The Bank of Thailand (BOT) will introduce measures to facilitate mergers and acquisitions among commercial banks to strengthen the banking system and prepare for financial liberalisation in 2010.

The measures will be indicated in a financial master plan II, which is aimed at further boosting the efficiency of the banking system by allowing liberalisation and creating a financial infrastructure.

Deputy governor Bandid Nijathaworn yesterday said the BOT's financial master plan II would be implemented at the beginning of next year after conducting an industry hearing this quarter.

The measures will lessen factors that have been obstacles in the way of mergers and acquisitions, including tax laws and regulations. This will reduce costs that discourage mergers among financial institutions, said Bandid.

In the second phase, the BOT wants to encourage mergers and acquisitions among Thai banks before liberalisation in 2010, which will boost competition in the industry.

"The new financial master plan will express a clear policy to allow mergers and acquisitions to happen easily," he said.

The central bank will allow the mergers through market mechanisms that function in accordance with the willingness of each bank, but will also use public policy to facilitate such moves, said the deputy governor.

The new master plan will be introduced to boost growth and enhance the efficiency of the Thai banking system, with the first master plan having been implemented for an orderly rearrangement of the system.

Bandid said new players would offer value-added knowledge and services, as they will provide innovative financial products.

The plan will also increasingly encourage a proper atmosphere of competition among Thai banks, between Thai and foreign banks, and between banks and non-bank financial companies.

Such competition will eventually enhance the efficiency of banks, said Bandid.

Moreover, new entities will be established to increase such efficiency.

They will be built up to provide the information required for banks to make key decisions, help their risk management, and develop their back offices to reduce operating costs.

"We want banks to have a good data system and risk management. The entities would help the banks to outsource risks.

"Thus, we will ensure the strength of the derivatives market," he said.

For example, some countries have founded entities that provided important data for

their banks, such as mark-to-market prices. This enables the banks to operate more easily, with declining costs but higher efficiency.

Anoma Srisukkasem

The Nation