Bank Of Thailand Tightens Governance Rules For Virtual Banks

BANGKOK — The Bank of Thailand (BoT) on Thursday clarified that all virtual bank applicants must separate their financial services from non-financial business affiliates to prevent conflicts of interest and ensure financial stability.

Assistant Governor Chayawadee Chai-anant stated that the central bank requires these new digital lenders to consolidate all licensed financial entities under a single business group. This move aims to protect consumers from unfair pricing and prevent the inappropriate transfer of benefits between parent companies and their virtual banking units.

The clarification follows recent public scrutiny regarding how major Thai conglomerates plan to restructure their subsidiaries to meet the central bank’s stringent licensing criteria.

Essential Rules for Virtual Bank Applicants

To secure a license, applicants must follow specific structural guidelines designed to keep banking operations independent from “real-sector” or non-financial businesses. According to official Ministry of Finance notifications, these requirements include:

Financial Consolidation: All entities holding financial business licenses must be grouped under the same control as the virtual bank.
Conflict Prevention: Applicants must ensure that the virtual bank does not provide favorable pricing or credit terms to its own affiliated companies.
Operational Independence: The bank cannot share core deposit or credit systems with other financial institutions to maintain security and autonomy.

“The goal is to supervise financial risks effectively,” Ms. Chayawadee said during a press briefing. “We must ensure that virtual banks do not create conflicts of interest for affiliated companies in both financial and non-financial sectors.”

Strategies for Compliance

The BoT outlined several paths for companies to align with the new regulatory framework. Companies that currently own both retail and financial subsidiaries have five primary options to satisfy the regulator:

Partial Transfers: Transferring only specific financial business units into the virtual bank’s business group rather than the entire company.
Divestment: Reducing shareholdings in a financial business until the parent company no longer has controlling power.
License Surrender: Giving up financial licenses for business units that are not considered vital to the overall strategy.
Justified Exceptions: Applying for a license without restructuring, provided the company can offer a compelling “reason of necessity” for the BoT to consider.
Alternative Action: Taking other steps that align with the transparency goals set by the Ministry of Finance.

Capital and Ownership Requirements

Thailand’s virtual banks will function as commercial banks but without physical branches. Because they handle public deposits, they are subject to the same rigorous standards as traditional “bricks-and-mortar” institutions.

Under the current guidelines, a virtual bank must have a minimum paid-up registered capital of 5 billion baht on its first day of operation. This amount must eventually increase to 10 billion baht within the first five years of business.

The BoT also maintains strict rules on who can own these banks. At least 75% of voting shares must be held by Thai nationals. However, foreign entities can hold up to 25% of shares, or even up to 49% if they receive special approval from the central bank on a case-by-case basis.

Protecting the “Underbanked”

The central bank’s push for virtual banks is part of a broader mission to improve financial inclusion. Unlike traditional banks that focus on established corporate clients or high-net-worth individuals, virtual banks are expected to serve the “underserved” and “unserved” segments of the population.

This includes small and medium-sized enterprises (SMEs) and individuals without regular income or formal credit histories. By using advanced data analytics and flexible technology, these new lenders aim to offer credit to those who currently struggle to access the formal banking system.

Next Steps for Licensing

The selection process is currently underway, with three main consortia vying for the first batch of licenses. These include groups led by SCB X, Krung Thai Bank, and retail giant CP All.

The BoT and the Ministry of Finance are jointly reviewing all supporting documents and evidence. Successful applicants are expected to be announced by mid-2025. Once approved, the new banks will have one year to demonstrate their operational readiness—including IT systems and risk management tools—before they can officially open to the public.

“All applicants will be assessed based on their ability to provide new forms of financial services that enhance efficiency without jeopardizing the stability of the financial system,” Ms. Chayawadee added.