'Easy money' campaigns to go

BANKING

Banks have agreed to the Bank of Thailand's request to reduce advertising campaigns that entice people to apply for consumer loans.

Salinee Wangtal, an assistant governor, said certain banks' campaigns promoted a perception of easy money for spending rather than sound financial planning.

"We need to strike a balance between toning down such enticing campaigns and nurturing competition and people's financial access," said Ms Salinee after a meeting with the Thai Bankers Association.

Teeranun Srihong, senior executive vice-president of Kasikornbank, said banks would control the tone of advertising in line with the central bank's requirement. Advertising should be based on consumer demand rather than banks' stimulation, he said.

"We should control advertising that encourages people to spend beyond their means," Mr Teeranun said.

The central bank asked for cooperation from the banking industry in improving consumers' financial literacy. Banks will attempt to educate consumers about both saving and borrowing.

Mr Teeranun said consumer lending had grown significantly in line with demand and government schemes, but it had not shown negative signs.

Sanannart Kulpaisantham, Thai Credit Retail Bank's executive vice-president, said greater competition in the loan market was a key factor in propelling consumers to seek loans.

Banks agreed with the central bank's request to improve consumers' understanding of financial discipline, she said.

Banks should ensure consumers have proper financial access, otherwise they might be pushed to the underground market and suffer high interest rates.

Ms Salinee said loan growth of late was led by the government's tax rebate for first-time car buyers.

Banks have maintained credit-screening standards for borrowers during the government's campaign.

Ms Salinee said defaults are likely to be minimal. In any case, damage to banks from the car programme should be limited as cars used as collateral would have a good market value, she said.

Ms Salinee said defaults on consumer loans had increased, mostly involving low-income borrowers, but they mainly involved loans from non-bank operators who have only a 10% share of the consumer loan market.

"The central bank has no supervisory power over non-bank operators, but we might raise our requests to banks about consumer loans with them," she said.

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Article source: http://www.thethailandlinks.com/2012/12/04/easy-money-campaigns-to-go/