The Bank of Thailand is the central bank of Thailand. The Bank of Thailand Act was promulgated on 28 April 1942 vesting upon the Bank of Thailand the responsibility for all central banking functions.
History
The reign of King Rama IV was characterized by fostering relations and trade of Siam with foreign powers. A significant milestone of these relations was the signing of a diplomatic and commercial treaty with England by King Rama IV. The so-called “Bowring Treaty” opened doors of Siam to the world, and also led to numerous similar treaties with other countries.
With increasing ties to the West under the reigns of Kings Rama V and VI, there were several attempts by these western powers to establish a central bank for Siam to issue bank notes which would bring about substantial benefits. Yet these attempts did not materialize as the Siamese believed that these powers intended to reap the benefits for themselves. However, it was believed that in principle, having a central bank would serve as a central medium for trade and economy, but the project was shelved due to the lack of experience and expertise at that time.
The idea to establish a central bank was brought into light again following the Revolution of 1932 which established constitutional rule in Siam. According to the Economic Plan of the People’s Party (the promoters of the Revolution) proposed by Pridi Banomyong (Luang Pradit Manudham), deemed it necessary to establish a central bank to act as a key mechanism to pursue economic policy of the country. However, Pridi’s Economic Plan did not have the required consent by the Prime Minister and several Ministers, which prompted Prime Minister Phraya Manopakorn Nitithada to dissolve the House of Representatives.
Shortly after that, the plan to have central bank was revived, when Phraya Phahon Phon Phayuhasena seized power on 20 June 1933.
However, the Minister of Finance consulted with James Bexter, the fiscal adviser to the Government at that time, who felt that it was not time to establish a central bank, given the lack of experts on banking issues in Siam, not to mention the lack of capital and the lack of a commercial banking system in the country.
The Government pushed forward the project to establish a central bank again in 1935. The Cabinet resolved to have the Ministry of Finance to propose a bill on the Establishment of the National Bank, B.E. 2478 (1935), drafted by Luang Voranitipricha. The bill proposed to incorporate the Siam Commercial Bank Ltd as the national bank. With just a mere eight articles, the bill was regarded as incomprehensive and lacking in details by the Comptroller-General, hence it was not promulgated.
On 16 December 1938, Lieutenant-General Luang Pibulsonggram was appointed Prime Minister, who in turn appointed Pridi Banomyong as Minister of Finance. Once he assumed this role, Pridi Banomyong revived again the idea to establish a central bank. He made Prince Vivat, the Director-General of the Customs Department, Adviser to the Ministry of Finance, a position hitherto held by foreigners. It was during that time when Pridi Banomyong tried to explain to these foreign advisers of the need and intentions of the government. Ultimately, these advisers cooperated well in assisting the drafting the central banking act, which could be considered the first step towards central banking in the country.
In the process of establishing the National Banking Bureau, Finance Minister Pridi Banomyong delegated Prince Viwat, the said Adviser to the Ministry of Finance, to finalise the bill which had been drafted by the foreign advisers. Ultimately, the bill on the establishment of the National Banking Bureau was presented to the Prime Minister, whose cabinet agreed to name it “Act on the Establishment of the Thai National Banking Bureau”. Once the House of Representatives deliberated and passed the bill, it was promulgated and announced in the Royal Gazette on 26 October 1935. One of the reasons for establishing the Thai National Banking Bureau was to lay groundwork for central banking and manage government debts.
The Thai National Banking Bureau started its operations on 13 May 1940. The official opening ceremony was held on 24 June 1940, which coincided with the National Day then. It was only after more than a year’s operation of the Bureau when the Asia-Pacific Theatre of the Second World War erupted. Japanese troops landed on Thai shores on 8 December 1941. The invading Japanese demanded that the Thai Government set up a central bank comprising Japanese advisers and department heads. Of course the Thai Government could not accept such conditions and requested that Prince Viwat draft a bill to change the status of the Thai National Banking Bureau to a central bank, with immediate effect. Hence the “Bank of Thailand Act” was promulgated on 16 April 1942.
