Industry sees options to BoT spat

Other levers than pressure available

The government should seek more acceptable options to resolve its dispute with the Bank of Thailand over policy rates rather than attempt to curb the regulator’s power, which is a contentious tactic, says Montri Mahaplerkpong, vice-chairman of the Federation of Thai Industries.

He said he disagrees with any proposals to amend a law that would impact the bank’s authority over managing the nation’s financial stability.

“Other countries want their central banks to remain neutral and independent from politics. Politicians are prevented from interfering with the bank’s affairs,” said Mr Montri.

“We need checks and balances to run the economy or else we may see an unpleasant impact on the country’s finances.”

He was speaking after Pheu Thai leader Paetongtarn Shinawatra criticised the central bank’s refusal to bow to government pressure to cut interest rates. She said the law that ensures independence for the regulator may be an obstacle to solving economic problems.

Pheu Thai Party leaders have called on the central bank to cut the policy rate from 2.5%, the highest level in a decade, for months to reduce financial costs for businesses, but Mr Montri said there are other options to help enterprises and support the economy.

He said one alternative is creating a new state agency tasked with monitoring the net interest rate spread of commercial banks, which is the difference between the interest rates for loans and deposits, and is crucial to

‘‘ One alternative is creating a new state agency tasked with monitoring the net interest rate spread of commercial banks.

MONTRI MAHAPLERKPONG Vice-chairman, Federation of Thai Industries

banks’ profitability.

A high spread affects small and medium-sized enterprises (SMEs), which are good debtors with high potential to repay debts, when they apply for loans as banks tend to lend at higher rates than they pay for deposits, said Mr Montri.

Easing the net rate spread means authorities could help SMEs solve their liquidity problems, he said.

The government can also bolster the economy by regulating the reserve for banks’ bad debts, as a high reserve requirement can exert pressure on their financial expenses, said Mr Montri.

Setting the reserve at an appropriate level may push banks to consider lowering loan interest rates, which could assist the government in stimulating the economy, he said.