18 Dec 2006 | SFEMC statement on Bank of Thailand reserve requirement on short term capital inflow

The decision by The Bank of Thailand (BOT) to impose controls on short-term capital inflows has been amended to exclude equity investments. The requirements will still apply to other short-term capital inflows, including debt and property investments. A brief summary of the new measures in effect can be found on BOT’s website at  http://www.bot.or.th/.

In summary, the BOT has decided to implement an unremunerated reserve requirement on short-term capital inflows, including debt investments. Financial institutions are required to withhold 30% of foreign currencies bought or exchanged against the Thai baht, except for those related to trades in goods and services, or repatriation of investments abroad by residents.

While market reaction to the announcement has been unsettling, the SFEMC wishes to announce that the measures announced by the BOT do not warrant any closure of existing trades as transactions traded prior to 19 December 2006 are exempted from this requirement. The SFEMC, together with other market bodies, will continue to monitor the situation and will inform market participants should there be a need for further action.