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21 Nov 2008

Thai Economy

Thai Banking Liquidity, October up MoM, Proper Management Remains Important (Business Brief No.2358)

KASIKORN RESEARCH CENTER (KResearch) has compiled data on liquid assets in the Thai banking system at 14 Thai commercial banks as of the end of October 2008, in comparison with the previous month and the end of 2007. In detail:
- Liquid assets (including cash, net investments in the short-term money market and net investments)[1] as of the end of October 2008 increased over the value recorded at the end of September. At the end of October, liquid assets totaled THB1.77 trillion, an increase of THB 40.9 billion over the THB1.73 trillion at the end of September. This increase stemmed primarily from an increase in net investments in the short-term money market and cash – the main components of liquidity. However, net investments decreased for the second consecutive month. The increase in liquid assets during October was partially boosted by fund mobilization via short-term bills of exchange (B/E) which pushed the borrowing of Thai commercial banks higher to around THB25.9 billion MoM, although the growth of deposits totaling THB12.9 billion. Fell short of the increase in net loans (after allowances for doubtful accounts) of THB18.5 billion.
- All bank groups[2] recorded increased liquid assets. Small banks recorded the highest increase ofTHB19.3 billion in liquid assets, showing an outstanding balance of THB227 billion as of the end of October 2008, followed by large banks that posted an increase of THB13.8 billion in liquid assets to total THB1.05 trillion, and medium-sized banks showing an increase of THB7.7 billion to THB492 billion.
- The liquid assets of those 14 Thai commercial banks decreased by THB23.3 billion from the end of 2007. Decreases were found at small and large banks that showed declines of THB32.3 billion and THB2.76 billion, respectively. On the other hand, the liquid assets of medium-sized banks showed an increase of THB11.8 billion.
KResearch hasassessed that despite the increase in liquid assets at Thai commercial banks during October, liquidity in the banking system during 10M08 had declined. The overall trend also shows that liquidity will fall over the remainder of this year. Amid the ongoing global financial turmoil, rising demand for funds required at troubled firms and financial institutions abroad to shore up their liquidity will likely continue. The persistent financial market volatility worldwide may prompt investors to become risk-averse, leading to a lackluster atmosphere in local financial markets and receding foreign investment. Meanwhile, exports and tourism will be hurt by the economic recession in advanced economies plus the protracted domestic political standoff here. Fast declining inflationary pressure is, however, providing greater leeway for central banks worldwide – including the Bank of Thailand – to adopt easing interest rate policy. Nonetheless, the global turbulence, which is showing no sign of abating, will induce Thai commercial banks to pursue more prudent business operations, especially when it comes to liquidity management, debt quality control, risk management and interest rate policy, alike.

[1]Liquid assets in the broader meaning includes net investments such as debt and equity instruments held by commercial banks. Those instruments may possess different levels of liquidity and cost of exchange for cash.
[2]Large banks include Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and KASIKORNBANK; medium-sized banks include the Bank of Ayudhya, TMB Bank, Siam City Bank and Thanachart Bank, while small banks include, Standard Chartered Bank (Thai), UOB (Thai), Bank Thai, TISCO Bank, Kiatnakin Bank and ACL Bank.

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Thai Economy