IMF proposes legal reforms

The International Monetary Fund and the World Bank have recommended that Thailand undertake legal reforms to clarify supervisory rules and powers over the financial sector.

The two agencies recently concluded a review of Thailand's supervisory system under the Financial Sector Assessment Programme (FSAP), an initiative launched in 1999 to promote financial stability.

Bandid Nijathaworn, a deputy governor of the Bank of Thailand, said Thailand generally scored well in the FSAP review, with supervisory standards comparing well with international best practices.

''One area that was highlighted for improvement however was in terms of the legal framework. There remains a lack of a clear supporting law for the central bank's supervisory powers,'' he said.

The FSAP review suggested that Thai law be overhauled in order to to support future development and changes within the country's financial system.

The roles of the Finance Ministry and the Bank of Thailand should also be clearly identified, and laws passed to support supervision of financial institutions on a consolidated basis.

The FSAP group also recommended that the central bank consider closer examination of financial institutions lending abroad. Foreign lending by Thai banks currently accounts for just 2% of total bank assets, but is expected to grow steadily in the future.

Dr Bandid said the FSAP group would conduct a new review in May, focusing on the resilience and readiness of Thai financial institutions to cope with economic volatility and risks.

The next assessment will also consider Thailand's anti-money laundering laws and practices, with the findings incorporated into a full report expected to be released by the end of the year.

Bangkok Post
Friday February 02, 2007