the reasons for the termination. The notification shall be effective after the lapse of 30 days following its receipt by the leasee. The termination notification shall state that if the leasee is able to pay the overdue installment or the material parts of the contract have been complied with within 30 days after receiving the notification, the notification shall be declared void and invalid. In case where the leasee is in default of paying two consecutive installments or in breach of one or more of the material parts of the contract, the termination notification may be cancelled if the leasee is able to pay the accrued installment or the material parts of the contract have been complied with within 30 days after receiving the notification. 4) After 31 December B.E. 2544, no international banking facilities shall engage in any new hire purchase or leasing business. In this regard, the international banking facilities shall clearly separate the accounts of the business under this Article from other accounts. Article 16. The international banking facilities shall be conducted at only one location and on the same premises used for the business of the commercial bank that owns it. Article 17. An annual fee of 500,000 baht shall be paid by any one international banking facilities. Payment of the fee under the first paragraph shall be made at the Bank of Thailand within the first 7 working days of each year, except for the first year when it shall be paid upon the receipt of the license. Article 18. This Notification shall come into force on the date of its publication in the Government Gazette. Given on 9 June B.E.2543 (M.R. Chatu Mongol Sonakul) Governor Bank of Thailand