Chart, commercial banks : explanation of the surge of credit since february

While working on a BOT’s table to create a chart of banks deposits, I started actually with… credit.

Because I noticed a large increase of total credit (outstanding) since february 2008 (look here).

This chart shows that the origin of this surge of credit is in Bangkok. I gave several possible explanations to this phenomenon. But it was necessary to find out more informations.

To do so, I worked on another table : “All Commercial Banks’ Credits Classified by Types of Debtors and Credits” (FI_CB_015_S3).

Type of debtors : that’s good because we can find out which entities are responsible for the increase (Businesses ? Individuals ? Government ? etc.)

Here is the result of this investigation.

The “culprit” can’t hide : “Domestic banks and Financial institutions“. This group is responsible for the hike since january. Eventhough the groups “Business” and “Government” continue to grow (“Individuals” too but at slower pace).

(to ease the reading of the chart I’ve removed groups with very small volume like “Funds” and “Non Profit Organizations”).

Here is another view, with the percentage for each group, of the total per month.

How to read ? In april, 51,4 % of the total credit (outstanding) of commercial banks were businesses. It’s declining… Same with Individuals.

Here is the same chart, but with a logarithmic view.

As you can see all the other types of debtor are marginal.

But it’s not finished. What is the group “Commercial banks and Financial Institutions” ?

The BOT gives us the details :
6. Domestic Banks and Financial Institutions
6.1 Commercial Banks Registered in Thailand
6.2 Branches of Foreign Commercial Banks
6.3 International Banking Facilities (Stand Alone)
6.4 Specialized Financial Institutions
6.5 Representative Offices
6.6 Finance Companies / Finance and Securities Companies
6.7 Securities Companies
6.8 Mutual Fund Companies
6.9 Credit Foncier Companies
6.10 Life insurance Companies
6.11 Thrift and Credit Cooperatives / Federation of Savings and Credit Cooperatives
6.12 Asset Management Companies
6.13 Pawn Shops
6.14 Other Financial Institutions

So now, we need to find the culprit INSIDE the culprit ! 😉

Crystal clear : the item “6.4 Specialized Financial Institutions” of the group “Domestic Banks and Financial Institutions” is responsible for the bulk of the increase of total credit.

Now, you’re going to ask me : what are the “Specialized Financial Institutions” ? !

(update june 19)

The official answer is :
1. Bank of Thailand
2. Government banks (Government Savings Bank, Government Housing Bank, Bank for Agriculture and Agricultural Cooperatives, Export-Import Bank of Thailand, Islamic Bank of Thailand, Small and Medium Enterprise Development Bank of Thailand)
3. Government Financial Institution (Secondary Mortgage Corporations, Small Business Credit Guarantee Corporations, Thai Assets Management Corporations)
4. Financial Institutions Development Fund (FIDF)
5. Deposit Insurance Agency

The surge is clearly linked to some action from the financial institutions linked to the government.

So to summarize (I think you need it 😉 ) :

-since february 2008 “someone” borrows more money (much more than it used to) from commercial banks.
-this “someone” is not businesses, individuals, nor government in direct (even though those groups continue to increase their loans). It’s linked to the government/financial authorities (but we don’t know the details and what this money is for).

-in april for instance, total outstanding credit increased by 174 billions THB, compare to march.
-on these 174 billions, the group “Domestic Banks and Financial Institutions” represents 109 billions (63 %)
-on these 109 billions, the item “Specialized Financial Institutions” represents 98 billions (98 %).

11 Responses to “Chart, commercial banks : explanation of the surge of credit since february”


  1. 1 Gloomy Observer 19 June 2008 at 3:18 am

    Excellent work TC; I like your style! Have you thought of asking the BoT economist responsible for those data directly? Their name and telephone number is usually listed…

  2. 2 Gloomy Observer 19 June 2008 at 3:20 am

    …my guess is either the government housing bank (which is specialised, right?), or some agricultural price support mechanism, or an oil/diesel fund – just seems logical. Would love to know the truth!

  3. 3 chinesethai 19 June 2008 at 4:43 am

    Interesting! I will follow your analysis until further details from BOT unfold.

  4. 4 thaicrisis 19 June 2008 at 4:47 am

    Well… actually, I think the word “institutions” is important.

    It’s a link to the government, right ?

    A reader told me that it could be linked to the recapitalization of some banks (we heard this kind of story recently).

    Anyway, I’ve contacted the BOT.

  5. 5 tom_bkk 19 June 2008 at 5:14 am

    >> what are the “Specialized Financial Institutions” ? !

    Well, maybe the who know the real interest rate …

    or we should ask Thaksin, this astrologers seem to know the inflection point ….

  6. 7 Gloomy Observer 19 June 2008 at 6:00 am

    How can it be a bank recapitalisation? That would imply equity inflows, which would show up in money supply instead…

  7. 8 Gloomy Observer 19 June 2008 at 6:01 am

    Unless they are borrowing hybrid Tier 2 capital again, but even that “looks” like equity (but comes with no voting rights)

  8. 9 thaicrisis 19 June 2008 at 7:26 am

    I’m impressed by the very fast reaction from the BOT.

    The answer is :
    “1. Bank of Thailand
    2. Government banks (Government Savings Bank, Government Housing Bank, Bank for Agriculture and Agricultural Cooperatives, Export-Import Bank of Thailand, Islamic Bank of Thailand, Small and Medium Enterprise Development Bank of Thailand)
    3. Government Financial Institution (Secondary Mortgage Corporations, Small Business Credit Guarantee Corporations, Thai Assets Management Corporations)
    4. Financial Institutions Development Fund (FIDF)
    5. Deposit Insurance Agency”

    Voila. So it’s clearly directed by the government. But to do what ? Furthermore, the group is still large. I’ve asked more details to the BOT.

  9. 10 Gloomy Observer 19 June 2008 at 8:10 am

    OK, we can rule out 5, 4, and 3. That leaves GHB (my initial guess) and the BoT. But the BoT wouldn’t be borrowing Baht to buy Dollars with as it can just print them: so I’m sticking with GHB and agricultural/oil price support. Who are they borrowing from though?

  10. 11 thaicrisis 19 June 2008 at 9:23 am

    From “commercial banks”, it’s very clearly stated in the BOT’s statistical table.

    I share your views regarding the GHB.

    -gvt wants to “boost” the GDP (for obvious and urgent political reasons, but that’s another story)
    -the “normal” commercial banks are reluctant to follow directly (again for many reasons)
    -therefore, the gvt uses its financial “armed arm” who then borrow (with I can imagine some garantees) from the commercial banks, in order to spread the money after.

    Sounds good.

    Anyway, BOT has many other datas
    http://www.bot.or.th/English/Statistics/FinancialInstitutions/Pages/index.aspx
    And we should have a look at the balance sheets of all those “specialized financial institutions”.

    Bur I just don’t have the time, nor the ressources, to look at everything.


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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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