The inauguration ceremonies were held on 10 December 1942, which was Constitution Day. On the following day, the Bank of Thailand started its operations at the former offices of the Hong Kong and Shanghai Banking Corporation on Siphraya Road. Prince Viwat assumed the position of the first Governor.
The Bank of Thailand was relocated to its present place in the grounds of the Bangkhunprom Palace on 3 March 1945. A new head office building was erected on 12 July 1982, and in 2007, the headquarters was moved to the new building constructed between the Bangkhunprom and Devavesm Palaces.
The Bank of Thailand Act, B.E.2485 was later amended in order to put emphasis on BOT’s social responsibility, to create a mechanism to guard against economic crisis, as well as to set up BOT’s decision making process to ensure good governance and transparency in the organization. Moreover, members of the public will be able to audit and increase the understanding of the BOT’s operations. The Bank of Thailand Act, B.E.2551 came into force with effect from 4 March 2008.
Mission
Promoting a stable financial environment to achieve sustainable and inclusive economic development.
Vision
To be an organization of vision and principles that engages with stakeholders in pursuit of Thailand's sustainable economic well-being.
Values
- Integrity;
- Vision;
- Outreach;
- Humility.
Objectives:
- Print and issue banknotes and other security documents;
The BOT prints and issues banknotes and other security documents under the enforcement of the Currency Act and has sole rights to print and issue banknotes in the Kingdom.
- Promote monetary stability and formulate monetary policies;
The BOT implements monetary policy as specified by the Monetary Policy Committee as follows :
- Mobilizing the deposits;
- Determining the interest rate for loans to financial institutions;
- Trading foreign exchange and exchanging for the future cash flow;
- Borrowing foreign exchange in order to maintain the monetary stability;
- Borrowing money in order to implement the monetary policy;
- Trading securities as necessary and exchanging for the future cash flow in order to control the money supply in the country’s financial system;
- Borrowing or lending the securities with or without returns.
- Manage the BOT’s assets;
The BOT manages its assets (excluding the assets within the currency reserve according to the Currency Act) and invests such assets for returns by realizing the security, liquidity, return on asset, and management risks.
- Provide banking facilities to the government and act as the registrar for the government bonds;
The BOT provides banking facilities to the government in terms of depository and lending facilities for the Ministry of Finance, acts as the custodian for the government, acts as the representative of the government for investment in assets and FX, trades and transfers the bill of exchange, securities, and share certificate, and controls and oversees FX. In additions, the BOT may provide banking facilities to the state enterprise or other government agencies. Moreover, the BOT acts as the registrar for the government bonds by acting as the government representative in purchasing and selling government bonds, paying principal and interest, or acts as the registrar of state enterprises, specialized financial institutions, or other government agencies.
- Provide banking facilities for the financial institutions;
The BOT provide banking facilities for the financial institutions by acting as lender of the last resort for the financial institutions, acting as the custodian for the financial institutions, and ordering the financial institutions to report or explain about the assets, liabilities or contingent liabilities.
- Establish or Support the establishment of payment system;
The BOT establishes or supports the establishment of payment system, electronics clearing system, and administers such systems for safety and efficiency.
- Supervise and examine the financial institutions;
The BOT supervises, examines, and analyzes the financial status and performance, and risk management system of the financial institutions in order to promote financial institutions stability.
- Manage the country’s foreign exchange rate under the foreign exchange system and manage assets in the currency reserve according to the Currency Act.
- Control the foreign exchange according to the exchange control act.
Monetary Policy
The Bank of Thailand Act, B.E. 2485 (1942) was enacted in 1942 during the Second World War. The BOT Act specified a mandate for the Bank of Thailand to conduct the business of central banking, with various functions as specified by the Royal Decree Regulating the Affairs of the Bank of Thailand added subsequently.
