BOT Notification No (27 September 2017)-check

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1 Unofficial Translation This translation is for the convenience of those unfamiliar with the Thai language Please refer to Thai text for the official version Notification of the Bank of Thailand No. FPG. 75/2551 Re: Regulations on Foreign Exchange Positions for Retail Banks 1. Rationale Foreign exchange positions of retail banks resulting from borrowing in foreign currencies, investing in foreign securities, or engaging in foreign exchange derivative transactions for hedging purpose may cause an exchange rate risk to retail banks. Having high foreign exchange positions causes retail banks a high exchange rate risk and may lead to damage which affects retail banks revenue and capital adequacy. Therefore, retail banks which involve in foreign exchange transactions shall consider managing the exchange rate risk as follows; (1) obtaining an internal control system which can identify, measure, monitor and control the exchange rate risk, (2) setting an appropriate exposure limit for transactions or foreign exchange positions and (3) maintaining adequate capital for the exchange rate risk under the market risk capital frameworks. In addition, retail banks shall take into account other risks related to the exchange rate risk, for instance, interest rate risk and liquidity risk. In order to supervise retail banks foreign exchange positions to be in line with the international standards and to effectively and accurately reflect the exchange rate risk, as well as allow retail banks to have an appropriate exchange rate risk management, the Bank of Thailand has prescribed the regulations on foreign exchange positions as an aggregate position. In addition, any retail bank which has transactions in its trading book exceed the threshold specified by the Bank of Thailand is required to maintain capital for market risks that are related to exchange rate. Details of market risks capital requirements are prescribed on the Notification of the Bank of Thailand on Supervision of Market Risk and Capital Requirements for Market Risk of Financial Institutions This Notification is issued to be in accordance with the Financial Institution Business Act B.E (2008) while the essence of the regulations has not been changed from the previous one. The retail banks which are granted a relaxation from the Bank of Thailand with regard to foreign exchange positions before the effective date of this notification may proceed without having to submit for another approval.

2 2 2. Statutory Power By virtue of Sections 41 and 71 of the Financial Institution Business Act B.E (2008), the Bank of Thailand hereby prescribes the regulations on foreign exchange positions for retail banks to comply with as specified in this Notification. 3. Scope of Application This Notification shall apply to all retail banks according to the law on financial institution business. 4. Repealed/Amended Notification and Circular The Circular No. BOT.FPG.(21) C. 348/2549 on Policy Guidelines on Foreign Exchange Positions and Relevant Report Forms for Retail Banks dated 14 March Content 5.1 In this Notification Capital means total capital of locally-incorporated banks as prescribed in the Notification of the Bank of Thailand on Components of Capital for Locally-incorporated Bank. 5.2 Regulations on foreign exchange positions (Aggregate limit) Retail banks shall maintain the aggregate position of all currencies at the end of each day equivalent to USD in a proportion to its capital not exceeding 20 percent or USD 2 million, whichever is the greater. position) 5.3 Regulations on calculating foreign exchange positions (Aggregate Retail banks shall calculate the aggregate position of all currencies from the greater amount between 1) Sum of all net foreign exchange overbought positions of all currencies converted into USD; and 2) Sum of all net foreign exchange oversold positions of all currencies converted into USD.

3 Net open position in each currency is the sum of net foreign exchange current position and the net foreign exchange forward position 3 Net foreign exchange current position in each currency shall be calculated by subtracting foreign currency liabilities from foreign currency assets in each currency Net foreign exchange forward position in each currency shall be calculated by subtracting net short foreign exchange derivative transactions 1 from net long foreign exchange derivative transactions 1 in each currency 5.4 Preparation and submission of report For calculating foreign exchange positions, retail banks shall comply with the calculation method according to report forms and the instructions for preparing an aggregate position report (details in the attachment). Retail banks shall prepare the aggregate position report by using the data as at Thursday of the last week of every month and submit the report in the form of CRF file to Data Management Department of the Bank of Thailand within 10 business days from the last day of the month. However, retail banks shall notify the Financial Institution Applications Department, Supervision Group in advance regarding the data source of exchange rate that will be used in converting each foreign exchange position into USD. 6. Effective Date This Notification shall come into force as from the day following the dates of its publication in the Government Gazette. Announced on 3 rd August 2008 (Mrs. Tarisa Watanagase) Governor Bank of Thailand 1 Option transactions shall be regarded by delta equivalent amount

