2023-07-10 08:03:18
Branchless commercial bank (Virtual Bank) is another important project of the Bank of Thailand. which prepares to open for application for the establishment of 3 new banks by the end of 2023 and actually open for service in 2025
Virtual Bank’s goal, according to the guidelines of the Bank of Thailand, is to meet the needs of customers who have not yet accessed traditional financial services (unserved or underserved), such as low-income groups or small SMEs with inaccessibility problems. Regarding various funding sources, such as traditional banks do not lend without collateral. Until having to rely on many informal borrowing channels in this era
The idea of the Bank of Thailand is to try to solve this problem with a Virtual Bank that does not require a physical branch. to reduce the cost of the bank and bring digital technology to help create new forms of financial services more efficient
For this reason, the project of establishing a branchless bank was born.
What is a virtual bank according to the definition of a national bank?
in the document “Guidelines for establishing a branchless commercial bank” (Virtual Bank) of the Bank of Thailand, revised as of June 2023, defines Virtual Bank mainly as follows:
Has a license to operate a full commercial banking business Equivalent to traditional banks It uses the same regulatory criteria as traditional banks. coupled with some regulatory requirements specific to Virtual Bank, must use the service through digital channels It is not allowed to have its own branch or ATM/CDM (deposit machine) for digitization. But can provide deposit and withdrawal services through a banking agent or an ATM pool network. Anyone can apply for a Virtual Bank license, including the same financial institution business groups. and other businesses that are not financial institutions There are foreign shareholders, but not more than 49%, but if it exceeds, a waiver can be requested from the Bank of Thailand as a special case. Must have a registered capital of at least 5,000 million baht on the service opening day And after passing through the first 3-5 years of supervision, a registered capital of at least 10,000 million baht is required.
Bank of Thailand The branchless bank has set guidelines for things to see (Green Line) and things that do not want to see (Red Line) as shown in the picture.
things to see
Comprehensive financial services Especially small groups and SMEs that are still insufficiently accessible. A Better Digital Finance Experience financial institutions compete develop more innovation
things you don’t want to see
unsustainable business operations Until there is a risk to the depositor Price competition for customers or lending to stimulate over-debt benefit the stakeholders or dominating the market Bank of Thailand
The Bank of Thailand expects to grant a license to set up a virtual bank for up to 3 operators because it sees it as a new type of business that has never been seen in Thailand. Therefore, it should start from a small amount first. in order to obtain quality and effective monitoring
Timeline of the Bank of Thailand Will try to present a draft announcement to the Minister of Finance by July 2023, open for applications by 2023, announce the list of licensees at the end of 2024, open for actual service by 2025.
The original bank is interested in applying for a license. Big businesses are bustling, aiming to join the competition.
Bank of Thailand used to provide information that There are about 10 investors who are interested and ask for information.
According to a survey conducted by Brand Inside, there are many large Thai businesses. Announcing the contest to apply for a Virtual Bank license, initially expected to have only 3 licenses as shown in the news, namely
traditional banking group
Other big banks, such as Bangkok Bank (BBL), Bank of Ayudhya (BAY), said they were still studying, while Tisco and TTB confirmed that they were not interested in applying for a license at this time.
Other non-bank business groups
with the BOT’s approach that focuses on financial stability I don’t want the Virtual Bank to go bankrupt until it becomes a burden to supervise. and set the criteria quite strict (It’s even more regulated than traditional banks.) So it’s not too surprising that we still see news specific to traditional banks. and large capital groups that are interested only
Criticism of the BOT’s approach, in the end, will it support only big capital?
With the regulations of the Bank of Thailand that are quite strict, such as requiring a registered capital of up to 5,000 million baht and not limiting the application for licenses of traditional banking operators. Resulting in criticism or concern that These regulations will not cause the “competition” required by the Bank of Thailand. And there will be only traditional banks left. With partners who are large capital groups, only those who meet the criteria are required.
inDocuments for the hearing No. 1/2023 of the Bank of Thailand There are echoes that a wide range of licenses should be granted. especially those who have never operated a commercial banking business before. To open up opportunities for new banks in the industry But the Bank of Thailand’s answer is that it still adheres to the original approach that does not divide the quota according to the number of licenses, how many licenses will be given to each group. And will consider and select all license applicants under the same criteria.
On this matter, the BOT itself did not clearly explain the reasoning if the three licenses were granted to all traditional banking groups. So what is the purpose of separating the Virtual Bank license? Because traditional banks already have both branches and digital services. Doesn’t add competition to the system at all Fighting and not doing it in the first place might still be better.
On the issue of only 3 licenses, there is a proposal that more than 3 licenses should be granted, or there is a plan to open more applications in the next round, which the BOT has considered and still confirms the original approach of no more than 3 licenses for the reason that it is a new business that requires Start with a small amount first. and do not want more players to the point of affecting financial stability Especially the retail credit market that will encourage people to over-indebt.
The explanation of only 3 licenses is still unclear why three rather than four or five licenses are unlikely to have much regulatory impact. As for financial stability and over-indebtedness, it’s a strange claim. Because nowadays, informal loans are spreading all over the place. Create debt without any oversight But the Bank of Thailand did not have any clear measures to control or suppress anything, and would still be “worried” about debt creation of new banks that were strictly supervised.
In the BOT’s own study document that cited the case of the United Kingdom It is an example of licensing a Virtual Bank that has no limit on the number of licenses.
source Bank of Thailand
As for the issue of registered capital of 5,000 million baht that is too high Is there a proposal to reduce or not determine the registered capital? But the Bank of Thailand insists on using the figure of 5,000 million baht as before. By citing the level of registered capital of Virtual Bank in Hong Kong (5,000 million baht) and South Korea (7,000 million baht).
This issue must be said that it is not very listenable. Because referring directly to the registered capital of banks in foreign countries Regardless of the context of a country’s economic level (e.g. GDP) or the financial and banking context of that country (e.g. number of banks), it may seem illogical. Probably just an excuse from the BOT to worry about Too much “stability and governance” and set up a barrier preventing new players who are unknown, unfamiliar, unable to play in this market.
Kao Klai Party proposed to increase 10 licenses, registered capital to 500 million baht.
on the website of the Progressive Party Which is the party that got the number 1 vote in the 2023 electionAnnouncement of policy proposals to Virtual Bank as follows
Increased the number of Virtual Bank licenses to 10 (from the original 3) Reduced the limit on registered capital to 500 million baht (from 5,000 million baht) Added conditions for setting up a head office in other provinces Implemented data standards to increase data transfer personal data for increasing the likelihood of credit approval in the system (such as property information income and expenses information Information for paying water bills – electricity bills – mobile phone bills, taxes) and add AI technology to analyze and recommend personal finances. When able to sync all their own financial information from the wallet app
The Kao Klai Party’s proposal hits the main point of increasing the number of licenses to 10 and reducing the registered capital to 500 million baht, which should open up opportunities for more new players to enter the market. But it was added with the condition of distribution to the provinces to increase employment. and more personal data standards
The Kao Klai Party is expected to be the Minister of Finance. Which will have to work with the BOT to grant a Virtual Bank license, will have to wait and see when the government is established How will the proposals of the Progressive Party that look different from the BOT’s original approach come back together in the middle?
Keep up with Brand Inside news on our Facebook page.
Related
1688976562
#eye #National #Banks #Virtual #Bank #increase #competition #support #big #capital