Thai Financial System Structure
A financial system plays an important role as an intermediary for capital mobilization and allocation
of economic resources and as a provider of payment and settlement services. A well developed, efficient
and stable financial system is thus the key to support sustainable economic development.
Table 1 Number and Asset Size of
In general, a financial system comprises three
Financial Institutions as of yearend 2014
key elements namely financial institutions, financial
Number % of Total
markets and payment systems.
Assets of
1. Financial Institution
Financial
There are 2 types of financial institution in
Institutions
Depository Corporations
2,020
69.6
Thailand, including:
Commercial Banks
30
47.9
1) Depositary Corporations, for example,
Specialized Financial Institutions
6
15.0
commercial banks, Special Financial Institutions
Saving Cooperatives and Credit Unions
1,943
6.0
(SFIs), Saving Corporative and credit unions, and
Money Market Mutual Funds
41
0.7
money market mutual funds; and
Non-Depository Corporations
7,074
30.4
2) Non-depository corporations, for example, Mutual Funds
1,495
9.8
mutual funds, insurance companies, provident funds,
Insurance Companies
86
7.6
Leasing Companies
661
3.0
asset management companies, and securities
Credit Card and Personal Loan Companies
29
2.8
companies.
Provident Funds
418
2.3
As of yearend 2014, total assets of financial
Government Pension Fund
1
2.0
institutions amounted to 36 trillion baht or 2.7 folds of Asset Management Companies
33
0.9
the country’s GDP. Considering such asset size,
Securities Companies
47
0.8
depository corporations played the most important role Agricultural Cooperatives
3,748
0.5
Pawn Shops
556
0.2
with the share of 69.6 percent, while non-depository
Source : Bank of Thailand
corporations had the share of 30.4.
The most important depository corporations were commercial banks and SFIs with the share of 47.9
and 15.0 percent, respectively. Such domination was attributed to their extensive branch networks which
allow them to service businesses and consumers more widely than other types of financial institutions. At
the end of 2014, commercial banks and SFIs together owned approximately 9,664 branches and 61,839 ATMs
nation-wide.
Thai Financial System Structure
2. Financial Markets
Financial markets comprise (1) money market
Comparison of Loan, Bond and Stock
which offers short-term liquidity to financial institutions via Ratio to GDP
interbank lending and repurchase market; (2) capital market 2.0
which offer medium-term and long-term capital
1.5
mobilization through bond and stock markets; (3) foreign
1.0
exchange market; and (4) derivatives market which offers
0.5
financial instruments whose return based on a designed
variable.
0.0
Bond and stock markets have developed and
Loan-Commercial Banks
Loan-Depository Corporations
expanded their roles continuously in supporting the Thai
Loan-Non-Depository Corporations
Stock(Market Value)
economic and financial system. At the end of 2014, bond
Bond(Par Value)
markets had 9.3 trillion baht total bond outstanding,
Source : Bank of Thailand
including short-term (< 1 year) and long-term (> 1 year
bonds. At the same time, stock market capitalization reached 14.2 trillion baht, with corporate as a major
players.
For foreign exchange market, monthly value of transactions of authorized entities averaged at 6.8
trillion baht. Money market size reached 2.1 trillion baht with the majority of transactions conducted by
financial institutions; whereas derivative market was not yet widely used where most transactions were for
hedging among counter parties on the over-the-counter (OTC) market.
3. Payment Systems
Achievement of smooth and stable economic transactions depends greatly on having in place
suitable payment systems infrastructure to support payment and settlement transactions between business
and institutions. The BOT also plays the role in promoting efficient, stable and secured payment services.
The payment systems consist of
BAHTNET (Bank of Thailand Automated High-value Transfer Network) is a financial infrastructure
serving for Real-Time Gross Settlement (RTGS) of large value funds transfer between financial institutions
and other organization maintaining deposit account at the BOT.
Cheque Clearing System consists of Electronic Cheque Clearing System (ECS), Provincial Cheque
Clearing and Bill for Collection (B/C)
Bulk Payment System is the convenient means of payment for a customer in making inter-bank
preauthorized transactions that are large in volume and have a regular recurring payment period.
Funds transfer via ATM In enhancing efficiency of payment system and performance of
commercial banks, the BOT has implemented a policy to promote the use of ATM in conducting an
interbank Retail Fund Transfer.
Financial Institution Regulation and
Supervision Policy
Definition of various financial institutions
Commercial bank business serves as the intermediaries that allocate funds from depositors and loan out
to household and business sectors. Commercial bank business can be categorized to many different forms,
namely commercial bank (universal banking), retail banks, foreign commercial bank’s subsidiary and foreign
commercial bank’s branch. The aforementioned forms of commercial bank business are registered under the
Financial Institutions Business Act B.E. 2551 (2008) and supervised by the BOT.
