Fitch: Thai State Banks Resilient to Deposit Shifts

Tue Feb 18, 2014 9:41pm EST

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(The following statement was released by the rating agency) BANGKOK/SINGAPORE, February 18 (Fitch) The recent deposit pull-out from Government Savings Bank (GSB) highlights the potential risk that politics could play in undermining the Thai financial system, says Fitch Ratings. We had recently highlighted that the country's political turmoil has already raised the risk of a longer-than-expected slowdown, and ultimately greater credit pressure on the banks. Deposit withdrawals from GSB appear to be of a manageable size for now. GSB reported that the net amount of the pull-out was around THB20bn on 17 February, while its total deposit base was THB1,724bn (as of August 2013). The withdrawals are related to public skepticism over GSB's new THB20bn credit line to the Bank for Agriculture and Agricultural Cooperatives (BAAC) in support of the government's rice subsidy programme - and motivated by political suasion rather than heightened financial risk. GSB has already indicated that it will cancel this credit line. We think GSB's liquidity buffers, as well as the scope for policy-driven financial support from the central bank or from other state-owned institutions, should enable GSB to surmount any limited, near-term funding challenges. One key risk, though not a central scenario, is an acceleration of deposit withdrawals from additional state-owned banks. This could place an increasing burden on inter-bank credit lines, and potentially the central bank. At the moment, we believe the authorities are able to ward off near-term funding challenges for the state-owned banks. However, systemic risks are skewed to the downside - as a resolution of the political deadlock is not in sight, and the funding of the government's rice subsidy programme remains uncertain. GSB and BAAC are both backed by acts of parliament, and are likely to obtain high levels of support. They account for 10.6% and 6.1%, respectively, of banking system assets (as of June 2013), and their stability is important for overall confidence across the Thai banking system. Contact: Parson Singha Senior Director, Financial Institutions Tel: +66 2108 0151 Aninda Mitra Senior Director, Fitch Wire Tel: +65 6796 7232 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. Applicable Criteria and Related Research: 2014 Outlook: Asia-Pacific Banks here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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