Thailand publishes revised consultation paper on virtual bank framework

BOT will propose licensing regulations by July.

The Bank of Thailand (BOT) has released a revised consultation paper for its Virtual Bank Licensing Framework, taking in comments from a public consultation conducted between January 12 to February 12, 2023.

The revised consultation paper laid out clarifications about the framework, and its expected qualifications for virtual bank applicants.

Following another round of consultations ending on 4 July, BOT said that it expects to propose the licensing regulations to Thailand’s Ministry of Finance by July 2023. 

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Revised framework
BOT noted that whilst most respondents–which include public agencies, individuals, and businesses both in Thailand and abroad– were supportive of the overall objective and framework of the virtual bank license, it also received a number of frameworks regarding important aspects of it.

Questions were also raised that may “significantly affect decisions or business plans of applicants” as well the business model of the virtual banks, BOT said.

BOT provided a clarification on how it expects virtual banks to stimulate healthy competition in the financial institution.

“Virtual banks should have mechanisms in place to facilitate transmission or transfer of customers’ personal data to other service providers in accordance with the customers’ legal rights, and in line with the BOT’s policy on Open Data,” the regulator wrote in the announcement of the revised consultation paper’s launch.

BOT added that it will not be open to virtual banks obstructing or hindering the transmission or transfer of customers’ data to other service providers, in accordance with the customers’ consent and legal rights.

Virtual banks are also prohibited from changing shareholders deemed critical to its success during the first 3-5 years of operations, except in necessary cases as permitted by the BOT. 

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Qualifications
The paper also laid out key qualifications for virtual bank applicants.

Notably, BOT now specifically states that no director, person with power of management, or advisor of a virtual bank may concurrently serve as a director, person with power of management, or employee of another financial institution. 

“This is to prevent potential conflicts of interest and enable such personnel to fully devote their time to the management of the virtual bank,” BOT wrote.

In terms of the use of technology by the virtual banks, the BOT wrote that virtual banks must not share critical IT systems with other financial institutions, such as core banking, mobile banking, and internet banking systems. This is to prevent potential contagion risks, data leakage, and cyber threats, the regulator said.

Aspirants must also demonstrate capabilities to “manage data in compliance with data governance principles and to develop data portability mechanisms to facilitate customers’ use of their personal data in transacting with other financial service providers.”

To determine successful applicants, BOT said that it will consider the applicants’ capabilities to deliver said qualifications effectively and sustainably and their ability to positively contribute to the overall financial and economic system of Thailand.

Currently, BOT is further seeking comments and suggestions on the revised licensing framework in parts where significant clarifications and conditions have been added. The new consultation period runs from 19 June to 4 July 2023. Responses can be submitted via the BOT website or email virtualbank@bot.or.th.