Special Financial Institutions established with each specific law, whose objectives are to serve the
government policies in promoting economic development and supporting investment. Examples of such
institutions are Bank for Agriculture and Agricultural Cooperatives (BAAC), Government Saving Banks
(GSB), Government Housing Banks (GHB), and Export-Import Bank of Thailand (EXIM) etc, whereby these
institutions are established in accordance with the Bank for Agriculture and Agricultural Cooperatives Act,
B.E. 2509 and amended, the Government Saving Banks Act, B.E. 2489 and amended, the Government
Housing Banks Act, B.E. 2496 and amended and the Export-Import Bank of Thailand Act, B.E. 2536 and
amended, respectively. Furthermore, these institutions are under the supervision of the Ministry of Finance.
Finance Company is a business that raises funds from the public in the form of promissory notes (P/N)
and employing such funds in several forms of investment including commerce, development, purchases and
consumption, and housing. Such business is established in accordance with the Financial Institution Business
Act, B.E. 2551 and under the supervision of the BOT.
Credit Foncier Business is business of accepting money from public in the form of promissory notes
(P/N) and employing such accepted money in one or several ways such as granting credits by mortgaging
immovable property, accepting immovable property on consignment etc. The Credit Foncier Business is
registered under the Financial Institutions Business Act B.E. 2551 (2008) and supervised by the BOT.
Saving Cooperative and Credit Union established on voluntary basis by members that generally consists
of people with the common bond (e.g. same occupation or living areas etc.), where the operating funds of
the cooperative is contributed periodically by members. The contributed funds will be loaned out to support
other members who are in need of money with interest charged. The benefit gained from permitting loans
will be contributed to members in the form of interest rate, dividend or other benefits etc. Saving
Cooperative and Credit Union is under the supervision of the Board of National Cooperative Development
in accordance with The Cooperatives Act, B.E. 2542.
Pawn-shop is a business that offers secured loans of maximum 100,000 baht per customer, with items of
personal property used as collateral. The collateral can be redeemed within a certain contractual period of
Financial Institution Regulation and
Supervision Policy
time. Such business is established in accordance with Pawn-shop Act, B.E.2505 and amended and under the
supervision of the Ministry of interior.
Money market mutual fund is a type of mutual fund that mainly invests in bank deposits, short term
debt with the repayment period of not exceeding 1 year (i.e. Treasury bills, Bill of exchange, Promissory
note) and Government bonds or corporate debentures with the repayment period of not exceeding 1 year.
Furthermore, such mutual fund is open-end fund with the portfolio duration of not more than 3 months and
under the supervision of the Securities and Exchange Commission in accordance with The Securities and
Exchange Act, B.E.2535 and amended.
Mutual Fund is a well managed investment tools that seek the highest returns under the certain extent
of risk investors can take. The mutual fund is suitable for retail investors who want to invest in money and
capital market but; are not well equipped with financial knowledge, are lack of experience and have limited
financial resources etc. Furthermore, such fund is under the supervision of the Securities and Exchange
Commission in accordance with The Securities and Exchange Act, B.E.2535 and amended.
Insurance can be categorized into 2 types of business namely;
1) Life insurance, insured against the loss or damage of individual/group of individual where the
insurer promises to pay a designated beneficiary in exchange for a premium, upon the death, disability, or
critical illness of the insured person.
2) Non-life insurance is broadly divided into 4 areas, namely Fire insurance, Auto insurance, marine
insurance and Miscellaneous Insurance.
Insurance businesses are under the supervision of the Office of Insurance Commission in accordance
with Life Insurance Act, B.E.2535 and amended, and non-life Insurance Act, B.E. 2535 and amended.
Provident Fund is a form of fund set up voluntarily between the employer and employees where the
assets of this fund consist of money contributed by both employers and employees. The setting up of a
provident fund can be regarded as a kind of benefit for employees where the assets of this fund will be
further managed by a professional fund management called "Asset Management Company (AMC)." The
benefits derived from management are distributed to members of the fund proportionately. Provident fund
is under the supervision of the Securities and Exchange Commission in accordance with Provident Fund Act,
B.E. 2530 and amended, and The Securities and Exchange Act, B.E.2535 and amended.
Credit card and Personal loan Company is a non-depositary business that provides credits in various
forms, for example credit card and personal loans etc. This type of business in under the supervision of the
BOT in accordance with Declaration of the Revolutionary Council No. 58 and the Financial Institutions
Business Act B.E. 2551.
Financial Institution Regulation and
Supervision Policy
Asset Management Company is established to manage Non-performing asset of financial institutions.
Such company is supervised by the Ministry of Finance in accordance with the Emergency Decree on the
Asset Management Company B.E.2541.
Securities Company conducts various kinds of securities business namely, brokerage, dealer,
underwriter, investment advisory and private fund management etc. Securities Company is under the
supervision of the Securities and Exchange Commission in accordance with the Securities and Exchange Act,
B.E.2535 and amended.
Money Changers are granted licenses to provide foreign currency exchange services in accordance with
the Exchange Control Act, B.E.2485. Money changers business is under the supervision of the Ministry of
Finance and the Bank of Thailand.