The Bank of Thailand (BOT) has issued a consultation paper entitled “Criteria for Supervising Virtual Banks” for the period from March 19, 2024 to April 17, 2024. A public hearing will be held. The consultation document makes clear that the BOT will apply traditional commercial banking supervision standards to virtual banks. However, the BOT also explains that additional regulatory oversight is required as the services provided by virtual banks are all digital.
Additional supervisory standards for virtual banks
- Financial business group
If a virtual bank belongs to the same financial business group as other financial institutions, its parent company must structure the virtual bank under a single consolidated financial business group. Once a virtual bank has passed its initial “restriction phase” (see below), other financial institutions within the group may not extend credit to the virtual bank or engage in transactions similar to lending activities. is prohibited.
- Shareholding structure
If the increase in the capital of the financial institution system is greater than the actual capital injection resulting from the bank’s shareholding structure, the BOT will introduce additional regulations to supervise the capital of virtual banks and the financial institution system to prevent double counting. We aim to publish it.
- Operational risk
Virtual banks must not use trademarks or logos that resemble or suggest an association with any other financial institution or group of financial institutions.
- Governance
Virtual banks must have at least one director and a chief technology officer (CTO) with at least three years of experience in the field of IT or digital services. Additionally, the CTO must work full-time for the virtual bank and cannot be an employee of another legal entity.
- Related Financing and Related Party Transaction Restrictions
Virtual banks must obtain unanimous board approval before engaging in transactions with major shareholders or unitholders.
- Service channels and outsourcing
Virtual banks are required to provide services only through digital channels, unless they are required to provide services through other channels.
- IT system
Virtual banks need to ensure their IT systems can provide uninterrupted service. Additionally, virtual banks must not share deposit systems, lending systems, internet banking services, or mobile banking services with other domestic or international financial institutions.
Restriction stage criteria
In addition to introducing new supervisory standards, the BOT plans to relax certain existing rules that apply during the restrictive phase (i.e., the first three to five years). This includes governance, stress testing and business continuity planning requirements.
For more information on Thailand’s regulations regarding virtual banks or other financial technologies, please contact Athistha (Nop) Chitranukroh ( nop.c@tilleke.com ), Pornpan Wichawut ( pornpan.w@tilleke.com ), or Rada Lamsam ( rada.l@ tilleke.com ) and Rujaporn Paritsantik ( rujaporn.p@tilleke.com ).
