Rapid Assessment for Resilient Recovery and ... - GFDRR

Government
Measure
Loan guarantee
for private bank
loans to SMEs
impacted by the
floods
Soft SME loans
for flood victims,
offered via
commercial banks
Ability of all banks
to restructure
loans to flood
victims, and
rapidly re-classify
as current
Decrease in
maximum loan to
value postponed
Minimum credit
card payments
waived
Fees waived on
inter-provincial
ATM transactions
Status
Up to THB 100 billion in new commercial bank loans to
flood-impacted SMEs will be guaranteed by the Thai Credit
Guarantee Corporation (formerly SBCGC). These loans have
an interest rate cap of 3 percent for the first three years. NPLs
on these loans do not need to be provisioned for the guaranteed
part (proportion guaranteed increased gradually, 7 percent by
end of year 1 to 30 percent by year seven, maximum duration of
the guarantee). The guarantee is free for the first three years –
but the government will reimburse TCGC for the lost fees (of
1.75 percent) for those three years. The maximum cost to the
TCGC is reportedly THB 23 billion.
THB 20 billion being made available from GSB to commercial
banks for loans to SMEs impacted by the floods. Cost of funds
0.01 percent, but must be matched 50:50 with private bank’s
funds (i.e. total of 40 billion in new loans). Three percent interest
cap for first three years of the loan. NPLs must be provisioned
for normally. 66
All banks may restructure loans to viable, flood-impacted
borrowers. These restructured borrowers can be taken off the
NPL list after merely one payment under the new schedule, as
opposed to three payments previously. Unclear if there are
tenors limits. Possible cost, if all the 0.5% of total loan portfolio
loses six months of 7% interest rate, would be THB 1.3 billion,
borne by the private banks.
The BOT has postponed a planned measure to reduce the
maximum loan to value in effect for mortgages. Unclear what
the impact will be.
The usual minimum payment of 10% of credit card balances
has temporarily been waived, in order to help the cash flow of
flood victims. This measure expires in June 2012.
Banks were told to waive their fees on inter-provincial ATM
transactions, but only for the period from November 4–30, 2011.
Unclear what the cost to the banks of this measure will be.
Details
Approved by
Cabinet
Approved by
Cabinet
Already put in
place by BOT
Already put in
place by BOT
Measure in
place
Measure in
place
Insurance Sector
The insurance sector will have financing needs to return to their pre-flood position. As
noted in the previous section, losses to the insurance sector are estimated to be around
THB 9 billion, after reimbursement from re-insurance companies, and assuming that the
OIC is correct when stating that around 95 percent of claims for these floods were reinsured
abroad.
Given the size and scope of this catastrophic event and the number of policyholders affected,
the loss adjustment and the claims handling will require a large number of loss
adjusters and insurance experts, beyond the apparent capacity of the domestic insurance
market. Japanese reinsurers, who reinsure many of the firms located in the industrial
estates, have already sent Japanese loss assessors. In addition, it is understood that the
domestic insurance companies have agreed to conduct joint loss assessment; a loss assessor
sent in a given area will assess the damage of all insured properties located in this
area on behalf of all the insurance companies.
66 There was a report that soft loans to SMEs are hard to obtain, due to too many requirements, including in terms of
collateral – as per “Red Tape Cut Urged for Recovery”, Bangkok Post, October 27, 2011.
68 THAI FLOOD 2011 RAPID ASSESSMENT FOR RESILIENT RECOVERY AND RECONSTRUCTION PLANNING