Updates on Thailand’s Capital Controls

Published by slang March 10th, 2008 in Asia-Pacific

As we are aware in 2006, the Bank of Thailand has imposed capital controls to discourage speculation in the Thai Bhat.

The Bank of Thailand has now abolished the capital controls and alternative measurers are implemented:

Thai banks can trade foreign exchange with non-residents without a need to set aside 30% of foreign funds as non-yielding reserves kept in domestic accounts.
Foreigners can ask correspondent banks for full refunds of withheld 30% deposits. Any outstanding withheld funds in Thai banks not reclaimed by owners after two years would be forfeited for public charity.
The requirement of full foreign exchange hedging for incoming speculative funds invested in Thai fixed income instruments and related mutual funds is now abolished. Applications made to the BoT for unwinding these hedging positions will be approved within 15 days.

Instead The Bank of Thailand has imposed the alternative measures when it abolished the aforesaid capital controls rules:

Liberalise the amount of baht supply in the market to which foreigners have access.
The limit on baht borrowing by Thai banks from a non-resident, affiliated non-residents or group of foreign corporate entities is cut to 10 million baht each from 50 million baht for all Thai banks.
The cap on the amount of baht a Thai bank lends to a foreigner, affiliated non-resident, or group of foreign corporate entities is raised to 300 million baht each from 50 million all together.
More stringent BoT monitoring of separation of foreign inflow accounts invested in Thai equities, fixed income, mutual funds and other non-speculative accounts for incoming funds.

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