BANGKOK: A Thai government plan to encourage mergers will more than halve the number of financial institutions in the country within a year and open the door wider to foreign competitors, the central bank said.
Many financial firms will have to merge with each other or parents or upgrade to be a bank, Bank of Thailand deputy governor Tarisa Watanagase told reporters. Then the number of existing financial institutions will be more than halved.
The plan, approved by the cabinet on Tuesday, is expected to help Thailand revamp an overcrowded industry seen as a weak spot in an otherwise booming economy, as it tries to close the door on the Asian economic crisis of 1997/98.
Finance Minister Suchart Jaovisidha said yesterday he expected a merger between Industrial Finance Corp of Thailand PCL and BankThai PCL, both state run, to be completed in the current quarter.
He also said negotiations on a merger between state-run Thai Military Bank PCL and DBS Thai Danu Bank, a subsidiary of Singapores DBS Group, were going well.
Strong economic growth is allowing Thai banks to finally emerge from the Asian financial crisis, when they were crippled by massive debt defaults, but they have been slower to consolidate than others in the region.
Analysts said the industry consolidation plan was aimed at lessening the burden on taxpayers, who were saddled with bailing out more than 50 financial firms that went under during the crisis.
Tarisa said the central bank would discuss the governments financial master plan with banks and finance companies, which currently number 83, over the next one or two weeks.
The plan envisages two types of financial institutions: full-service banks and banks for small- and medium-sized enterprises.
It includes incentives such as waiving taxes on mergers of financial institutions. It will also allow foreign banks in the country, such as HSBC Holdings Plc, Citigroup and Standard Chartered Plc, to operate more than the one branch they are permitted now. Reuters