FINANCE / CAPITAL CONTROLS : Procedures for non-resident accounts to be decided today

FINANCE / CAPITAL CONTROLS : Procedures for non-resident accounts to be decided today.

DARANA CHUDASRI

Local bank executives will meet today to finalise operating procedures for handling foreign capital inflows into non-resident baht accounts (NRBA).

Bordin Unakul, the chairman of the Custodian Club and a senior executive at Bangkok Bank, said custodians would begin opening NRBAs for offshore clients this week.

Local custodians want to ensure that operating procedures meet a single standard, particularly in terms of how NRBAs and special non-resident securities accounts (SNS) are handled.

"The Custodian Club wants to make sure everyone is using the same procedures, with no exceptions or case-by-case waivers," Mr Bordin said. "We will comply with the principles set out by the Bank of Thailand. Funds can only be transferred from SNS accounts to NRBAs."

Custodians agreed to establish dedicated accounts to track foreign inflows in a compromise worked out with the central bank last month to accommodate investment into the equity market.

Funds held in NRBAs will be subject to the 30% reserve rule announced by the central bank on Dec 18 last year, while SNS funds will be exempt. Both accounts will be capped at 300 million baht.

Many banks and custodians began setting up SNS accounts for overseas clients last week. The central bank plans to monitor fund flows to both account types on a regular basis to ensure full compliance with the 30% reserve rule, which was imposed to deter speculation on the baht.

Mr Bordin said Bangkok Bank had already set up SNS accounts for around one-third of its foreign clients.

Under the Dec 18 rule, foreign inflows into the fixed-income market are required to set aside a 30% deposit held interest-free at the central bank. The deposit will be refunded after one year, with shorter-term investments subject to a 10% penalty.

Investments in listed securities, property and foreign direct investment are exempted from the reserve rule.

Bangkok Post
Monday January 15, 2007