The Bank of Thailand (BOT) has recently unveiled its intention to issue virtual bank licenses in a bid to enhance competition in the financial sector. In pursuit of this goal, the BOT has released a revised Consultation Paper on the Virtual Bank Licensing Framework, taking into account valuable feedback received during the initial public consultation. The revised paper provides further clarity on key issues to ensure that all applicants possess sufficient information to make well-informed decisions.
One of the crucial aspects clarified in the revised paper relates to the concept of “Green Lines” and “Red Lines.” The BOT expects virtual banks to foster healthy competition while enabling the smooth transmission and transfer of customers’ personal data in accordance with their legal rights and the BOT’s Open Data policy. At the same time, the BOT emphasizes that virtual banks should not obstruct or impede the transmission and transfer of customers’ data to other service providers, provided it is done with customers’ consent and in compliance with their legal rights.
Furthermore, the revised paper outlines the key qualifications expected from virtual bank applicants:
- Robust corporate governance: The paper specifies that individuals serving as directors, managers, or advisors of a virtual bank cannot simultaneously hold positions within another financial institution. This measure aims to prevent conflicts of interest and ensure that relevant personnel can fully dedicate their time to managing the virtual bank.
- Secure and resilient technology infrastructure: Virtual banks must deploy independent IT systems and refrain from sharing critical systems, such as core banking, mobile banking, and internet banking, with other financial institutions. This requirement aims to mitigate contagion risks, protect against data leakage, and minimize cyber threats.
- Data management capabilities: The applicants must demonstrate proficiency in managing data according to data governance principles and develop mechanisms for data portability, which allow customers to utilize their personal data when transacting with other financial service providers.
In terms of applicant selection, the BOT will prioritize the most qualified candidates who possess the capabilities to effectively uphold the Green Lines, contribute positively to Thailand’s financial and economic system, and sustainably operate virtual banks.
In addition, the revised framework imposes a condition that restricts changes in critical shareholders during the initial 3-5 years of a virtual bank’s operations. This measure aims to ensure the stability and success of the virtual bank during its formative stage.
To encourage the provision of innovative financial services that cater to diverse customer segments, the BOT invites comments and suggestions on the revised licensing framework. Interested stakeholders can participate in the consultation process from June 19th to July 4th, 2023. The BOT intends to propose the licensing regulations to the Ministry of Finance for consideration by July 2023. The introduction of virtual bank licenses is expected to usher in a new era of financial services in Thailand, meeting the evolving needs of customers efficiently and effectively.
