The Bank of Commerce sends a circular letter to financial institutions preparing to enforce standards for responsible and fair lending, or responsible lending, covering 8 important areas, with the hope of reducing household debt and reducing debt accumulation behaviours. D-Day goes into effect on January 1, 2024.
On December 31, 2023, journalists reported that the Bank of Thailand (BoT) sent a circular to all regulated financial institutions. With respect to responsible and fair lending (Responsible Lending), the above standards will be effective from 1 January 2024 onwards.
The reason for issuing the announcement is to provide responsible and fair lending (responsible lending) because Thai household debt represents a structural problem that has been accumulating for a long time and has continued to increase sequentially from 76% of GDP in 2012 to 84% of GDP in 2019 and has worsened.
Intensified during Covid-19 by 95% of GDP in 2021
Although the ratio of household debt to GDP will begin to gradually decline to 91% in the second quarter of 2023 after the economy recovers and credit expands. Slowing down after the end of aid measures, but this percentage is still high. The Bank of Thailand recognizes the importance of the household debt problem as a structural problem for the country that must be solved in order to control the level of household debt so as not to affect the stability of the financial system and the long-term expansion of the economy.
Solving family debt problems takes time and must be done in a comprehensive manner that is appropriate to the nature and causes of the problems in each period of debt. Doing so in a correct manner, i.e. repairing it to its extent without creating additional burdens on the debtor. It does not reduce the opportunity to obtain credit and all sectors must cooperate, including creditors, debtors and the government sector.
Therefore, the Bank of Thailand has issued guidelines for responsible and fair lending.
(Responsible Lending) to enhance adherence to the management guidelines circular
Giving fair credit to be more comprehensive and clear. It is used as an additional standard from the Bank of Thailand Declaration regarding the fair management of services provided to customers (market conduct).
By appropriately defining the role and duty of service providers in taking responsibility for clients throughout the debt cycle. From developing and advertising loan products to providing new loans of good quality, and taking care of existing debts, especially chronic debts and bad debts. Even taking legal action and debt transfer including enhancing the provision of information to stimulate customer behavior throughout the debt cycle and promote financial discipline. So that people only have debts when necessary and can repay them.
This will be an important part of solving the household debt problem sustainably in the long term. Including encouraging service providers to manage services in a responsible and fair manner. This will be an important factor that will support service providers to operate their businesses sustainably.
The standards for granting loans in a responsible and fair manner (Responsible Lending) are additional standards from the Bank of Thailand Declaration on Fair Management of Services to Customers (Market Conduct), and consist of the Credit Grant Management Standards. Throughout the debt cycle, 8 areas are covered as follows:
1. Develop loan products
2. Advertisement
3. Sales process
4. Consider the ability to repay debt (affordability)
5. Promote financial discipline and management during periods of debt.
6. Providing assistance to debtors who suffer from chronic debt problems.
(ongoing debts)
7. Providing assistance to debtors who have problems repaying debts. Both debt restructuring of distressed debtors (non-distressed loans, which is a preventive DR) and restructuring of distressed debts (TDR).
8. Legal procedures and debt transfer
To other creditors
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