Bangkok--6 Oct--Moody's
Moody's Investors Service says in a new report that the Thai banking system continues to face political volatility and economic uncertainty. Accordingly, Moody's outlook for the Thai banking system remains unchanged at negative as domestic demand is expected to be subdued and investment sentiment to be further suppressed, adding more downside risk to growth.
Entitled, 'Banking System Profile for Thailand', the report also notes that despite improvements, the system's regulatory and supervisory framework is still developing and needs to be tested further.
"The steps taken by the Bank of Thailand ("BoT") to enhance supervisory techniques and oversight are welcome, and its plan to further liberalise the banking sector would be a positive development," says Karolyn Seet, a Moody's AVP/Analyst and author of the report.
"The BoT has also successfully moved Thailand's regulatory framework closer to international standards. Additionally, offsite supervision has emerged as a critical component in the supervisory process, especially now with the adoption of the Basel II accord," adds Seet.
The Thai banking sector is highly concentrated at the top, with the four largest banks -- Bangkok Bank ("BBL"), Krung Thai Bank ("KTB"), Siam Commercial Bank ("SCB") and Kasikornbank ("KBank") -- controlling around 55% of the system's total assets. However, it remains relatively fragmented at the bottom with another 14 commercial banks accounting for the remaining market share. The government still holds a sizeable stake in some banks, such as KTB, TMB Bank ("TMB") and Siam City Bank ("SCIB").
Meanwhile, foreign presence in the system is still modest but is likely to increase over time. This is based on growing interest from foreign banks in purchasing stakes in local banks to take advantage of opportunities in Thai markets, as well as to take advantage of the government's willingness to sell its stakes in a number of state-owned entities.
Moody's Banking System Profile for Thailand is a first for that country and forms part of a new series of reports on banking systems throughout the world. These profiles are designed to complement the rating agency's Banking System Outlook reports by serving as descriptive reference guides to key structural factors that are reflected in Moody's bank credit ratings.
The report has been published today and is available on www.moodys.com.