On September 12, 2024, the Bank of Thailand (BOT) Notification Re: Virtual Bank Supervision Criteria took effect. According to this notification, virtual banks must adhere to standards for traditional commercial banks, along with additional requirements tailored to address virtual banks’ digital nature and corporate structure.

Specific Requirements

The concepts of supervision remain unchanged from the consultation paper titled “Criteria for Supervising Virtual Banks”. Some of the key additional provisions and details on supervision criteria relate to the following:

• Financial business groups: The notification identifies virtual banks as financial businesses, subject to the BOT’s regulations on financial business group supervision. If a virtual bank is a part of another financial institution’s financial business group, the virtual bank must be under a solo consolidated group. After the “initial phase” (see below), other financial institutions and companies within the financial business group are prohibited from extending credit to or engaging in transactions similar to lending activities with the virtual bank.
• Capital fund requirements: If other financial institutions’ investment in a virtual bank increases the capital fund in the financial system beyond a safe level and this poses a risk to other financial institutions, the BOT may order the relevant financial institution to maintain capital funds as the BOT deems appropriate.
• Service channels and outsourcing: Virtual banks must provide services solely through digital channels, except when necessary. For example, with the BOT’s approval, a virtual bank may use other commercial bank electronic branches via an ATM pool system, use a banking agent to serve customer needs for cash, or occasionally provide on-site services.

Initial Phase

The “initial phase” runs from the date that the virtual bank commences its operations until it receives the BOT’s approval to become fully operational. During this period, certain BOT supervisory requirements are relaxed as follows:

• Governance: Virtual banks in the initial phase may request permission from the BOT to appoint a manager or person with authority from another financial institution to oversee their operations. The BOT will consider each request based on the reasons for it, the necessity of the proposed appointment, and the measures that will be taken to prevent conflicts of interest.
• Stress test: Virtual banks in the initial phase can utilize either self-developed scenarios or supervisory scenarios when conducting stress tests.
• Recovery plan: Virtual banks in the initial phase are not required to submit a recovery plan (i.e., a plan that identifies mechanisms to deal with financial stresses to the bank or its financial group) to the BOT.

For more information on Thailand’s regulations pertaining to virtual banks or any other financial technology matters, please contact Athistha (Nop) Chitranukroh at [email protected], Pornpan Wichawut at [email protected], or Rujaporn Paritsantik at [email protected].