Cab­i­net ap­proves mea­sures to sweeten bank merg­ers


The cab­i­net yes­ter­day ap­proved tax de­duc­tions and ex­emp­tions to en­cour­age merg­ers among Thai banks in a bid to sup­port do­mes­tic fi­nan­cial in­sti­tu­tions and im­prove their abil­ity to com­pete re­gion­ally.

Nath­porn Cha­tus­rip­i­tak, an ad­viser to the Prime Min­is­ter’s Of­fice min­is­ter, said the cab­i­net ap­proved a draft of a royal de­cree on the de­duc­tion of cor­po­rate in­come tax and ex­emp­tions from val­ueadded tax, spe­cific busi­ness tax and rev­enue stamps to sup­port merg­ers among Thai fi­nan­cial in­sti­tu­tions.

The royal de­cree also re­quires rel­e­vant agen­cies to deduct re­lated mea­sures for bank­ing merg­ers such as trans­fer fees and trans­fer of real es­tate as­sets.

Mr Nath­porn said the Bank of Thai­land’s third phase of fi­nan­cial de­vel­op­ment dur­ing 2016-20 is aimed at up­grad­ing ef­fi­ciency and com­pet­i­tive­ness among Thai banks in an ef­fort to de­velop them into re­gional fi­nan­cial in­sti­tu­tions. For this, the gov­ern­ment needs to im­ple­ment mea­sures to en­sure that Thai banks have suf­fi­cient cap­i­tal to com­pete with other Asean banks.

Banks in Sin­ga­pore and Malaysia have as­sets worth more than 4 tril­lion baht, he said.

Thai banks with the po­ten­tial to com­pete in the re­gion should have as­sets of at least 4 tril­lion baht, Mr Nath­porn said.

Banks with as­sets in the range of 1-1.5 tril­lion baht are suit­able for merg­ers with medium or large-sized banks, he said.

Merged banks that have to­tal as­sets val­ued at more than 4 tril­lion baht will be al­lowed to deduct dou­ble their ex­pen­di­tures, while those with as­sets worth be­tween 3 tril­lion and 4 tril­lion baht can deduct up to 1.75 times.

Merged banks with as­sets worth 2-3 tril­lion baht will be per­mit­ted a de­duc­tion of 1.5 times, and those with as­sets val­ued at 1-2 tril­lion baht will have a de­duc­tion rate of 1.25 times.

The merg­ing process should be com­pleted by the end of 2022.

Mr Nath­porn said the gov­ern­ment is ex­pected to lose be­tween 600 mil­lion and 1.4 bil­lion baht in rev­enue from the tax mea­sures.

He said the ex­pan­sion of in­vest­ments from bank­ing merg­ers, such as in­vest­ments made in core bank­ing and in­for­ma­tion tech­nol­ogy, are ex­pected to be worth 3-7 bil­lion baht for each merger.

Separately, t he cab­i­net has also ap­proved the Fi­nance Min­istry’s pro­posal of a de­vel­op­ment plan for fin­tech.

De­vel­op­ment in the first stage dur­ing 2018-19 in­cludes the es­tab­lish­ment of the In­sti­tute for Fi­nan­cial In­no­va­tion and Tech­nol­ogy, which is ex­pected to re­quire 650 mil­lion baht from the fund of spe­cialised fi­nan­cial in­sti­tu­tions.

The sec­ond de­vel­op­ment phase, sched­uled for 2020-22, is ex­pected to de­velop and pro­mote Thai fin­tech star­tups to have con­nec­tions with their in­ter­na­tional coun­ter­parts, for which a bud­get of 513 mil­lion baht is to be used.

Fi­nan­cial tech­nol­ogy is im­por­tant for of­fer­ing greater ef­fi­ciency in fi­nan­cial ser­vices, ac­cord­ing to the Fi­nance Min­istry.

Many coun­tries in the re­gion have pro­moted fin­tech de­vel­op­ment, in­clud­ing Sin­ga­pore, Malaysia and Tai­wan.

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