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Legal Update

The Bank Of Thailand Bids To Limit Currency Dealings

15 January 2007
Mayer Brown JSM Legal Update


To discourage Thai baht speculation, on 18 December 2006 the Bank of Thailand ("BOT") published a notification implementing a reserve requirement on short-term capital inflows.  Commercial banks, through which foreign currency remittances are made, are required to withhold 30 percent of foreign currency amounts of US$20,000 or more (or the equivalent in any other foreign currency) bought or exchanged against the Thai baht, although transactions relating to trades in goods and services or repatriation of overseas investments by Thai residents are excluded.  Thirty percent of the remittance must be placed in a non-interest bearing account as a reserve requirement.  Foreign investors, as a result, will only be able to exchange 70 percent of their money into baht.

Full Update

The details of the measure are summarised as follows:

1.  Foreign currencies bought or exchanged against the baht for foreign currency borrowings or investments in debt securities transacted from 19 December 2006 onwards are subject to the 30 percent foreign currency reserve requirement.

2.  Foreign currencies bought or exchanged against the baht for the following transactions are exempt from the 30 percent foreign currency reserve requirement:

  • Foreign currency borrowings transacted prior to 19 December 2006;



  • Foreign currencies bought or exchanged against the baht amounting to less than US$20,000 or equivalent;



  • Inflows for equity investment in companies listed in the Stock Exchange of Thailand and Market for Alternative Investment (excluding mutual fund and warrants), investment in the Thai Futures Exchange (TFEX), and investment in the Agricultural Futures Exchange of Thailand (AFET).  Funds destined for these investments should be deposited in a Special Non-resident Baht Account for Securities (SNS);



  • Foreign exchange transactions related to current account activities including transactions related to exchange of goods, services, income, transfers and aid;



  • Foreign direct investment where the investor owns at least 10 percent of the equity capital and participates in the management of the business;



  • Investment in real estate (excluding real estate mutual funds);



  • Buying foreign currency from foreign currency transactions under a Rollover Swap Agreement made with an established financial institution;



  • Foreign currencies bought or exchanged against the baht from (a) foreign embassies, foreign consulates, international organisations or institutions located in Thailand; or (b) Thai embassies, Thai consulates or other Thai government entities located outside Thailand; and


  • Foreign exchange bought or exchanged against the baht in the form of travellers' cheques and banknotes.

If the 30% reserve remains unwithdrawn for not less than one year, it is returned in full (with no interest).  If the funds are repatriated within a year, the refund would only be two-thirds the total amount, as one-third of the reserve is forfeited.

The seller or exchanger can maintain only one SNS for the settlement of investments in equity. The balance in the SNS account must not exceed 300 million baht. The BOT will continue to review the appropriateness of this limit.

The BOT will keep the reserve requirement under review, and it is possible that the measure will be cancelled, or the reserve amount changed or the time limit altered, depending on circumstances.


Although the BOT is of the view that this measure will discourage speculation, as it will increase costs for speculators, there has been widespread criticism of the negative impact of this measure on inward investment.  The measure introduces additional uncertainty, complexity and, potentially, cost to an already difficult investment environment.

For further information, please contact:

Name: Ananya Thongdumrongchai
Phone: +66 2 677 7555 ex168
Fax: +66 2 677 7599

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