The Evolution of Corporate Governance in Banking Industry of Thailand from the 1997 Asian Crisis to the 2008 Global Credit Crisis

Abstract

Corporate governance (CG) in banking industry of Thailand has evolved significantly after the 1997 Asia Crisis. The international standard such as OECD and BIS guidelines has been closely followed. Bank of Thailand (BoT) has continuously updated its regulation and best practice advice to reflect the changing financial environment. The new Financial Institutions Business Act was enacted and became effective on Aug 3, 08. The Act that standardizes the different regulations governing commercial banks gives BoT an exclusive supervisory power over all types of financial institutions. In the wake of the 2008 Global Credit Crisis, some foods for thought are given and discussed for further improvement. Ownership structure does matter. Thai banking characteristics and local environment should be officially recognized. Its practical implication is a need to apply Western CG standards onto local context with a clear strategic direction. Next a trade-off between micro and macro prudence is examined with one example cited. Finally, credit extension cycle and a need for more counter cyclical measures are discussed to improve stability and safety.