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Financial Sector Development

Financial Sector Development

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Financial Sector Development

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  1. Financial Sector Development Sustainable Growth, Regional Balance, Social Development for Poverty Reduction Bangkok, October 26, 2006 Renuka Vongviriyatham GE Money Retail Bank

  2. Thai Financial Sector: More Resilient to Shock • More balance financial sector • No. of financial institutions supervised by BOT declined • Financial strength of Thai banks improved • Loan growth in line w/ econ growth Source: BOT & SEC & WB’s estimate Source: BOT & WB’s estimate Source: BOT & WB’s estimate

  3. Several Master Plans being implemented Financial Sector Master Plan (2004-2009); Capital Market Master Plan II (2006-2010); and Insurance Master Plan (2006) Master Plan for Grass Root Financial Services (draft) BOT’s supervisory policies, procedures, practices being strengthened & more transparent Some improvement in contract enforcement regime Formal out-of-court mediation framework established Special Bankruptcy Court established Legal execution process streamlined to expedite auctions of foreclosed assets Credit Bureau in operations and governing law amended Capital market development New Public Debt Law enacted (2005); Bond market information centralized; a central depository agency created Derivatives Law enacted; TFEX launched its equity future in 2006 Deregulation of consumer finance market Major Reform Actions

  4. Reform Gaps • Legal reform for contract enforcement and secured transaction • Banking law & Central Bank law • Limited deposit insurance – to enhance market discipline • Amendments to Public Limited Companies law; Securities and Exchange law; Insurance Industry law • Supervision of financial conglomerate and insurance industry • Policy direction for state-owned financial institutions and its implementation (incl. risk management & CG & supervision) • Restriction on issuance of gov’t securities • Restriction on utilization of Credit Bureau information

  5. Looking in Detail: Resiliency to Shock not Tested • Performance varied • Large private banks capable of weathering economic shocks • Small players need to strengthen their franchises to compete Source: FitchRatings; Phatra Securities Source: FitchRatings; Phatra Securities Interest Spread of Thai Commercial Banks Source: FitchRatings; Phatra Securities

  6. Areas for Improvement Efficiency; credit risk Resource allocation Source: BOT & WB’s estimate Source: BOT & WB’s estimate Access to finance Asset quality Source: BOT & WB’s estimate Source: BOT & WB’s estimate

  7. Looking into the Future • Saving for retirement & growth • Are we saving enough? • How to increase return on saving? • Not only boost saving but not waste it • Instruments • More efficient financial intermediaries • Balance bet. efficiency and stability • Infrastructure & legal framework • Market mechanism & supervision • Effective exit mechanism • Financial service liberalization • Unavoidable • When and how? • Prepare for increase in volatility • Access to finance • SMEs • Low income HH Source: NSO & WB’s estimate Source: NI 1980-2001 and NI 2004

  8. Appendix

  9. WB’s CDP-FC Program • Launched in April 03 • Subsequent to crisis responded assistance and CDPC – both emphasized short-term structural reform to cope with the impact of the financial crisis • Geared toward medium-term issues of enhancing competitiveness of the financial and corporate sectors • Concluded in June 06 The Country Development Partnership (CDP) is a knowledge-based partnership that provides support in terms of policy advice, third party technical assistance, and capacity building in response to the needs of the authorities. CDP-FC: CDP Financial and Corporate Sector Competitiveness CDPC: CDP Competitiveness

  10. CDP-FC’s Six Components • Strengthening financial sector strategy and structure • Enhancing supervision and regulation • Improving the speed and quality of corporate debt restructuring • Enhancing intermediation on a risk-adjusted basis • Improving corporate governance • Developing capital markets

  11. CDP-FC’s End Outcomes • Promote sustainable growth • Decrease vulnerability, frequency, and costs of downturns • Improve resource allocation to most productive uses • Ensure access to assets and income opportunities for all segments of society

  12. CDP-FC’s Intermediate Outcomes