To Manager All Commercial Banks

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1 Unofficial Translation With the courtesy of the Foreign Banks' Association This translation is for the convenience of those unfamiliar with the Thai language. Please refer to the Thai text for the official version THE BANK OF THAILAND 3 March 2004 To Manager All Commercial Banks No. SorNorSor. (22) Wor. 41/2547 Re: Dispatch of the Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks The Bank of Thailand has enclosed herewith the Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks dated 25 February The Notification has already been published in the Government Gazette, General Section, No. 121, Special Edition 22 Ngor, on 27 February The essence of this Notification is to repeal the regulations on the ceiling of deposit interest rate. Nowadays the deposit interest rate ceiling is no longer necessary, since, the liquidity in financial institutions system is high and the competition in deposit mobilization is less intense comparing to during the last crisis period. As deposit rate shall be determined by market mechanism, this Notification is expected to benefit the public depositors, to encourage competition among financial institutions, as well as to enhance the development of new financial instruments as an alternative for investment. Additionally, certain elements were added or modified, in order to clarify practical procedures and to protect benefits of the public, as shown in the enclosed Notification of the Bank of Thailand. For consistency with the repealing of deposit rate ceiling as mentioned above, 2 circulation letters of the Bank of Thailand, namely the Circulation Letters No. Ngor (Wor) 1514/2541 Re: Practical Guideline on Interest Payment dated 13 July 1998 and No. ThorPorTor. Ngor. (Wor) 3132/2541 Re: Interest Rate on NCD dated 21 August 1998, shall be repealed. As the repealing of deposit rate ceiling benefits public depositors, this Notification is effective retroactively on 17 February 2004, which was the date that the Minister of Finance gave approval. BOT Notification No ( ) Page 1 of 1

2 Please be informed and comply with accordingly. Yours faithfully, (Mr. Samart Buranawatanachoke) Senior Director, Financial Institutions Policy Group for Governor Enclosure : Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to observed by Commercial Banks dated 25 February 2004 Risk Supervision Policy and Analysis Department Tel: , Note [ ] The Bank of Thailand will arrange a clarification meeting on at. [X] There will be no clarification meeting. BOT Notification No ( ) Page 2 of 2

3 Unofficial Translation With the courtesy of the Foreign Banks' Association This translation is for the convenience of those unfamiliar with the Thai language. Please refer to the Thai text for the official version Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks 1. Objective By allowing deposit interest rate to be determined by market mechanism, the notification is expected to benefit depositors - as they will receive fair returns, to encourage financial institutions to compete more, and to give rise to transparency and clarity in practice, as well as to help develop alternative financial instruments for investment. 2. Provision of Law By virtue of the provisions of Section 14 of the Commercial Banking Act B.E. 2505, as amended by the Commercial Banking Act (No.2) B.E.2522, the Bank of Thailand, with the approval of the Minister of Finance, hereby issues this regulation. 3. Scope of Application This Notification is enforceable for all commercial banks in accordance with the Commercial Banking Act. 4. Content 4.1 The following Notifications shall be repealed: (1) The Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks dated 20 October 1993 (2) The Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks (No.2) dated 30 June 1997 (3) The Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks (No.3) dated 18 July 1997 (4) The Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks (No.4) dated 18 September 1997 (5) The Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be observed by Commercial Banks (No.5) dated 10 July 1998 BOT Notification No ( ) Page 3 of 3

4 4.2 In respect on interest rates on deposits and borrowings, commercial banks shall observe as follows : (1) Commercial banks shall pay interests based on the rate announced by commercial bank for the following deposit account: demand deposits, both current account and saving account not to be withdrawn by a check book; time deposits; negotiable certificate of deposits; and contractual savings with at least 24- month deposits continual monthly deposit. In this respect, commercial banks may pay higher interest rate for selective customers but shall not be exceed the rate for general customers more than 0.5 percent. (2) For time deposits with the maturity date coinciding with a bank holiday and customers do not wish to keep the deposit by withdrawing such deposits on the following business day, commercial banks shall calculate interest during the banking holiday for the customers as well. (3) For deposits or borrowings, which pay returns based on variables other than deposit rate, commercial banks shall pay the returns based on the calculation methods that commercial banks had agreed with their customers. In this regard, type of customers and scope of businesses shall be in accordance with those prescribed by the Bank of Thailand. According to (1), commercial banks shall make an announcement on interest rates and payment conditions for each type of deposits in respect of general customers, customers with large deposit amount, and selective customers, including the rates and conditions for time deposits that commercial banks consent to withdraw before maturity. The announcement shall be complied by the head office and all branches, except for the deposit amount, which each branch of commercial banks may change deposit amount for the purpose of different interest payment. 4.3 In respect of interest rates and discounts on loans, commercial banks shall observe as follows : (1) Commercial banks shall make an announcement on the maximum interest rates and discounts charged on all types of customers, including any conditions (if any), classified by type of customers and type of loans, including the announcements on: (a) Term-loan interest rates charged on prime large customers (Minimum Loan Rate (MLR)) and the definition of customers qualified to be charged interest and discount at such rates. (b) Interest rates charged on prime retail customers (Minimum Retail Rate (MRR)) and the maximum margin that commercial banks may add to the MRR. (c) Interest rates and discounts other than MLR or MRR, conditions, and types of customers to be charged interest and discount at such rates. (d) The maximum interest rate to be charged on customers who fail to comply with the specified conditions. BOT Notification No ( ) Page 4 of 4

5 (2) The rates of interest or discount to be charged on customers shall not exceed those announced by the commercial banks for each type of loans according to (1), except for the case where customers fail to comply with the specified conditions, the rates of interest and discount, including associated fees on loans combined shall not exceed the maximum interest rate according to (1) (d). (3) For housing loans extended to low-income earners as prescribed by the Bank of Thailand, which have been contracted before 1 June 1992, the rates of interest and discount to be charged by commercial banks shall not exceed the MLR according to (1) (a). (4) For credit card loans, the interest rates to be charged shall not exceed the rates announced by the commercial banks, but must not exceed the interest rate ceiling for credit card loans as prescribed by the Bank of Thailand. 4.4 Commercial banks shall submit a copy of the announcement on interest rates for deposits and loans according to Clause 4.2 and 4.3 to the Bank of Thailand within 3 days from the announcement date and every time there is an announcement for change. Beside, commercial banks shall post such announcement in conspicuous place at every office of the commercial banks. Commercial banks shall keep the original copy of the announcements either in the form of documents, computerized medium, or any other forms for no less than 10 years, in order to provide for customers or the court of justice, upon request. 4.5 This announcement does not enforce for the case of deposits or borrowings between commercial banks and the financial institutions according to the Act on Loan Rates of Financial Institutions, as well as the case where commercial banks accept deposits or lend in foreign currency, except for the case in according to Clause 4.2 (3). 5. Effective Date This Notification shall come into effect from 17 February 2004 onwards. Given on 25 February 2004 (M.R. Pridiyathorn Devakula) Governor Bank of Thailand BOT Notification No ( ) Page 5 of 5

All commercial banks registered in Thailand All branches of foreign commercial banks

All commercial banks registered in Thailand All branches of foreign commercial banks Unofficial Translation by the courtesy of The Foreign Banks' Association This translation is for the convenience of those unfamiliar with the Thai language. Please refer to the Thai text for the official