Ladies and gentlemen : I eventually did it. I found a pertinent and smart comment made by a thai minister. And not any minister : the Finance Minister Suchart, someone I don’t really like (read here).
You see, I’m fair-play. 😉
Competition in the banking sector remains weak, resulting in high interest rate spreads that hurt depositors and borrowers alike, according to Finance Minister Suchart Thada-Thamrongvech.
Dr Suchart, speaking to members of the House finance and banking committee, said competition in the Thai banking sector was considerably softer than in developed markets.
Weak competition in turn resulted in higher profits for banks.
Average minimum loan rates for the largest banks stand at around 7.5%, compared with savings deposit rates of just 0.75%.
“And even with prime lending rates at 7.5%, banks aren’t really that eager to lend, as they need to set aside reserves to cover their loans and they aren’t confident about whether loans will turn bad in the future or not,” Dr Suchart said.
“On the other hand, if they lend in the repurchase market, you can receive 3.75% with no risk or need to set aside reserves. And they still can profit from the spread against deposit rates.” (Bangkok Post)
Spot on ! Absolutly true. 100 %.
Let’s recap :
-banks borrow money at repurchase rate (3,75 %) (see my chart here).
-banks have a high minimum lending rate (7,50 %) (eventhough it’s possible to get a better rate, says one of my readers working in banking services).
-banks offer a ridiculously low interest rates for the deposits of their customers (0,75 %)
-therefore, thai banks make outrageous profits. They always win. 😉
-and the reason of this (and this is the courageous fact pointed by the minister) is : A LACK OF COMPETITION
Suchart doesn’t speak about the weather, doesn’t try to forge an excuse. Indeed, the thai banking system is protected… Carefully controled by a few big families, groups and interests… In Thailand, like in many other countries, banks and power are linked. Intimately.
Now we are waiting for the Finance Minister to go further, and to increase competition by allowing more foreign players on the thai market. 😉