24 September B.E.2544(2001)To Manager Authorised Banks* The Export and Import Bank of Thailand The Industrial Finance Corporation of Thailand Asia Credit Public Co., Ltd. (Public) No.BOT.FOG.(14) C.2107/2544 Subject: Revision of Procedures under Measures on Preventing Thai Baht Speculation In accordance with the Circulation No.BOT.FOG.(14) C. 462/2544, dated 28 February B.E. 2544 (2001) on Procedures under Measures on Preventing Thai Baht Speculation for financial institutions' purchases of foreign currency against Thai Baht (value-same-day or value-tomorrow) from non-residents, issuance of letters of credit/guarantee for non-residents' transactions and direct loans to non-residents. To reduce the burden of financial institutions in complying with the above-mentioned circulation, to enhance a better understanding of regulations on their business activities and to facilitate non-residents with trade or investment activities in Thailand, the Bank of Thailand would like to cancel the Circulation No.BOT.FOG.(14) C.462/2544 dated 28 February B.E. 2544 (2001) and requires financial institutions to comply with the following procedures: A. Purchase of Foreign Currencies against Thai Baht from Non-Residents (value-same-say or value-tomorrow 1. In case of non-residents having trade or investment activities in Thailand (with Underlying) 1.1 Non-Residents who are not natural persons, for instance, businesses institutions, funds, firms or institutions registered abroad 1.1.1 Financial institutions wishing to purchase foreign currencies against Thai Baht from non-residents are required to seek prior approval from Financial Markets and Reserve Management Department, Financial Markets Operations Group, Bank of Thailand, by facsimile at 0-2356-7508 before 16:30 hours of the business say. In seeking approval, the financial institutions must provide details of the underlying transactions, the date of Thai Baht delivery to residents and should notify their non-resident customers the cut-off time. 1.1.2 After the permission is granted, the financial institution are required to acquire evidences of actual payment made to residents in accordance with the underlying transactions and send copies of evidence via facsimile to the Bank of Thailand within the same day. 1.1.3 The financial institutions are required to report those underlying transactions in Table 22, Report of Outstanding Balance of THB Lending transactions with Non-Resident (with Underlying). For value-same-day transactions, the transaction sate in to be entered under Trade date, Value date and Maturity date (column 5.2, 5.3 and 5.4) and the code "SD" (same day) under Type (column 7.1). For value-tomorrow transactions, the transaction date is to be filled in under Trade Date (column 5.2), the date of the next business day under Value date and Maturity date (column 5.3 and 5.4) and the code "TM" (tomorrow) under Type (column 7.1) 1.1.4 The financial institutions are allowed to purchase foreign currencies against Thai baht for value-same-day or value-tomorrow from embassies, consuls, units or agents of the United Nations or international organisations which are resided in Thailand and not required to comply with the procedures stated in 1.11, 1.12 and 1.1.3 1.2 Non-Residents as Natural Persons 1.2.1 Purchase of Foreign Currencies against Thai Baht in an amount less than 25 million baht per person per say Financial institutions are allowed to purchase foreign currencies against Thai baht without seeking prior approval but required to keep evidences of underlying transactions to be examined by the baht if Thailand for at least three years for transactions amounting of 200,000 baht and above. The financial institutions are required to report transactions in Table 22, Report of Outstanding Balance of THB Lending Transactions with Non-Residents (with Underlying) in aggregate on the first business day of following month and fill in Name of Non-Residents (column 6.1) with "Total" followed by, in parentheses, the number if non-residents from which they purchase foreign currencies. 1.2.2 Purchase of Foreign Currencies against Thai Baht amounting to 25 million baht but less than 50 million baht per person person per day Financial institutions are allowed to purchase foreign currencies against Thai baht without seeking prior approval but report transactions in Table 22, Report of Outstanding Balance of THB Lending Transactions with Non-Resident (with underlying) as 1.1.3 as well as keep evidences of underlying transactions to be examined by the Bank of Thailand for at least three years. 1.2.3 Purchase of Foreign Currencies against Thai Baht amounting to 50 million baht and above per person per say Financial institutions are required to seek prior approval from the Bank of Thailand by complying with the procedures stated in 1.1.1, 1.1.2 and 1.1.3 2. In case of non-residents having no trade and investment activities in Thailand (without Underlying) The Bank of Thailand do not allow financial institutions to purchase foreign currencies (value-same-day or value tomorrow) from non-residents. 3."Per entity" includes all transactions made by one juristic person or one natural person with all financial institution in Thailand B. Thai Baht Lending (Direct Loans) Extended by Financial Institutions to Non-Residents The Bank of Thailand has no policy to allow financial institutions to extend Thai baht direct loans to non-residents with or without underlying transactions and with or without collateral. In addition, financial institutions are not allowed to offer guarantees to non-residents which obligate the financial institutions to be liable to deliver baht to other entities on behalf of non-residents. Direct loans, however, shall not include credit card issuance of financial institutions for non-residents. The Bank of Thailand, however, shall relax regulations on some transactions as follows: 1. Financial institutions are allowed to extend Thai baht direct loans with collateral to non-residents who are natural persons and have been granted work permit to work in Thailand for not less than one year for purpose of personal consumption. The outstanding balance of Thai baht lending from all financial institutions for each non-resident shall not exceed 5 million baht in aggregate Nevertheless, the financial institution are required to acquired to acquire letters from the non-resident borrowers confirming the borrowers' obligations to or outstanding loans from other Thai financial institutions and granting the lenders the right to demand repayment of the loans prior to maturity if the information provided by the borrowers is untrue. The financial institutions also need to keep the evidences of loans made to non-residents for examination for at least three years and reprot those transactions in Table 22, Report of Outstanding Balance of THB Lending Transactions with Non-Resident (with Underlying) by the next business day of the transaction date. 2. Financial institutions are allowed to issue letters of guarantee for non-residents in case of bids or performance bonds to government agents, state enterprises or other juristic persons in Thailand. However, the financial institutions must be provided with Standby L/C from financial institutions abroad as collateral of non-residents (back-to-back guarantee) and there must be a clause stated in the Standby L/C that if the letters of guarantee are claimed, Thai financial institutions shall be able to claim in full within the same day of payment date or being able to claim in full from Standby L/C issuer before payment is made. The Circulation will be effective since 28 September B.E.2544 (2001) Please be informed and strictly comply with the circulation. Sincerely yours, (Mr. Chetthavee Charoenpitaks) Assistant Governor Financial Markets Operations Group for Governor Exchange Control Division Financial Markets and Reserve Management Department Financial Markets Operations Group Tel: 0-2283-5326-7 Remark: (/) No meeting organsied.-YK-