The Act did not make any clear statement about monetary policy but it gave power to the Court of Directors to set the Bank Rate which was the interest rate under the Bank's lender-of-last-resort facility. It also empowered the Bank to buy and sell debt instruments and foreign exchange and to extend credits to financial institutions against eligible collateral. These transactions would not be carried out with a view for profit.
Therefore, although monetary policy objectives were not explicitly stipulated in the Bank of Thailand Act, in practice the Bank has always regarded the maintenance of monetary and financial stability as its primary goal, both of which are necessary in achieving sustainable economic growth over the long run.
Payment Systems Policy
"To promote the safe, efficient and smooth operation is the vital objective in payments system policy of the Bank of Thailand, which supports the high level of trade and financial transactions".
Strategic objectives
Seven Strategic Objectives were formulated to achieve this Roadmap’s vision. Details of these objectives are:
- Extend the usage of electronic payment services by all user groups:
- Establishing guidelines to deal with electronic payment barriers;
- Establishing guidelines to promote extensive use of electronic payment services;
- Establishing guidelines to ensure equitable payment services for both users in the central and regional sectors.
- Establish measures to reduce cash usage:
- Establishing guidelines to reduce cash usage in business sectors with high volumes of cash payment;
- Establishing guidelines to promote electronic payment to be an alternative to cash payment.
- Establish fair and appropriate service fees structure and promote electronic payment services:
- Establishing guidelines for payment service fees which reflect relevant costs;
- Establishing guidelines for fair service fees and equitable treatment of all payment users;
- Establishing service fees structure that encourages competitiveness among services providers and promotes electronic payment service usage.
- Concrete implementation of supporting laws for electronic payment systems:
- Acceptance of electronic documents as evidence in legal proceedings and business transactions.
- Establish standards and guidelines for the observance of applicable laws to reduce payment provider`s operation costs:
- Establishing common guidelines and standards for payment service providers.
- Develop payment systems which promote international trade and investment between Thai and its neighboring countries.
- Establish oversight to ensure safe, sound, and efficient, payment systems that comply with international standards and promote public confidence in the financial systems and financial institutions systems:
- Establishing guidelines to improve efficiency of payment systems oversight to fit with ongoing changing environment.
International Cooperation
The Bank of Thailand represents Thailand in various international organizations as well as international financial cooperation fora both at bilateral and multilateral level.
The representation of the BOT in international organizations aims to promote stability and soundness of global financial and economic system while the participation in international financial cooperation fora aims mainly to enhance financial cooperation and macroeconomic surveillance among-st member countries.
International Monetary Fund (IMF)
Thailand joined the IMF on 3 May 1949 as its 44th member. The Bank of Thailand (BOT) represents Thailand in the IMF under the Act Authorizing Operations Relating to the International Monetary Fund and the International Bank for Reconstruction and Development B.E. 2494 (1951). In this regard, the governor and a deputy governor of the BOT serve as governor and alternate governor of Thailand in the IMF respectively. Thailand’s quota is 1,081.90 million SDR, equivalent to 0.5% of total quotas, corresponding to 11,069 votes.
As part of an obligation under Article IV of the Articles of Agreement, Thailand is subject to an annual economic review by the IMF – a “consultation” between the IMF staff and authorities. In addition, Thailand has accepted obligations under Article VIII of the Articles of Agreement.
Thailand has borrowed from the IMF under the Stand-by Arrangement 3/ (SBA) five times in total of 4,431 million SDR: 45.25 million SDR in July 1978; 814.5 million SDR (only 345 million SDR drawn) in June 1981; 271.5 million SDR in November 1982; 400 million SDR (260 million SDR drawn) in June 1985; and 2,900 million SDR (only 2,500 million SDR drawn) in August 1997.
