Chart : Bangkok Bank MLR and BOT interest rate

Something happened last week.

Since Monday, Bangkok Bank, Siam Commercial Bank, Kasikornbank and Krung Thai Bank have all increased their prime lending and fixed-deposit account interest rates. Market leader Bangkok Bank currently quotes minimum lending rates of 7.25%, up 0.375 points from last week. (Bangkok Bank)

Basically, the cost of money is increasing.

But let’s remember that the Bank Of Thailand is on hold for its monetary police at 3,25 % (since august 2007).

So I thought it was interesting to compare both : the MLR (minimum lending rate) of Bangkok Bank (because it’s by far the biggest thai bank) and the interest rate of the BOT (14 days repurchase rate) (source BOT).

Here is the chart, with the difference between the 2 rates. As for the timeline, I took the first day of each month.

The difference has now increased to 4 points (7,25 % – 3,25 %).

Now, how to interpret such move ?

-as Bangkok Post writes : “Analysts said the rate increases were coming as banks look to bolster interest spreads to compensate for an expected drop off in new lending in the second half.”. Basically : we are going to lend less (because the sxxx is about to hit the fan, so we need to earn more money per loan).

-or the banks anticipate that BOT will increase its rates soon (we are talking about july, for the next meeting of monetary policy)

-or the banks are becoming unwilling to lend. Because they are afraid of the economic perspectives.

-but the banks have also increased the deposit rate (interests that they pay to their customers), so we could say that they want to increase their liquidities (by increasing the level of total deposits).

In any case, it could hurt the economy. Bangkok Post puts it well : “Rising interest rates would affect retail borrowers potentially more than large companies, particularly as most consumer loans such as home mortgages or personal loans are floating rates tied to minimum lending rates.

The party is about to end.

1 Response to “Chart : Bangkok Bank MLR and BOT interest rate”

  1. 1 vikas 2 August 2008 at 8:54 am

    Dear Sir,

    Please let me know MLR, MOR, MMR Rate for Bangkok Bank and Kasikorn Bank.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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