Impact of Foreign Entry on the Thai Banking Sector: Initial Stage of Bank Restructuring

Following the 1997 crisis, Thai authorities allowed foreign investors to hold more than 49% of the share in Thai commercial banks for a period of 10 years. The guidelines for equity holding were announced in November 1997. The requirements on loan-loss provisioning and capital adequacy standards have led to a radical changes, with giant foreign banks acquiring controlling stakes in Thai local banks. As a result, shares of family ownership in Thai banks have declined considerably. In this initial stage of foreign entry, operational improvements of the banks have focused on cost cutting, introducing new banking products/services, and staff training. As a result, other Thai banks have revamped their corporate management and technology base to maintain their market shares.