Thailand: Bank of Thailand Initiatives

Thailand Apr 14, 2020

IMPORTANT - Note from Editor:
The following is a compilation of initiatives by Bank of Thailand. All information below is directly retrieved from the BOT website, with certain sections summarised by the Reapra team for brevity. To view the complete description of each measure, please refer to their respective links.

To ensure relevance for our readers, we are only providing measures relating to support for businesses. For the full listing of measures, please head over to the BOT website.

Key source: BOT website

The Bank of Thailand and the Ministry of Finance have worked closely together to swiftly implement measures to alleviate the impact of COVID-19 outbreak on households and businesses. However, the intensified and longer-than-anticipated outbreak necessitates additional relief measures to support small and medium-sized enterprises (SMEs), which are the backbone of the Thai economy and a primary source of employment, to have sufficient funding and liquidity to bridge through these testing times and retain their workforce. It is also necessary to have measures to stabilise the corporate bond market to ensure the normal functioning of the market as the financing source for the private sector and to safeguard the economy and financial stability as a whole.

The package consists of four important measures.

• Loan Payment Holiday
• Soft loans
• Market liquidity enhancement
• Reduction of the FIDF fee

Loan Payment Holiday

A loan payment holiday of 6 months for all SMEs with a credit line not exceeding 100 million baht, to provide the much-needed liquidity to the SMEs.

SMEs with a line of credit with a commercial bank or a specialised financial institution not exceeding 100 million baht are automatically eligible to pause payments of both principal and interest for 6 months. This payment holiday will not be considered as a missed payment and thus will not impair credit history.

Read the full announcement:

Soft Loans

Soft loans to support liquidity for SMEs with a credit line not exceeding 500 million baht, with a concessional interest rate of 2% per annum and interest-free for the first 6 months.

The BOT will provide soft loans of 500 billion baht at 0.01% interest rate per annum to financial institutions for 2 years. Financial institutions will then on-lend to SMEs at a concessional rate of 2% per annum. SMEs that are eligible for this measure must

(i) operate domestically,
(ii) are not listed in the Stock Exchange of Thailand or the Market for Alternative Investment (MAI),
(iii) have a credit line with a financial institution not exceeding 500 million baht, and
(iv) still have a performing loan with normal repayment status or arrears of less than 90 days (non-NPL) as of 31 December 2019.

The maximum drawdown for the soft loan is 20% of the loan outstanding as of end-December 2019. Interested SMEs can apply for soft loans at their banks.

Read the full announcement:

Market Liquidity Enhancement

In order to stabilize the corporate bond market by providing liquidity backstop to ensure its continued functioning, the BOT and the Ministry of Finance see the need to establish the Corporate Bond Stabilization Fund (BSF) to provide bridge financing to high-quality firms with bonds maturing during 2020-2021, at higher-than-market ‘penalty’ rates.

Eligible corporate bonds/issuers must meet a number of criteria including
(i) be at least an investment grade,
(ii) have raised the majority of their funding needs through other means such as bank loans or capital increase,
(iii) have a clear long-term financing plan, and
(iv) meet other conditions as set out by the BSF’s investment committee.

In addition, if the issuers simultaneously offer secured bonds to the general public, the bonds that the BSF will invest in must also be secured with collaterals no inferior than those pledged on the bonds sold to the general public.

Read the full announcement:

Reduction of the FIDF fee

The BOT will halve the rate of contribution from financial institutions to the FIDF from 0.46% of deposit base to 0.23% per annum for the period of two years. This is intended for financial institutions to immediately pass on such cost savings to businesses and households by further reducing their loan rates.

Read the full announcement:

Source: Bank of Thailand
Cover image: BOT LinkedIn


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