Cabinet approves measures to sweeten bank mergers
The cabinet on Tuesday approved tax deductions and exemptions to encourage mergers among Thai banks in a bid to support domestic financial institutions and improve their ability to compete regionally.
Nathporn Chatusripitak, an adviser to the Prime Minister’s Office minister, said the cabinet approved a draft of a royal decree on the deduction of corporate income tax and exemptions from value-added tax, specific business tax and revenue stamps to support mergers among Thai financial institutions.
The royal decree also requires relevant agencies to deduct related measures for banking mergers such as transfer fees and transfer of real estate assets.
Mr Nathporn said the Bank of Thailand’s third phase of financial development during 2016-20 is aimed at upgrading efficiency and competitiveness among Thai banks in an effort to develop them into regional financial institutions. For this, the government needs to implement measures to ensure that Thai banks have sufficient capital to compete with other Asean banks.
Banks in Singapore and Malaysia have assets worth more than 4 trillion baht, he said.
Thai banks with the potential to compete in the region should have assets of at least 4 trillion baht, Mr Nathporn said.
Banks with assets in the range of 1-1.5 trillion baht are suitable for mergers with medium or large-sized banks, he said.
Merged banks that have total assets valued at more than 4 trillion baht will be allowed to deduct double their expenditures, while those with assets worth between 3 trillion and 4 trillion baht can deduct up to 1.75 times.
Merged banks with assets worth 2-3 trillion baht will be permitted a deduction of 1.5 times, and those with assets valued at 1-2 trillion baht will have a deduction rate of 1.25 times.
The merging process should be completed by the end of 2022.
Mr Nathporn said the government is expected to lose between 600 million and 1.4 billion baht in revenue from the tax measures.
He said the expansion of investments from banking mergers, such as investments made in core banking and information technology, are expected to be worth 3-7 billion baht for each merger.
Separately, the cabinet has also approved the Finance Ministry’s proposal of a development plan for fintech.
Development in the first stage during 2018-19 includes the establishment of the Institute for Financial Innovation and Technology, which is expected to require 650 million baht from the fund of specialised financial institutions.
The second development phase, scheduled for 2020-22, is expected to develop and promote Thai fintech startups to have connections with their international counterparts, for which a budget of 513 million baht is to be used.
Financial technology is important for offering greater efficiency in financial services, according to the Finance Ministry.
Many countries in the region have promoted fintech development, including Singapore, Malaysia and Taiwan.