Chuck Bao
10/9/2008, 04:28 PM
I spent all day yesterday on the phone with Thai banks and the Thai central bank. It seems that the nasty little virus started in the US has finally spread to Thailand.
Thai banks don’t trust foreign banks, particularly American and European banks. Now, that is something I never imagined that I would write.
With foreign banks being shunned, there is a dollar shortage. The Bank of Thailand has had to step in to inject $11-12 billion into the local system and is preparing to inject more.
Oh I know, that’s just peanuts compared to the hundreds and thousands of billions of dollars being used to support the US and European banking systems.
I’m not so worried about Thailand, as the Bank of Thailand is in a strong position to keep the local money market functioning, at least for now.
My chief concern, however, is that Thai exporters are being warned to be careful in accepting letters of credit from foreign banks. Typically, Thai exporters get these LCs and cash them in at Thai banks at a discount. Thai banks now have lists of foreign banks which they are no longer doing business with and they are asking their clients to call in to check before accepting these LCs.
Nobody has heard of any cases that settlement has been delayed. Thai exporters are getting paid on time and there are no complaints that I have heard, so far. However, Thai banks are reporting that transaction volume is slowing very quickly. This is not good because we should be in the peak export season for Christmas / holiday sales to the US and Europe.
What happens if store shelves are empty at Christmas? This question is probably moot if people don’t have money to spend anyway.
Do you think Christmas will be cancelled this year?
Thai banks don’t trust foreign banks, particularly American and European banks. Now, that is something I never imagined that I would write.
With foreign banks being shunned, there is a dollar shortage. The Bank of Thailand has had to step in to inject $11-12 billion into the local system and is preparing to inject more.
Oh I know, that’s just peanuts compared to the hundreds and thousands of billions of dollars being used to support the US and European banking systems.
I’m not so worried about Thailand, as the Bank of Thailand is in a strong position to keep the local money market functioning, at least for now.
My chief concern, however, is that Thai exporters are being warned to be careful in accepting letters of credit from foreign banks. Typically, Thai exporters get these LCs and cash them in at Thai banks at a discount. Thai banks now have lists of foreign banks which they are no longer doing business with and they are asking their clients to call in to check before accepting these LCs.
Nobody has heard of any cases that settlement has been delayed. Thai exporters are getting paid on time and there are no complaints that I have heard, so far. However, Thai banks are reporting that transaction volume is slowing very quickly. This is not good because we should be in the peak export season for Christmas / holiday sales to the US and Europe.
What happens if store shelves are empty at Christmas? This question is probably moot if people don’t have money to spend anyway.
Do you think Christmas will be cancelled this year?