Thailand has no financial obligation to the IMF as Thailand completed repayment of the last Stand-By Arrangement in July 2003, two years ahead of schedule. Currently, Thailand participates as a potential lender to the Fund under the New Arrangements to Borrow (NAB), in an amount not exceeding 340 million SDR.
Bank for International Settlements (BIS)
The Bank of Thailand initially held 3,000 shares in the BIS since 2000. In 2005, the BOT took up another 211 shares following the change in the BIS regulation requiring shares to be held only by
central banks. The 3,211 shares held by the BOT represent approximately 0.6% of total ownership (547,125 shares of issued capital).
As a shareholder, representatives from the BOT are invited to attend regular meetings of Governors held every two months in Basel. These gatherings provide an opportunity for participants to discuss the world economy and financial market developments, and to exchange views on topical issues of central bank interest or concern. The main result of these meetings is an improved understanding by participants of the developments, challenges and policies affecting various countries and markets.
In addition, the BIS organizes frequent meetings of experts on monetary and financial stability issues as well as on more technical issues such as legal matters, reserve management, IT systems, internal audit and technical cooperation. Though targeted mostly at central banks, BIS meetings sometimes involve senior officials and experts from other financial market authorities, the academic community and market participants.
Asia-Pacific Economic Cooperation (APEC)
As one of the 12 founding ecomomies of APEC, Thailand has actively participated in the meeting at all levels including being the host of the APEC Economic Leaders' Meeting in 2003.
The Bank of Thailand's main role in APEC is to provide inputs on the annual policy initiative during the Finance and Central Bank Deputies Meeting and the Senior Finance Officials Meetings.
Furthermore, the Bank of Thailand also participates in the drafting of the APEC Model Measures, a guideline for best practices in FTAs/RTAs, and provides information on Thailand 's Individual Action Plan on Financial Services, which is an assessment of the economy's progress towards reaching the goal of free and open trade and investment.
The Association of Southeast Asian Nations (ASEAN)
The Ministry of Finance and the Bank of Thailand are the main responsible agencies in the area of regional financial cooperation and surveillance process. Since 1997, ASEAN Finance Ministers have been meeting annually, and the technical work on regional financial and economic cooperation has been undertaken by the 3 Working Committees, namely (1) Capital Market Development (WC-CMD), (2) Financial Services Liberalization under the ASEAN Framework Agreement on Services (WC-FSL/AFAS), and (3) Capital Account Liberalization (WC-CAL).
On top of this, ASEAN Finance Ministers are also responsible for the implementation of the financial sector component of the AEC Blueprint, covering areas such as financial services liberalization and capital account liberalization.
Apart from the cooperation under the AFMM, the Bank of Thailand also actively takes part in the ASEAN Central Bank Forum (ACBF) which was established on 5 November 1997. The meetings under the ACBF consist of 2 high-level meetings: the ASEAN Central Bank Governors’ Meeting (ACGM) and the ASEAN Central Bank Deputies’ Meeting (ACDM). Like the AFMM, the issues for discussion amongst ASEAN central bankers mainly focus on the regional financial cooperation.
In addition, the ASEAN central banks established the ASEAN Swap Arrangement (ASA) on 5 August 1977 with an aim to provide short-term liquidity assistance to member countries facing temporary liquidity problems. The agreement had an original term of 2 years, and it has been renewed up until now. The current total amount of the ASA is
USD 2.0 billion.
The Association of Southeast Asian Nations and China Japan Korea (ASEAN+3)
The Bank of Thailand (BOT) has been actively participating in the ASEAN+3 Finance Ministers’ Process alongside the Thai Ministry of Finance in issues under the BOT’s responsibility, predominantly on the Chiang Mai Initiative and issues relating to surveillance. The BOT is also active in the various Working Groups of the ABMI.
Useful links
- Currency of Thailand:
- Thai baht
- List of Central Banks:
- Central Banks
- Official website of Bank of Thailand:
- www.bot.or.th
- Ministry of Finance of Thailand:
- www2.mof.go.th