Thailand liberalises foreign ownership rules in the banking and insurance industries

Thailand liberalises foreign ownership rules in the

banking and insurance industries


Stephen Frost, Bangkok International Associates

Introduction Thailand has recently changed the rules regarding foreign ownership of banks and insurance companies. In this article, we summarise the changes.

Banks and financial institutions The Financial Institutions Business Act (2008) came into force on 3 August 2008. Under the Act, a foreign bank may now own:

  • up to 25% of a Thai bank, without approval by the Bank of Thailand. This percentage also applies to its shareholding in any parent company, and also to voting rights. Up to 25% of the directors may be foreign,

  • up to 49% of a Thai bank, subject to approval by the Bank of Thailand. Up to half of the directors may be foreign, and

  • more than 49% of a Thai bank, and appoint foreigners to be more than half of the directors, subject to approval by the Ministry of Finance.

These rules apply to foreign ownership of Thai registered banks, not to branches of foreign banks in Thailand.

There are also creeping takeover rules that apply to banks and financial institutions. If a person owns more than 5% of a bank or financial institution, then such shareholding must be reported to the Bank of Thailand. If a person wishes to own more than 10% of a bank or financial institution, then consent must be obtained from the Bank of Thailand.

Current foreign shareholdings in Thai banks At present, the following Thai banks are believed to have less than 25% foreign ownership, and thus there is scope to increase the level of foreign ownership: ACL Bank, Bangkok Bank, Krungthai Bank, Siam City Bank and Thanachart Bank. The following banks already have substantial foreign ownership of up to 49%, and thus may not be so attractive to potential foreign investment, unless the existing foreign shareholders are seeking an exit: Bank of Ayutthaya, BankThai, Kasikorn Bank, Kiatnakin Bank, TMB Bank, Tisco Bank, Siam Commercial Bank, UOB (Thai) Bank and Standard Chartered Bank.

Insurance companies Amendments to the Life Insurance Act (1992) and the Non-Life Insurance Act (1992) came into effect in February 2008. With regard to the shareholdings and directorships in an insurance company, the current position is:

  • at least 75% of the shares must be held by:

(a) Thai individuals or Thai non-juristic partnerships in which all the partners are Thai, and/or

(b) an entity registered in Thailand in which:

(i) a person in (a) has more than 50% of the shares, or

(ii) a person in (a) or an entity in (i) has more than 50% of the shares.

The Insurance Commission as industry regulator has power to permit up to 49% foreign ownership and to allow up to half of the directors to be foreign. The Finance Minister on the recommendation of the Insurance Commission, has discretion to permit greater foreign ownership and a majority of foreign directors, where the operation of the company may cause loss to insured parties or to the public. Such approval may be granted subject to conditions, or for a limited period of time.

Existing insurance companies are given five years to adjust to the new foreign shareholding and director requirements. If the requirements are still not complied with after five years, the company will not be permitted to open new branches.

In addition, all insurance companies must convert to public company status by February 2013. If a company does not do, it may continue to operate for a further three years but may not arrange new policies. Failure to convert to public company status by February 2016 means that the company will lose its license to operate an insurance business.

Some insurance companies are partly foreign owned, others are still wholly Thai owned. Foreign insurers present in Thailand include: ACE, AIG, Allianz, AXA, Generali, ING, Millea Holdings, Manulife, New York Life and Prudential. The largest companies are AIG, Thai Life, and Ayutthaya Alliance CP (a joint venture between non-life insurer Ayudhya, the CP Group and Allianz), Ocean Life, Finansa, AXA (Krungthai) and ING. In the non-life sector, the largest companies include Bangkok Insurance, Dhipaya Insurance, Phatra Insurance, New Hampshire Insurance, Ayudhya Insurance, Mitsui Sumitomo Insurance, MSIG Insurance, Sri Muang Insurance, Siam Commercial Samaggi, South East Insurance, Viriyah Insurance, Synmunkong Insurance, and Krungthai Panich.

Comment Foreign investors should feel encouraged by this liberalisation of foreign ownership rules in the banking and insurance sectors. There is certainly scope for increased foreign involvement in the banking sector, including consumer finance and credit cards. The insurance sector is considerably larger in terms of the number of active companies. Increased consumer income means that in the long term the scope for sale of life policies and other personal financial products is particularly interesting. There are certainly opportunities for acquisition of some of the smaller companies which may still be family owned or controlled.

© Stephen Frost, Bangkok International Associates 2008


Bangkok International Associates is a general corporate and commercial law firm. For further information, please contact Stephen Frost by email at sfrost@bia.co.th or telephone (66) 2 231 6201/6455.

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