BOT may opt for Macro measures

The Bank of Thailand says macro-prudential measures could be used to oversee rising household debt.

The issue of household debt will be discussed at a joint meeting of the Monetary Policy Committee (MPC) and the Financial Institutions Policy Committee (FIPC) next month.

BOT Governor Prasarn Trairatvorakul said it was possible for the central bank to use macro-prudential measures to control financial institutions' extension of household debts as they were tools to oversee overall economic stability.

However, it does not plan to use such tools yet.

"It's possible, as they [macro-prudential measures] are among the tools that could be used together with the policy-rate tool," Prasarn said.

He said the rate tool had a relatively wide effect on almost everyone while some problems in the financial system needed specific tools. For example, 12-per-cent business credit expansion is explainable, as most business loans are for local and overseas investment.

Household debt for residential purposes is also explainable, but the central bank needs to monitor household borrowing for non-residential purposes.

The BOT will discuss with financial institutions the household-debt issue and ask them to tone down advertisements persuading people to borrow.

The meeting of the MPC and FIPC, which is scheduled for mid- or late December, is expected to discuss rising household debt. The joint meeting takes place twice a year.

"The MPC oversees interest rates and exchange rates while the FIPC supervises the financial-institutions system. Tools of both committees have been used many times. The joint meeting is to consider any related issues, exchange ideas, and see all sides of the financial system," Prasarn said. Regarding the current policy rate of 2.75 per cent, he said it would accommodate Thailand's economic expansion.

"The rate at this level is relatively in balance for both price levels and growth while inflation has not accelerated. With the current economic figures, the MPC decided against a policy-rate cut."

On the possibility of another rate cut due to capital movement, Prasarn said such movements were influenced by other factors besides interest rates.

An example is Hong Kong, where the interest rate is low but the economy has seen large capital inflows.

The baht has not seen any irregular fluctuations, he said.

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Article source: http://www.thethailandlinks.com/2012/11/30/bot-may-opt-for-macro-measures/