On 7 April 2020, the Bank of Thailand (BOT) issued additional measures to assist the private sector in combating the COVID-19 which primarily concern short-term liquidity boosting measures offered to small to medium enterprises (SMEs) that have been affected by the spread of the COVID-19 virus – a global crisis which has tended to only increase in severity and is likely to take some time to be resolved. Furthermore, the BOT has issued additional measures to maintain the stability of the corporate bond market as a means of fund mobilization via debenture issuance, allowing high-grade businesses to continue their operations.
KResearch notes that such measures have a considerably large value frame nearing level of THB1 trillion– though, in practice, the ability to swiftly enact these measures may vary in accordance with the terms of each measure, including the economic environment as a whole. In practice, disbursement and approval of additional soft loan limits still depends on a number of conditions, including the preparedness of debtors and the ability to cope with the varied losses incurred from loan extensions offered by each commercial bank.
Regarding Corporate Bond Stabilization Fund (BSF), KResearch views that, while the BSF mechanism is designed to mitigate the issue of fund mobilization for rollover of high-grade businesses' debentures that are reaching maturity, its success still depends on the ability of each business to raise funds on its own until it attains half of the amount of matured bonds in accordance with the criteria established by the BSF. This matter will need to be monitored amid these highly uncertain economic conditions. Meanwhile, reduction of contribution to the Financial Institutions Development Fund (FIDF), and relaxation of other rules and regulations should result in the amelioration of the financial institutions' cost burden amid dwindling interest and fee incomes as a result of the offering of debt moratoriums and debt restructuring to the business sector and households, as well as increased burdens incurred from these measures and additional ones that may be announced in the future.
Overall, the measures issued by the BOT reflect the authorities' effort and intention to address the problems directly with a focus on enhancing liquidity in the Thai financial system – in conjunction with restoring confidence in the financial market so that the financial system's mechanisms will continue to function normally. The factor that is the key to the success of these measures is the COVID-19 situation, both in Thailand and worldwide, which will provide a clearer picture of the economic trend going forward and consequently influence confidence in the market and among investors, as well as the assessment of business trends and their debt servicing ability. If there are more promising signs that the COVID-19 pandemic is being brought under control, liquidity boosting measures for Thai SMEs on this occasion will naturally show signs of progress and will lead to higher utilization of the soft loan measure. Finally, these developments will likely have a positive impact on the effectiveness of restoring the financial mechanisms back to normalcy as rapidly as possible.