How Thailand’s Central Bank Confronts Thai Banking Industry Monopoly Power

English: In Bangkok, these students were retur...

English: In Bangkok, these students were returning from their lunch break. Their school was next to a temple that we were visiting. (Photo credit: Wikipedia)

If u know me, I am a critic of the Thai Central Bank chief, Prasarn, for many reason, as his track record, is just “God Awful.” For example, several local press reports that 3rd Quarter Thai banking industry profit is up like 20% and in the same 3rd Quarter, like every local and global units, went reducing Thai GDP growth estimate to like 2% to 4%, from close to 5%. And all Prasarn says for that, is that he is worried about public and private debt. The real problem, most economist would point out about Thailand, is the “Monopolistic Powers” of the Thai banking industry, that when someone walks into a typical bank, the “Board” announcement of the interest rates, at all banks, is about the same thing, being savings at about 2% to 3% and lending rates at about 7% to 8%. To consumers, that is about a 4% to 5% interest rate spread. Then there is all the service charge fee, at every instance, of every banking activity with the banks from the public. Of course, Prasarn does not recognize that 4% to 5% interest rate spread the public is faced with, but hides behind the total bank interest payout and banking interest earned, called in banking terms, NIM, which is at about 2% to 3%.

Prasarn, of course, says that NIM, is about average in ASEAN and so it is OK and acceptable. The problem is, typically, in a liberalized banking industry, banking industry earnings, shadows the GDP, and again, here in Thailand, as the economy or GDP has been slowing, Thai banking industry profit, showing no sign of slowing, but just zoomed up about 20%. And again, what does Prasarn say? Like a master “Public Relations” guy, came out and blasted public and private sector debt, saying for Thailand GDP to grow on a sustainable basis, the public and private sector, must save more. The fact that Prasarn is not mentioning, is that because of the interestrate spread, of 4% to 5% meaning, saving at about 2% to 3%, that low savings rate, “DISCOURAGE SAVINGS” and the lending rate of 75 to 8% “DISCOURAGE INVESTMENTS” so what Thailand ends up, is people on a “CONSUMER BUYING SPREE.” If Prasarn is serious, about sustainable GDP, obviously, he would try to reduce the “INTEREST RATE SPREAD.” For example, if savings rate is higher, more people would save, and if lending rate was lower, people would invest more. With more savings and investments, obviously, consumer spending will be squeezed and fall.

The problem, many have pointed out, is that Prasarn, perhaps is not really interested in sustainable GDP growth, but in protecting the Thai “BANKING MONOPOLISTIC PROFIT” because the interest rate spread, is about the Thai banking industry profit potential. If there was real competition in the Thai banking industry, not a monopoly, the interest rate spread will, by competitive force, be reduced.

Concerning “Public Debt” anyone who has been in Thailand for a few years now, have seen Prasarn and the Yingluck government clashed on a number of issue, including Prasarn’s position on Thailand’s interest rate policy and interest rate spread. There is no need to play a child game of denying reality, but the fact is, Prasarn is a critic of the Yingluck government’s economic policy. But fundamentally, Prasarn forgets, that the Yingluck government won an election landslide, and that gave the Yingluck’s government “LEGITIMATE MANDATE BY THE PEOPLE TO GOVERN THAILAND.” And where did Prasarn come from? Well, Prasarn was appointed by the ABHISIT government, a government that was orchestrated and formed in a “MILITARY CAMP.”

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