The Bank of Thailand has asked all commercial banks set up a risk management board by mid-2019 as part of efforts to strengthen risk management to protect financial stability, reported the Bangkok Post.
These boards are expected to help banks rein in risks involved with markets, credit and the financial segment amid growing uncertainties both locally and internationally, said deputy governor for financial institutions Ronadol Numnonda.
The move was triggered by a series of recent defaults by both bond issuers and on loans for some corporations that are bank customers. The extended low-rate environment and intensified competition in corporate lending saw commercial lenders underprice risks in lending to large corporations at cheaper rates than they should, practices which lead to financial fragility, noted Mr Ronadol.
The risk management board must be separate and independent from the credit board. Even some large players have not installed a risk management board yet, he said.
Mr Ronadol also said that the central bank plans to implement principle-based regulations in 2019 to supervise financial institutions, rather than rule-based ones. This means that the central bank will give banks practical guidance and allow them self-governance.
According to the Bangkok Post report, the regulator plans to implement the first phase of the guidance for core banking, IT and digital areas, including cloud data in 1Q2019. It will let banks set up their own sandbox to test innovative financial products and services before commercial launch.
Financial products and services in the overall industry must still be tested in the central bank’s regulatory sandbox.