Thai central bank to get more powers

Ulhas Joglekar ulhasj at bom4.vsnl.net.in
Sun Apr 2 07:54:09 PDT 2000


Wednesday 29 March 2000

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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