• 11 September 2000
• 14 October 2003
• 14 October 2003 (Guidelines)
• 28 October 2003
• 07 November 2003

11 September 2000

No. BOT.FMOG (03) C. 2003/ 2546: Measure to curb short-term capital inflows (unofficial translation)

In pursuance to Bank of Thailand’s circulars to financial institutions seeking cooperation in the prevention of Thai Baht speculation, lending Thai Baht or engaging in any obligations which results in providing foreign currency to nonresidents in the future without underlying trade or investment in Thailand is limited to 50 million Baht per entity. For nonresidents that have the above underlying activities, financial institutions may carry out the transaction up to the underlying value.

In response to the current situation, the Bank of Thailand has requested additional cooperations from financial institutions as follows:

1. Financial institutions are limited to the borrowing of Thai Baht or engaging in transactions comparable to Thai Baht borrowing with a contract maturity not more than 3 months from nonresidents without underlying trade or investment transactions in the country. The outstanding limit is not over 50 million Baht per entity. Transactions that have a contract maturity above 3 months are not subject to the limitation.

2. Transactions mentioned in 1, include the following:

   • 1) Direct borrowing

   • 2) Issuance of short-term debt instruments to nonresidents

   • 3) Buy FX/ THB outright forward

   • 4) Sell/ Buy FX/ THB Swap

   • 5) Derivatives transactions

   • 6) Sell FX/ THB with value date less than 2 days

   If financial institutions are uncertain whether the transactions are subject to the above limitation or not, please contact the Strategy and Exchange Control Office, Financial Markets and Operations Group, Bank of Thailand, Tel: 02-283-5326-7 before transacting.

3. Financial institutions are required to prepare daily transaction reports. Transactions without underlying activities are to be reported in Table 23 on Report of Outstanding Balance of THB Borrowing Transactions with Nonresident (Without Underlying). Those with underlying activities are to be reported in Table 24 on Report of Outstanding Balance of THB Borrowing Transaction with Nonresident (With Underlying). The reports are to be sent to the Bank of Thailand by 12.00 p.m. on the following business day after trade date in Excel file format through the Microsoft Exchange system, as in the case of Table 21-22 (Report of Outstanding Balance of THB Lending Transactions with Nonresident (without/with underlying))

   The measure is effective from September 12, 2003.

Please be informed and comply strictly with this circular.

Respectfully yours,

(M.R. Pridiyathorn Devakula)

Governor

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14 October 2003

No.BOT.FMOG (03) C. 2262/2003 Subject: Measure to prevent Thai Baht speculation

In pursuance to the Bank of Thailand’s circular seeking cooperation from financial institutions to limit the outstanding balance of Thai Baht borrowing or engaging in transactions comparable to Thai Baht borrowing with a contract maturity not exceeding 3 months from Nonresidents (NRs) to Baht 50 million per entity, it has been found that the outstanding balances of Nonresident Baht Account( NRBAs) have increased significantly and NRs use such NRBAs to speculate Thai Baht instead of facilitating payment and remittance resulting from trades, services and investments in Thailand. In order to prevent NRs from using NRBAs for unintended purposes and for Thai Baht speculation which result in damaging the Thai economy, the Bank of Thailand requests cooperation from financial institutions as follows:

1. In case NRs wish to open NRBAs for the purpose of settlement, they can open only current NRBAs or saving NRBAs. Should they wish to open NRBAs for other purposes, they can open fixed NRBAs with maturity 6 months or over.

2. Financial institutions are refrained from paying interests for current and saving NRBAs except NRBAs belonging to central banks of other countries or receiving approval from the Bank of Thailand on a case by case basis.

3. Financial institutions have to monitor the outstanding balance of NRBAs at the end of each day to the limit not exceeding Baht 300 million for each NR which includes all NRBAs belonging to such NR at all financial institutions in Thailand except receiving approval from the Bank of Thailand on a case by case basis.

4. In case the outstanding balance exceeds the specified limit as indicated in item 3 for the time being, financial institutions have to do the following:

   • Reduce the outstanding balance of current and saving NRBAs to the specified limit by October 22, 2003.

   • Reduce the outstanding balance of fixed NRBAs at the maturity date of the contract.

   • NRs can temporarily place deposits in NRBAs during the period of October 14-22, 2003 but only for deposits resulting from transactions occurred before the date of this circular and financial institutions have to submit the information regarding NRs’ names, dates, amount and purposes of the transactions to the Bank of Thailand by the next business day after the date of placing such deposits.

   • After October 22, 2003, should NRs wish to deposit money in NRBAs which result in the outstanding balances during the day exceeding the specified limit, financial institutions have to ensure that the outstanding balances can be reduced to the amount not exceeding Baht 300 million at the end of the day. In addition, financial institutions are requested to have such information available for Bank of Thailand’s examination all the time.

The Bank of Thailand requests financial institutions to monitor NRs to use NRBAs only for facilitating trades and investments in Thailand. Should the Bank of Thailand find that NRs use NRBAs for any unintended purposes, the Bank of Thailand will issue additional measures for each particular financial institution concerned.

