Thai central bank to get more powers
BANGKOK: Thailand's Cabinet on Tuesday approved legislation which will give
the central bank more independence and increase its power to supervise local
financial institutions, a government spokesman said.
Amendments to the Bank of Thailand Act, which still needs parliamentary
approval, will empower the central bank to conduct monetary policy without
prior government approval, Akapol Sorasuchart told reporters.
Central Bank Governor Chatu Mongol Sonakul had objected to wording in an
earlier version of the draft Act, which he said curtailed some of the bank's
independence.
Finance Ministry and Bank of Thailand officials agreed to revise the wording
to say the central bank should "consider" rather than "support" the
government's policy in its decision-making, Akapol said.
Political meddling in the central bank led to the unsuccessful defense of
the baht in mid-1997, which many blame for wasting foreign reserves and
exacerbating the country's economic collapse.
Under the draft Act, the central bank is committed to letting the market
decide the baht's level, while it sets monetary policy through monitoring
inflation.
However, the draft Act retains a provision that the ultimate power to
impeach a central bank governor lies with the finance ministry, Akapol said.
The Bank of Thailand had proposed giving that power to the Senate, which
under a new constitution is politically independent, he added.
The Commercial Bank and Finance Companies and Credit Foncier Act, a new Act
which also needs parliament's approval, gives the central bank power to
supervise financial institutions, while diluting the finance ministry's
role.
Increasing the central bank's power is supposed to stop a repeat of lending
practices based on personal connections and overvalued collateral, which
caused an asset price bubble in the mid-1990s.
Also on Tuesday, the Cabinet passed amendments to the Currency Act which
will empower the central bank to use excess foreign reserves for investment.
Excess reserves are those not used to support the amount of baht in
circulation.
The Cabinet also passed two other draft Acts dealing with loans from the
International Monetary Fund and secured lending, Akapol said. Details
weren't immediately available. (AP)
For reprint rights: Times Syndication Service
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