Business World

Thailand plans to ease restrictions on foreign ownership of banks and may offer new licenses to lure overseas investment and spur lending as Southeast Asia’s second- biggest economy slows. Banking stocks rose.

The Finance Ministry may approve the plan in March, Bank of Thailand Governor Tarisa Watanagase said in an interview in Bangkok yesterday. The licenses will allow overseas lenders to expand and open full-fledged local banks.

“We don’t just blow the whistle and let everyone in at one go,” said Tarisa, 59, the first woman to helm the nation’s central bank. “We are taking a careful approach in opening up our financial sector. We realize that liberalization is something that will bring benefits to the financial sector, to the consumers.”

Prime Minister Abhisit Vejjajiva is seeking funds from abroad to revive an economy forecast to expand at its slowest pace in almost a decade as the intensifying global credit crisis dries up exports and investment. Foreign ownership of Thai banks is capped at 49 percent. Domestic banks have forecast lending will expand this year at about a third of last year’s pace.

Bangkok Bank Pcl, the nation’s biggest lender, rose as much as 4 percent and gained 3.4 percent to 77 baht at 12:30 p.m. in Bangkok, headed for its highest close since Nov. 7. Siam Commercial Bank Pcl, the No. 4 bank, gained 3.6 percent to 57 baht, marking its fifth straight day of advances. Bank of Ayudhya Pcl, controlled by General Electric Co., rose 2.8 percent, to 9.2 baht.

‘Not Good Timing’

“This will give banks more flexibility in finding foreign partners,” said Sukanya Udomvoranun, an analyst at Kim Eng Securities Pcl, the nation’s biggest stock brokerage by trading volume. “It’s a good start, but it will take time to implement given the current financial crisis.”

The plan to loosen restrictions comes as global financial companies are hobbled by more than $1 trillion of losses and credit-market writedowns since 2007, according to data compiled by Bloomberg. Citigroup Inc. and Royal Bank of Scotland Plc are among banks that are paring international operations after accepting government bailouts.

“It is just not good timing,” said Poramet Tongbua, head of research at Tisco Securities Ltd. in Bangkok. “Thailand can’t draw much interest as foreign banks are suffering from the credit crunch and aren’t in any shape to expand.”

Economy Slows

Thailand has 14 commercial banks, including Bangkok Bank, Siam Commercial Bank and Kasikornbank Pcl. Indonesia, which has about 128 commercial banks, allows foreign banks to own stakes of as much as 99 percent in local lenders.

Southeast Asia’s second-largest economy may expand no more than 2 percent this year, according to the central bank. Exports, which make up 70 percent of Thailand’s gross domestic product, may shrink in 2009 as orders slump amid a global recession, Prime Minister Abhisit Vejjajiva said on Feb. 4.

The Bank of Thailand has said it may continue easing monetary policy after cutting its benchmark interest rate to 2 percent in two reductions since Dec. 3.

The opening of the nation’s banking sector will be gradual to allow local lenders time to adjust to increased competition, Tarisa said. Inflows to the local branches of foreign banks and overseas borrowings in the early 1990s led to the baht devaluation in 1997 and the Asian financial crisis, she said no credit check payday loans.

‘Don’t Want Another Crisis’

“We aren’t going to let it happen in the next two months,” said Tarisa, who has headed the central bank since 2006. “We have to make sure there are certain steps and conditions that will ensure the transition won’t be too disruptive. We certainly don’t want to have another crisis.”

Malaysia’s central bank is considering a liberalization program for the domestic banking industry, Central Bank Governor Zeti Akhtar Aziz said in December, without providing details. Malaysia has nine locally owned commercial banks, and allows 30 percent foreign ownership in such lenders.

The Netherlands ING Groep NV and Malaysia’s Bumiputra- Commerce Holdings Bhd. have expanded in the $269 billion Thai economy as demand for loans and services from consumers and small and medium-sized companies rise. ING has a 26 percent stake in TMB Bank Pcl, and Bumiputra-Commerce has a 42 percent share in BankThai Pcl.

Raising Stakes

Thailand’s Finance Ministry gave Bumiputra-Commerce approval in October to lift its stake in BankThai above the 49 percent foreign ownership limit. Bank of Nova Scotia, Canada’s third-biggest by assets, said Feb. 3 it doubled its stake to 49 percent in Thanachart Bank, the nation’s biggest auto-finance company.

Tarisa doesn’t “need to worry about being knocked over by a rush of foreign banks desperate to snap up local banks,” said Sean Callow, a Sydney-based currency strategist at Westpac Banking Corp., Australia’s biggest lender by market value. “Many banks are focusing on their home countries. It will take time for foreign investors to be confident that there will be policy continuity.”

Still, Thailand’s government has “struggled” to achieve competition in the banking industry, Finance Minister Korn Chatikavanij said Feb. 4.

The central bank regulates banking in the nation and would have to change its rules to allow foreign lenders greater access. Overseas banks that operate in Thailand, including New York-based Citigroup Inc. and London-based HSBC Holdings Plc, are limited by the central bank to having a single branch each.

“Not everyone will get a license,” Tarisa said. It will be for “anyone who is fit and proper, and anyone who can bring value to the system.”

Seeking State Aid

Thailand’s commercial banks are seeking so-called soft loans of 50 billion baht ($1.4 billion) from the government, designed to help them lend to exporters, Thai Bankers Association Secretary-General Twatchai Yongkittikul said Feb. 2.

The banks face a “deteriorating outlook” this year because of worsening asset quality and slower loan growth amid the economic slump, Fitch Ratings Thailand said Jan. 23. Moody’s Investors Service lowered the outlook on the foreign currency debt and deposit ratings of eight Thai lenders on Dec. 5 to “negative” from “stable,” citing slower growth.

Loan expansion will slow to about 5 percent this year as the economy weakens, Apisak Tantivorawong, president of the Thai Bankers’ Association and state-owned Krung Thai Bank Pcl, said Jan. 5. That’s less than half the 13 percent pace posted in 2008 by Bangkok Bank, the largest lender.

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