The Bank of Thailand has asked commercial banks to suspend interim dividend payments for this year and to delay share buybacks, in order to maintain strong capital reserves to help businesses when the COVID-19 situation eases.
BoT Governor Veerathai Santipraphob explained the rationale, saying that there is still a lot of uncertainty over when the pandemic will end and the severity of its impacts, hence the need to protect financial institutions and the economic system.
He said that only some commercial banks pay interim dividends, usually in August, while other banks, which believe they have a strong capital position, buy back their shares from the stock market after the prices fall to a certain level.
He emphasized that protecting the commercial banks is as important as immunizing the Thai people against the virus, adding that the BoT’s strong capital position will enable the commercial banks to increase lending, to help reboot the economy post-COVID-19.
Due to the BoT’s regulations, covering risk management at commercial banks, Mr. Veerathai said that the ratio of the banks’ capital to assets (BIS capital ratio) is at 18.7%, an indicator that banks are capable of helping customers affected by the pandemic.
“In the future, we will still face a high degree of uncertainty, so we must not lower our guard and maintain the capital levels,” he said, adding that the central bank’s instruction will benefit bank share-holders and depositors in the long run.