Bank of Thailand urges Thai banks to monitor debt.

In an effort to cool Thailand's red-hot market sectors such as real estate and avoid a another bubble, the Bank of Thailand (BOT) has urged all Thai commercial banks to closely monitor mortgage loans and household debt.

After meeting with central bank officials yesterday, Siam Commercial Bank president Jada Wattanasiritham told reporters the Bank of Thailand does not want to see excessive growth that could lead to another economic bubble in Thailand.

Recently, the Thai central bank told commercial banks not to lend buyers more than 70 per cent of a home's market value if they were purchasing residences costing Bt10 million (1US$ = 39,50 baht) or more. Effectively, that required purchasers to make at least a 30-per-cent down-payment.

Starting this month, the Bank of Thailand is also requiring financial institutions to report details of project financing for property developers who borrow Bt100 million or more on a quarterly basis. The central bank is looking for a way to develop its database on the real-estate market, she said.

We talked about household debts and the central bank wants Thai banks to monitor them to prevent the bubble. However, the bubble may occur from other sectors such as the stock market in Thailand, Khun Jada added.

Bank Thai senior executive vice president Duangporn Sucharit said her bank has already been exercising caution in issuing housing loans and it has relatively few Bt100-million loans extended to property developers in Thailand. The Thai Military Bank president-designate Subhak Siwaraksa said that the bank would take extra care extending loans in view of the central bank's warning.

Loan growth next year in Thailand would be below the economic growth forecast of 8 per cent due to thin demand, as corporations can raise funds by issuing bonds or shares, Duangporn Subhak said. Loan growth at present is different from the past, when loans grew 0.5 times faster than Thailand's economy, he further said.

The Thai Military Bank expected that its loan growth would be 8-10 per cent next year, a Bt30 billion increase from its current lending of about Bt300 billion, Subhak added.

Kasikornbank President Banthoon Lamsam said he was bullish on the economy, which he saw as being on an upward cycle, with an improvement in Thailand's exports helping to reduce the risk of a new bubble.