The project’s scope was
reduced from encompassing the
entire Thai financial system to
covering mainly deposit-taking
financial institutions under the
supervision of the Bank of
Thailand, namely commercial
banks, finance companies, credit
fonciers, and international
banking facilities.
Several compelling
reasons substantiated this
amendment. First, even though
there are some signs that the role of commercial bank loans has been slowly declining
over-time (Chart 1), Thailand is still considered a bank-based economy whereby
financial institutions under the supervision of the Bank of Thailand dominate the
financial sector. Given this reliance on commercial bank financing, Thailand’s
economy as a whole is bound to benefit from policies that improve efficiency and
ability of deposit-taking institutions to offer innovative products at competitive prices.
Second, as commercial banks’ started to return to profitability in 2000 (Chart 2)
and less preoccupied with internal restructuring, the situation was right for authorities