Kasikorn Research Center Revealed that although the impact of the Thai capital market will have a ripple effect from two banks in the United States collapsed But pointed out that it did not affect Thai commercial banks. due to the asset-deposit structure Customer behavior is different and most importantly, the BOT supervises more intensely

Kasikorn Research Center According to two commercial banks in the US, Silicon Valley Bank (SVB) and Signature Bank, were ordered to shut down. After having to deal with the money parade situation In the midst of the panic of depositors just a few days ago. Even the US government, including the Ministry of Finance Federal Reserve regulator And the Deposit Insurance Corporation (FDIC) has sped up several measures to restore confidence. Block systemic risks in the US commercial banking sector. and take care of the group of depositors and relieve pressure on other financial institutions. that may occur in the future But still need to be careful about the impact that will have on Thailand although in some dimensions but believes that events will not follow the case of banks in the United States The Kasikorn Research Center views the impact on Thailand from the turbulence of banks in the United States as follows:

1. Volatility of the money market, capital market Appears during the way that the market waits to follow the clarity and development of the situation in the banking system in the United States. Especially in terms of restoring the confidence of the depositors. (After the US authorities have issued measures to some extent) to assess the policy stance of the Fed in the next phase that it can continuously raise the policy rate to near 6.00% as financial markets gradually predict. earlier?

that means The baht may still fluctuate within the volatility range. (Since the beginning of the year, the level of volatility is as high as 11-12%) as well as pressure on the Thai stock market that may still face risks following the direction of foreign stock markets. In the opposite direction with the support of highly secured assets such as gold in case the situation is still unstable.

In addition, if the issue of uncertainty in the banking sector and the slowdown in the US home market causing the Fed to raise interest rates cautiously and lowering his stubborn demeanor may cause the baht to fluctuate in a stronger frame

2. Effects on the Thai commercial banking system believe that the direct impact is limited This is because Thai commercial banks have very little or no direct linkage and risk to the two US banks.

However, because the situation is still unstable Causing still to follow up on the clarity of various issues continuously after this In addition, there are also effects in other parts. that may occur amidst an upward interest rate environment, such as the impact of recording losses from holding fixed income at market prices; (Mark-to-Market) at a time when bond yields have gradually increased since 2022, which is an event that appears to investors in bond markets around the world. For example, in the past year 2022, although there was a record of losses from the holding of debt instruments when calculated at market prices (MTM losses), but in order to cope with such direction. Banks in Thailand have adjusted their bond holding strategies. to reduce the average life of the instrument (Shorten Duration) and/or adjust the investment strategy to be in line with economic conditions and direction of money market, capital market more (to limit the impact of Mark-to-Market)

In addition, the status of Thai commercial banks is more stable in many dimensions. Both about liquidity and the strength of the capital This can be seen from the Liquidity Coverage Ratio (LCR) of Thailand that is above the threshold. and the capital adequacy ratio (%CAR) of Thailand is higher than the US. The liquid asset ratio (%LCR) of the commercial banking system registered in the country as of January 2023 was 189.49%, higher than the regulatory requirement.

Meanwhile, the capital of the domestically registered banking system was also strong. Its total capital ratio was 18.98%, its Tier 1 capital ratio was 15.93%, and its Common Equity Tier 1 ratio was 15.39%, higher than the US. with a total capital ratio of 15.16%, a Tier 1 capital ratio of 13.69%, and a Common Equity Tier 1 capital ratio of 12.37%.

Asset and deposit structure of the Thai commercial banking system Less concentrated than troubled US banks, in the case of Silicon Valley Bank in the US, it is structured in such a way that it has a smaller credit ratio than its investment portfolio. (Net loans account for 35% of total assets. While the investment portfolio in debt instruments accounts for up to 55% of total assets), while deposits are quite concentrated. Because it mainly comes from customers from tech companies, VCs and startups.

But in the case of the Thai commercial banking system, it is the opposite. The net loan portfolio accounts for 64% of total assets. And is a portfolio that is spread between large credit, SMEs and retail in the ratio of 35.8%, 23.5% and 40.7% of the total loan system. (excluding financial business), respectively, which is considered a better spread than in the case of US banks.

while the net investment portfolio Including debt and equity instruments Approximately 11.7% of total assets Due to the more diversified and balanced asset portfolio structure of Thai commercial banks, it can create a continuous stream of income from lending. And mitigate the impact of asset price volatility in the investment portfolio to a certain extent.

the debt side especially the deposit There is a structure that includes retail, business, government, non-profit institutions and others in the ratio of 55.3%, 26.7%, 7.4% 2.7% and 6.3% of total deposits, respectively, which is more balanced than in the case of Silicon Valley. Bank and the nature of the depositor will focus on stability. rather than seeking returns, therefore, when coupled with the high level of stability of Thai commercial banks Strong risk management and the close supervision of the Thai authorities as well therefore causing the risk of being withdrawn This is likely to be much lower than that of the troubled US banks.

In addition, investments in startups of Thai banks will be conducted through established Venture Capital. It also has a strategic objective. to support new technology or business that contribute to increasing the competitiveness of the bank in the future Rather than focusing on the dimension of investment to make a profit In addition, it is under the regulation of the structure and scope of business of financial business groups by the Bank of Thailand (BOT).

Kasikorn Research Center Stating that although the case of the weakness of US banks (Silicon Valley Bank and Signature Bank) should not escalate to become a systemic risk at this time among the efforts of the US authorities to restore the confidence of depositors But it must be assumed that this problem is not yet fully resolved. and have issues to follow Especially during the period when US interest rates are still on the rise.

In addition, it is believed that the US authorities and the market will gradually monitor the situation of other financial institutions. To clarify and ensure that similar vulnerabilities will not occur again in the future.

For Thailand, the impact will appear indirectly. through the volatility of the financial markets over While the direct impact of the two US banks is limited. In addition, due to the fact that Thai commercial banks have stable liquidity and capital stability as well as better diversification of asset structure and deposit structure In addition, customer behavior is different from the United States. And most importantly, there is strict and close supervision by the Bank of Thailand, therefore, it is believed that Thai commercial banks will not occur in the case of the United States.

Source: Thai News Agency