Analyst urges narrower interest rate spread

Large gap between loans and deposits

- WICHIT CHANTANUSORNSIRI

The new governor of the Bank of Thailand is being urged to prioritise narrowing the spread between lending and deposit interest rates, which is the highest in Southeast Asia, while also managing the baht to align with regional currencies.

According to Aat Pisanwanich, an independent analyst of international economics, while the spread in Singapore and Malaysia does not exceed 2%, the average spread among commercial banks in Thailand is 5-7%, which is excessively high.

With such a wide spread, adjustments to interest rates in either direction has little to no impact on commercial banks.

The narrower spreads in Singapore and Malaysia are because their central banks actively supervise and regulate commercial banks in those nations, setting policies that cap the spread within a prescribed limit, he said.

In contrast, Thai commercial banks enjoy profits of hundreds of billions of baht because of this wide spread, while depositors receive very low interest rates and borrowers face high loan rates.

Although banks may argue the high risks of lending in the country justify higher loan interest rates, the risks should not be so great as to generate profits of this magnitude, said Mr Aat.