4 1/1 Daily report on the summary of foreign exchange positions Retail bank s name As at. Foreign exchange positions Foreign currency (Unit: 000 USD) Sum of all currencies Banking business 1. Net current position 2. Foreign currency loans classified as doubtful of loss 3. Waived Items 4. Reserved for classified assets in foreign currency 5. Net foreign exchange current position ( ) 6. Net forward position Adjusted by 7. (plus/less) Net notional amount of currency options shown in item (plus/less) an equivalent value to cash position of the net notional amount of currency options 9. Irrevocable guarantee (shall be shown as Short Position (-)) 10. Net foreign exchange forward position ( ) 10.1 Present Value (PV) of net foreign exchange forward positions shown in item 10. (only for banks that obtained permission) 11. Net open position in each currency International Banking Facilities (IBF) (only for locally-incorporated banks) Attachment 12. Net open position in each currency of International Banking Facilities (IBF) (only for locally-incorporated banks) Overseas branches (only for locally-incorporated banks) 13. Net open position in each currency of overseas branches (only for locally-incorporated banks) 14. Sum of net open position in each currency ( ) (Individual currency positions) percent of total capital (Individual Currency Limit) 16. Sum of all net foreign exchange overbought position 17. Sum of all net foreign exchange oversold position 18. Aggregate position (i.e. the higher amount between the sum of all currencies in item 16. and 17.) percent of total capital (Aggregate Limit) 20. Total Capital

5 1/2 Explanation on the preparation of the aggregate position report Preparation and submission of the report 1. Retail banks shall establish a system to prepare the aggregate position report according to a form provided and submit the report by using data on the last Thursday of every month to the Data Management Department of the Bank of Thailand within 10 business days. An exception is given when the last Thursday of the month is a holiday, retail banks shall prepare the report by using data of the previous business day. 2. The exchange rate used in the conversion of other currencies into USD, both for current position and forward position, shall be either the exchange rate from generallyused data sources, for instance, Reuters, Bloomberg, Telerate or the exchange rate as provided by the Bank of Thailand via in the morning of the same business day. The exchange rate from the same data source shall be used consistently. However, retail banks shall notify the Bank of Thailand in advance regarding the data source of exchange rate that will be used in converting each foreign exchange position into USD. Consent from the Bank of Thailand is required prior to the change of the data source and supportive reasons shall also be provided. Meaning of each item 1. Sum of all net foreign exchange overbought position (item 16) means the sum of all net open position in all currencies that have overbought positions (amount with + sign) after converting into USD. 2. Sum of all net foreign exchange oversold position (item 17) means the sum of all net open position in all currencies that have oversold positions (amount with - sign) after converting into USD. 3. Aggregate position (item 18) means the higher amount between the sum of all net foreign exchange overbought positions from item 1. and the sum of all net foreign exchange oversold positions from item percent of total capital (Aggregate limit) is the total capital amount from Item 5. multiplied by 20 percent.

6 1/3 5. Total Capital (item 20.) means total capital of retail banks which use the same definition as prescribed in the Notification of the Bank of Thailand on Components of Capital for Locally-incorporated Bank. The total capital shall be presented in thousand USD. Remark Retail banks shall prepare reports of net open position in each currency which shall be used in calculating the aggregate position and keep them at the retail banks for the Bank of Thailand s examination or submit to the Bank of Thailand upon request. The net open position in each currency is the sum of net current position and net forward position in each currency, as follows; 1. Net current position means foreign currency assets deducted by foreign currency liabilities. If the amount of the assets is more than the amount of liabilities, the net current position shall be reported by using the (+) sign. If the amount of the assets is less than the amount of the liabilities, the net current position shall be reported by using the (-) sign. 1.1 Foreign currency assets mean the outstanding amount of foreign currency assets as at the reporting date. such assets may include cash on hand, and/or interbank and money market transactions, and/or foreign investment, and/or other foreign currency assets, for instance, accrued interests, prepaid expenses, deferred expenses, accrued revenue. However, fixed assets, for instance, lands, buildings, leasehold contracts of lands and buildings, and equipments shall be excluded from this item. 1.2 Foreign currency liabilities mean outstanding amounts of all foreign currency liabilities as at the reporting date. Such liabilities may include borrowing, and/or other foreign currency liabilities, for instance, accrued expenses. 2. Net forward position means the outstanding amount of long derivative transactions deducted by the outstanding amount of short derivative transactions. If the outstanding amount of long derivative transactions is more than the outstanding amount of short derivative transactions, the net forward position shall be reported by using the (+) sign. If the outstanding amount of long derivative transactions is less than the outstanding amount of short derivative transactions, the net forward position shall be reported by using the (-) sign. 2.1 Outstanding amount of long derivative transactions means the total notional amount of outstanding obligation arising from engaging in foreign exchange derivative transactions which are long positions, for instance, outright forward, FX swap, cross currency

7 swap, currency futures and others (currency option shall be regarded by delta equivalent amount). 1/4 2.2 Outstanding amount of short derivative transactions means the total notional amount of outstanding obligation arising from engaging in foreign exchange derivative transactions which are short positions, for instance, outright forward, FX swap, cross currency swap, currency futures and others (currency option shall be regarded by delta equivalent amount).

BOT Notification No (27 September 2017)-check

BOT Notification No (27 September 2017)-check Unofficial Translation This translation is for the convenience of those unfamiliar with the Thai language Please refer to Thai text for the official version -------------------------------------- Notification