BoT licenses joint ventures to handle banks' bad debts Effort based on long-term outlook

The central bank forecasts the impact of the pandemic is going to be long-lasting and could differ from past economic crises, such as the 1997 Asian financial collapse. (Reuters photo)

The Bank of Thailand announced conditions to establish a joint venture asset management company (JV AMC) to support financial institutions managing bad debt for the long term as the pandemic persists.

The conditions to create a JV AMC are effective from yesterday and financial institutions can apply for a licence for the next three years.

A licence is valid for 15 years, said Suwannee Jatsadasak, senior director of the Bank of Thailand.

The central bank forecasts the impact of the pandemic is going to be long-lasting and could differ from past economic crises, such as the 1997 Asian financial collapse. As a result, a JV AMC supports financial institutions offering assistance to customers for the long term, helping them survive the crisis.

A JV AMC gives banks more flexibility in managing bad debts, helping both individual and commercial borrowers in the longer term, Ms Suwannee said.

The central bank stipulates the two major shareholders — a financial institution and a JV partner — to hold equal shares to balance controlling power.

Existing AMCs such as Bangkok Commercial Asset Management Company Plc and Sukhumvit Asset Management Company (SAM) play a key role in the country’s bad asset management, but both have capital limitations in terms of buying distressed debt from financial institutions, she said.

Ms Suwannee said while non-performing loans are rising in the banking sector during the pandemic, they should not be at a significant level at the end of 2022 given the central bank’s debt relief measures.

The debt aid measures expire in 2023.

Speaking at a separate event, SAM president Tharatporn Techakitkachorn said the company is in talks with 2-3 potential business partners to set up JV AMCs.

One potential partner is a local mid-sized bank and discussions with this party are expected to be concluded this year, said Mr Tharatporn.

If a deal can be reached, it is possible this JV could apply for a central bank licence this year, he said.

Other potential partners in talks with SAM on similar deals are commercial banks and specialised financial institutions, said Mr Tharatporn.

It is possible SAM could agree to 2-3 JV AMCs to manage bad assets for partners, he said.

Krungthai Bank (KTB) is studying a plan to set up a JV AMC, said bank president Payong Srivanich.

He said 3-4 of the bank’s partners in bad debt management approached the bank about a possible JV.

These partners comprise both listed and non-listed companies, said Mr Payong.

If KTB is able to agree on a JV partnership, it will propose the deal to its board for approval, he said.

Recently JMT Network Services Plc informed the Stock Exchange of Thailand its board approved in principle a JV with a Kasikornbank subsidiary to set up companies to operate two types of business: debt collection and asset management.