Thai Banks Leaf as Cheap Cash Pours in

Panita A. ID 5180476

Thai Banks Leap as Cheap Cash Pours in

The article was taken from Bangkok Post that was published in 24 September 2012. It was about the low-cost funding that Thai local banks have been raising from the international market by issuing bonds. For example, Bangkok Bank issued two types of US dollar-denominated debentures which were rated A3 by Moody's and BBB+ by Standard & Poor's and Fitch. The next example is five-year unsecured notes of Siam Commercial Bank or SCB which was rated A3 from Moody's. The note was very popular among investors in money market by 4.6 times oversubscribed. Also, the debenture from Kasikorn Bank that issued 5.5 year A3 and BBB+ rated debenture which became the first foreign-currency issue in sixteen years was oversubscribed by 5.4 times. In addition, a new debt issuance program that was worth about two billion dollar from Tisco Bank was just approved by its shareholder on last Friday. These signs indicated the situation of low interest rates and a surplus of liquidity in the worldwide financial market. The situation was expected to continue for the next few years and it would create a great opportunity for Thai local banks to earn cheap-cost fund since there was a strong loan growth in Thailand. One of examples in this case is Tisco Bank which had more than 20% expansion of total loan for the first eight months of the year.

The article is quite related to the topic of financial policy because one interesting thing that the article pointed out is that the situation seemed to be the effect of loose monetary policy by US Federal Reserve. I believe that loose monetary policy is the result from Operation Twist which is a program that was conducted by Fed in late 2011 and 2012 to help stimulate the economy. First of all, we have to understand the term of loose monetary policy and Operation Twist. Loose monetary policy is how the Fed reacts to inflation or deflation by increasing money supply in the market by several...