This year, five important financial laws will be in effect. These laws are the most important financial legislation since 11 financial laws were passed after the 1997 economic crisis, which led to wide debate throughout the business sector and the government. First, the Bank of Thailand Law states the mission, roles and authority of the Bank of Thailand (BOT) to include: 1) issuing and manage bank notes; 2) managing foreign exchange; 3) managing international reserves; 4) supervising and examining financial institutions; 5) serving as banker of the government; and, 6) determining and conducting monetary policy. Moreover, this law stipulates the structure of BOT’s operations, and how the governor and the board are appointed and removed. The law empowers the BOT to request information from anyone in order to conduct monetary policy. The central bank will also have the authority to supervise and inspect any financial products which may impact the public. Second, the Financial Institution Business Law consolidates the current banking law and finance law. The BOT will be the sole party to supervise and inspect financial institutions. In addition, the law empowers the BOT to submit royal decrees in order to apply this law to any business operators, not covered by this law at the time of passage, which gives credit, takes deposit or conducts any financial business. Moreover, the law gives the central bank the power to determine the shareholding conditions, and to set the qualifications of directors and executives of the financial institutions. The BOT will be responsible for setting the BIS ratio (capital to risky asset ratio), the types of business transactions that financial institutions are allowed to conduct, and the conditions for lending and investing the institutions’ capital. Finally, the law empowers the BOT the right to take actions against any financial institution in order solve the institution’s problems. Third, the Deposits Protection Law sets out a limited deposit insurance scheme to be implemented in Thailand, which will guarantee a certain level of deposits to the depositors. This law is to ensure the confidence and trust of depositors, while maintaining the stability of the financial institutions particularly during financial crisis. Financial institutions which are members of this scheme must pay insurance premiums and report to the Deposit Protection Agency, which will be created under this law. Fourth, the Securities Exchange Law changes the structure of Thailand’s capital market supervision. It includes the establishment of a capital market supervision board in addition to the Securities Exchange Commission Board and the SEC office. It also stipulates the conditions for corporate governance of companies which issue securities to the public including the accountability of directors, executives, and management, and shareholders’ rights. It also states the requirements for gaining approval for Initial Public Offerings from the SEC. Moreover, the law describes the conditions required for operating securities companies, the Stock Exchange of Thailand and other securities dealing centers to operate. Fifth, the Supervision and Promotion of Insurance Business Law specifies the supervision of insurance businesses and it establishes the Insurance Supervision Office, an independent agency. The agency will also promote the expansion of insurance to cover a greater number of businesses, people and property. In conclusion, the analysis of these laws should be made concurrently because the laws have two important interconnections. First, the BOT is given authority and independence to supervise and inspect a range of financial institutions, which account for 80% of the assets held by financial institutions, through the first three laws listed above. This can be viewed as positive by economists who believe in independence principle of central bank. Second, the power, the operational structure and the type of governance agencies responsible for implementing the Financial Institution Business Law, Securities Exchange Law and the Supervision and Promotion of Insurance Business Law are quite similar. Therefore, one should consider the five laws in tandem to gauge their impacts in the ever changing landscape of financial, capital and insurance markets. By: Dr.Chodechai Suwanaporn [email protected] Source: Fiscal Policy Office / www.fpo.go.th