Please be informed and comply with this circular.

Sincerely yours,

(M.R.Pridiyathorn Devakula)

Governor

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14 October 2003 (Guidelines)

Guidelines to the measure on the prevention of THB speculation, issued on 14 October 2003

1. The outstanding amount of non-resident baht account (NRBA) may exceed the limit of 300 million baht during the day but it has to be under the limit at the end of day.

2. The Bank of Thailand (BOT) requires all financial institutions (FIs) to settle all major non-resident (NR) transactions through NRBA by 15.30. This is to enable all FIs to better manage the problem of NRBA exceeding the outstanding amount of 300 million baht at the end of day.

3. If any NRBA exceeds the specified limit after 15.30, the FIs holding such NRBA have to contact the owner of the NRBA to reduce the outstanding amount.

4. If the NR is unable to reduce the NRBA outstanding within the limit by 16.00, the FIs should advise NR to sell Thai baht value-same-day with the full back-to-back transaction with BOT at the penalty rate in order to lower the outstanding to the limit.

5. If the NR refuses to comply with the outstanding limit, the FI have to report BOT instantly. In this case, BOT may consider requiring the FIs to enter into transactions with BOT at penalty rates in order to comply the limit. In that event, the FIs will have to seek compensation from NR by themselves.

6. If the FI, holding the NRBA with outstanding amount exceeding 300 million baht, cannot contact the owner of that NRBA to reduce the exceeding amount, the FI is obliged to inform BOT at once and provide BOT all related document as requested.

7. If financial institutions (FI) want to seek an approval from BOT to maintain the NRBA outstanding exceeding the limit, FIs have to inform BOT on this matter by 16.00 at number 02-2835326-27. Moreover, FIs have to provide the BOT all related documents such as the name of NRBA’s owner, the statement of NRBA requested for the exceeding outstanding amount at the day-end, and the underlying document with the payment date. These documents shall be sent to BOT through FAX number 02-2835428.

8. The BOT will inform FIs by 16.10 whether BOT approve the exceeding NRBA outstanding as requested.

9. The BOT will allow NR to maintain NRBA outstanding exceeding 300 million baht only if NR has the underlying trade or investment in Thailand with the payment date specified on a following day after the day that outstanding amount exceeding the limit.

10. In case of receiving the approval from BOT to maintain the outstanding exceeding the limit, the owner of NRBA is required to manage baht outstanding to be in the limit in a following day. In addition, the FI holding such NRBA has to send BOT the NRBA statement to confirm that THB in such account is in the limit in a following day.

11. If BOT does not allow NR to maintain the outstanding exceeding the limit, FIs should advise the owner of such NRBA by 16.20 to sell baht value-same-day to reduce the outstanding with the full back-to-back transaction at a penalty rate.

12. To carry out the back-to-back transaction with BOT, FIs have to contact the FX team, Financial Markets Operations Group, BOT at number 02-2835452 by 16.30.

28 October 2003

Notification of BOT dated 28 October 2003

The Bank of Thailand (BOT) requires all financial institutions (FIs) to settle all major nonresident (NR) transactions through the non-resident baht account (NRBA) by 15.30. This is to enable all FIs to better manage the problem of NRBA exceeding the outstanding amount of 300 million baht at the end of day. If any NRBA exceeds the specified limit after 15.30, the FIs holding such NRBA have to contact the owner of the NRBA to reduce the outstanding amount. If the NR is unable to reduce the NRBA outstanding to be in the limit by 16.00, the FIs should advise NR to sell Thai baht value-same-day to comply with the limit. If not, BOT may consider requiring the FIs to enter into transactions with BOT at penalty rates in order to comply. In that event, the FIs will have to seek compensation from NR by themselves.

07 November 2003

No.BOT.FMOG (03) C. 2441/ 2003 Subject: Clarification of measure to prevent Thai Baht speculation

In pursuance to the Bank of Thailand’s circulars to financial institutions seeking cooperation in the prevention of Thai Baht speculation, lending and borrowing Thai Baht to nonresidents (NRs) are limited to 50 million Baht per entity if NRs do not have underlying trade or investment in Thailand. In addition, financial institutions are required to curb the outstanding amount of Nonresident Baht Accounts (NRBAs) at the end of day to the limit of 300 million baht for each NR.

There have been recent attempts to breach the above measures in the offshore market by trading forward transactions of foreign currency against Thai baht without the real exchange of the currency amount according to the transaction contract. The settlement will instead be paid on the net basis in USD. This transaction is referred to as non-deliverable forward (NDF).

The Bank of Thailand does not encourage NDF trading since this may stimulate market volatility. The Bank of Thailand seeks cooperation from financial institutions to cease the NDF transactions against Thai baht except for rollover transactions, or for transactions that have to be terminated due to settlement failure caused by the counter party being unable to seek sufficient liquidity to fully settle the transaction.

Please be informed and in compliance with this circular.

Respectfully yours,

(MRS. Tasna Rajatabhothi)

Assistant Governor