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The
Bank of Thailand was established in 1942 to act as the country' s
central bank. Its function is to issue notes, act as banker to the
government and other banks, act as fiscal agent of the government
in its dealing with international monetary organizations, manage
public debt, maintain exchange controls, supervise commercial
banks and manage public credit fonciers.
As
banker to the government, the Bank of Thailand holds the main
accounts of the Government as well as those of government
enterprises. It extends loans to the Government through the
purchase of treasure bills and government bonds, and advises it
regarding the formulation and implementation of monetary policy.
The Bank of Thailand has three branches in the provinces---a
southern branch at Songkhla, a northeastern branch at Khon Kaen,
and a northern branch at Lampang.
Under
the Commercial Banking Act of 1962 and its revision of 1979, the
Bank of Thailand is entrusted with supervising the commercial
banks and has the power to prescribe the cash reserve ratio, the
maximum rates for loans and deposits, and the ratio of capital
funds to risk assets. The Bank also acts as a lender of last
resort for commercial banks by giving short-term loans against
government securities and making available rediscount facilities.
In 1979, a repurchase market was established whereby the Bank of
Thailand bought and sold government bonds with an agreement to
repurchase of resell. It is considered one of the best central
banks in Asia.
As
of 1993, there were 15 local commercial banks with 2,700 branches,
including head offices: 757 in Bangkok and 1,943 in the provinces.
In addition, there were 39 overseas branches of Thai banks, and 14
foreign banks (with 2 branches) registered abroad but operating in
Thailand. The commercial banking network reaches practically every
town in the country.
The
commercial banks in Thailand had total assets of 2,746.9 billion
baht of which more than 79 percent was in the form of bill, loans,
and overdrafts. Commercial bank lendings are concentrated to a
large extent on manufacturing (24.3 percent), wholesale and retail
trade (17.9 percent) mostly in the form of working capital
financing, and imports and exports (11 percent).
The
commercial banks normally provide credit in the form of overdrafts
which are on a short-term basis but may be rolled over on a year-to-year
basis. Due to fluctuations in interest rates both in the
international and domestic markets, commercial banks at present
encourage customers to utilize term loans instead of overdrafts.
Moreover, many commercial banks also provide guarantees for
foreign and domestic loans, most of which are in the form of short
and medium-term for local companies purchasing machinery and
equipment from overseas manufacturers.
To
further improve the role of commercial banks, the Commercial
Banking Act of 1979 stipulated requirements for reducing the banks
involvement in non-banking activities, encouraging lending to
selected sectors and promotion a better relationship between the
banks and their clients.
To
promote Thailand as a regional financial centre, the Bank of
Thailand implemented foreign exchange liberalization and in 1993
authorized 46 commercial banks to operate International Banking
Facilities by providing loans in foreign currency to foreign and
local borrowers. Of these, 20 banks were newly-established foreign
banks in Thailand.
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