As interest rates climb, the Thai Bankers’ Association (TBA) has arranged a meeting with regulators to consider further relaxation of banks’ contributions to the Financial Institution Development Fund (FIDF).
During this week’s meeting of the Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB), Payong Srivanich, the chairman of the TBA, met with representatives from the Bank of Thailand (BoT) and the Finance Ministry to discuss the possibility of relaxing the FIDF fee contribution.
Payong, however, indicated that several issues must be examined and that the relaxation is not anticipated to be finalized in the near future.
As a result of the impact of Covid-19, the central bank mandates that banks continue contributing to the FIDF fee at the standard rate of 0.46 percent of their deposits beginning in January 2023. This is an increase from the current rate of 0.23 percent.
According to the TBA, if regulators permit banks to reduce their FIDF fee contribution, banks could delay projected interest rate rises for loans caused by the recent normalization of the central bank’s policy rate.
Payong said FIDF fee contribution at the standard rate would boost financing costs for the banking sector as interest rates begin to rise following the Bank of Thailand’s rate hike last month amid an uneven economic recovery.
Payong remarked that fee reduction would coincide with the normalization of the central bank’s policy rate and the commercial banks’ delayed increase in prime lending rates. (NNT)