Unofficial Translation
With courtesy of the Foreign Banks’ Association
This translation is for convenience of those unfamiliar with the Thai language
Please refer to the Thai text for the official version
-----------------------------------------4 October 2007
To
Managers
All commercial banks
All finance companies and credit foncier companies
No. ThorPorTor. ForNorSor. (21) Wor. 1950/2550 Re: Regulation on
Collateral Valuation
As the Bank of Thailand (BOT) had dispatched the Circular No. ThorPorTor.
ForNorSor. (21) Wor. 1979/2549 Re: Regulation on Collateral Valuation of Financial
Institutions dated 21 December 2006,
BOT has revised the aforementioned regulation by amending summary table
on approach of appraisal or valuation and frequency of appraisal or valuation as follows:
1. To add collateral type of inventory so that commercial banks can deduct its
value from book values of loans before making provision. Commercial banks shall apprise or
value inventory by using direct sales comparison approach at the end of every accounting
period. Furthermore, commercial banks shall put in place appropriate internal control
guidelines to prevent banks’ customers from reusing inventories currently pledged with other
financial institutions as collateral at the banks. Such guidelines shall be approved by
committees of commercial banks.
2. To add approach of appraisal or valuation of collateral types of machinery.
Commercial banks shall apprise or value machinery by using replacement cost approach as
co-specified by The Thai Bankers’ Association, The Thai Valuers Association, and The
Valuers Association of Thailand.
3. To rescind the approval on collateral types of structured deposit (deposit
embedded with financial derivative) to be deducted from book values of loans in making
provision.
BOT Notification No 1950-2550 (04-10-07)
-2Please be informed and comply accordingly.
Yours Sincerely,
(Mr. Krirk Vanikkul)
Assistant Governor, Financial Institutions Policy Group
for Governor
Prudential Policy Department
Tel. 0-2283-5304, 0-2283-5837, 0-2283-5886
Note
[ ]
Clarification meeting will be organized on ………….. at …………….…….…
[X]
No clarification meeting will be organized.
BOT Notification No 1950-2550 (04-10-07)
Summary table on approach of appraisal or valuation and frequency of appraisal
or valuation
Types of Collaterals
Appraisal or Valuation Approach
1. Cash, commemorative banknotes for
special occasions or right of claim in
Appraisal or valuation is not
Appraisal or
Valuation
Frequency
-
required.
deposit with that financial institution or
bill of exchange, promissory note,
certificate of deposit with that financial
institution which is issued for borrowing
from the public
2. Aval, acceptance, or letter of
guarantee
Appraisal or valuation is not
required.
-
3. Cash equivalent collateral:
-
Marketable securities, both
equities and debt securities such as
common stocks, preferred stocks,
debentures, and debt instruments and
bonds which are listed on the Stock
Exchange of Thailand or securities
trading centers
-
Gold
Appraisal is not required but
valuation is required by using market
price that is last offering price to be
in line with Thai Accounting
Standard No. 40.
Appraisal is not required but
valuation is required by using market
price that is last offering price
4. Securities that are not listed on the
Stock Exchange of Thailand or securities
trading centers
At the end
of every
accounting
period
Appraisal or valuation is required
depending on book value of loan.
If market price is not available,
financial institution may apply net
worth derived from latest financial
statements, which are certified by an
auditor, of the issuer.
BOT Notification No 1950-2550 (04-10-07)
At the end of
every accounting
period
-2-
Types of Collaterals
5. Other collaterals:
Appraisal or Valuation Approach
Appraisal or
Valuation
Frequency
Appraisal or valuation is required
depending on book value of loan.
Every 3 years
If appraisal is required, financial
institutions shall apply appraisal
approach in accordance with
standards and professional ethics
with regard to assets appraisal in
Thailand that is announced by The
Securities and Exchange
Commission and The Stock
Exchange of Thailand.
If valuation is required, financial
institutions shall comply with the
following approaches:
- Commercial immovable
properties
-
Residential real estates
- Other immovable properties such
as negotiable leasehold
-
Machinery
- cost approach, or direct sales
comparison approach, or Income
approach
Every 3 years
- direct sales comparison approach,
or cost approach
Every 3 years
- cost approach, or direct sales
comparison approach, or income
approach
Every 3 years
- direct sales comparison approach,
or replacement cost approach, or
guidelines which are further
announced as minimum requirements
by The Valuers Association of
Thailand, or The Thai Valuers
Association, or The Securities and
Exchange Commission. Depreciation
shall be taken into account every
year.
Every 3 years
BOT Notification No 1950-2550 (04-10-07)
-3Types of Collaterals
-
Vehicles such as cars,
motorcycles, airplanes, etc.
Appraisal or Valuation Approach
-
Direct sales comparison
Appraisal or
Valuation
Frequency
Every 3 years
approach, or guidelines, which are
further announced as minimum
requirements by The Valuers
Association of Thailand, or The Thai
Valuers Association, or The
Securities and Exchange
Commission. Depreciation shall be
taken into account every year.
-
Inventory
- Intellectual properties that can be
legally pledged or accepted as collateral,
appraised or valued on a reliable ground,
and legally taken possession of
- Direct sales comparison
approach
- Appraisal or valuation is required
depending on book values of loans
by complying with guidelines of
international standards or guidelines
which are further announced as
minimum requirements by The
Valuers Association of Thailand, or
The Thai Valuers Association, or
The Securities and Exchange
Commission.
At the end of
every accounting
period
Every 3 years
In this regard, financial institutions are required to consider the impairment of or
any decline in values of assets which are collaterals when there is an indication that
such collaterals are devalued or depreciated by their working life.
Disclaimer:
The Foreign Banks’ Association, its directors, members and employees take no
responsibility, accept no liability from any use or misuse of the information in these pages and do
not attest to the correctness of the translation, if any. This translation contains privileged
information. It is intended for the named recipients only. No portion of this translation may be
transmitted by any means without prior written permission from the Foreign Banks’ Association.
All rights reserved.
BOT Notification No 1950-2550 (04-10-07)