As the search for the next governor of the Bank of Thailand nears its conclusion, with cabinet approval of the chosen candidate expected within days, attention is rapidly shifting to the challenges awaiting the appointee.
The two candidates vying to lead the central bank — Roong Mallikamas, deputy governor for financial institutions stability at the central bank, and Vitai Ratanakorn, president of the Government Savings Bank — are both seasoned financial executives.
Yet the role they seek to fill demands far more than conventional banking expertise.
With current governor Sethaput Suthiwartnarueput set to step down on Sept 30, the incoming chief will inherit an economy experiencing sluggish domestic demand, simmering political tensions, and the growing threat of punishing US tariffs.
Leadership reformation
Economists argue the central bank must shift away from its traditionally conservative stance.
Nonarit Bisonyabut, a research fellow at Thailand Development Research Institute (TDRI), urged the incoming governor to be more proactive, warning that over-cautiousness could hamper the financial sector’s ability to stimulate growth.
The central bank is now grappling with mounting challenges amid shifting global monetary trends, including a weakening US dollar, rising trade protectionism, and intensifying international competition. Domestically, unresolved structural issues persist, most notably a high level of household debt and a concentrated financial sector that restricts credit access for smaller borrowers.
Mr Nonarit emphasised that the next governor must move beyond theoretical frameworks and take a more hands-on approach to policymaking. He said the role requires the courage to steer the institution through both deep-rooted structural issues and external economic shocks, rather than staying in a policy comfort zone.
He said the term monopoly in the financial sector does not refer to a situation where there is only a single provider, but rather a market structure controlled by only a few large players who often collude or divide the market among themselves, limiting genuine competition.
Even with the introduction of virtual bank licences, only three have been issued so far, with each tied to existing major banking groups. This limited diversification has done little to improve credit access or lower borrowing costs for underserved segments.
To address this, he suggested the central bank encourage greater competition by issuing more virtual banking licences. This could unlock new lending channels for smaller borrowers and startups, potentially fuelling the growth of emerging sectors.
Reflecting on the aftermath of the 1997 financial crisis, Mr Nonarit observed that the central bank’s enduring focus on financial stability has fostered an overly cautious banking environment. Institutions now avoid risk-taking, showing little incentive to compete or extend credit to smaller borrowers, resulting in an inefficient and exclusionary financial system.
“In today’s rapidly changing environment, prioritising stability alone is no longer sufficient,” he warned. “Anomalies like a strong baht amid weak economic performance, or persistently low inflation, are signs that the current approach may be out of sync with reality.”
He also argued that monetary policy tools, particularly interest rates, have become less effective, requiring a more agile and responsive policy stance.
“What we must avoid is appointing a governor who is overly conservative and reluctant to act,” Mr Nonarit cautioned. “That kind of leadership would limit the financial sector’s ability to support economic recovery and growth.
Independence essential
Former central bank governor Tarisa Watanagase weighed in with a sharp reminder: independence from political interference remains the bedrock of central bank credibility.
In an open letter to Finance Minister Pichai Chunhavajira last Tuesday, Mrs Tarisa emphasised that the most crucial qualification for a new governor is the ability to formulate policy free from political interference — a principle that underpins not only the credibility of monetary policy but also investor confidence in the country.
“Central bank independence does not mean opposition to the government,” she wrote. “Cooperation is vital, but it’s important to recognise that the two institutions operate on different policy horizons. Governments often prioritise short-term outcomes, while central banks are responsible for long-term stability.”
The central bank’s long-term orientation serves as a vital counterbalance, ensuring that short-term policies do not cause long-term damage. For this reason, independence from political influence is crucial, she said.
This divergence, Mrs Tarisa pointed out, is what makes the central bank’s independence so essential. It acts as a counterweight to short-term political pressures that could otherwise cause long-term economic harm.
She further warned that candidates from state-owned specialised banks — whose roles typically involve executing government policy — may lack the institutional mindset necessary for independent decision-making. In such banks, policy losses are often absorbed by the government, shielding the organisation from direct risk.
“In contrast, the central bank’s decisions carry national consequences,” she wrote. “Appointing a governor whose background is closely aligned with following government directives raises serious concerns about their ability to act independently.”
Supportive Policy
Business leaders are united in calling for a monetary policy more closely aligned with the needs of the private sector.
Dhanakorn Kasetrsuwan, chairman of the Thai National Shippers’ Council (TNSC), has called on the central bank to adopt a more growth-oriented monetary policy, particularly in support of small and medium-sized enterprises (SMEs) that continue to struggle with high interest rates.
“The central bank’s policies should be flexible and responsive to evolving economic challenges,” he said, urging the Bank of Thailand to lower borrowing costs and improve access to credit by easing excessively stringent collateral requirements and complicated approval processes.
Mr Dhanakorn also called for the introduction of targeted loan programmes and measures to support banks in offering low-interest financing.
He warned against allowing financial institutions to become overly cautious, which could choke liquidity in the system.
To ensure the regulator’s supervisory measures remain fit for purpose, he recommended revising some supervisory criteria such as temporarily lowering the liquidity coverage ratio (LCR).
On currency policy, he stressed the importance of maintaining a competitive exchange rate and avoiding sharp baht appreciation, which would hurt exporters. He also advocated for clearer communication around currency trends to help businesses plan more effectively.
Additionally, Mr Dhanakorn called for enhanced access to financial services, particularly through digital payment systems and central bank digital currency (CBDC) development, along with improved financial inclusion for small businesses and individuals.
“The private sector wants a stronger voice in policy formulation,” he said, urging the central bank to establish formal channels for industry input.
Echoing these concerns, Poj Aramwattananont, chairman of the Thai Chamber of Commerce and the Board of Trade of Thailand, said the central bank should allow a weaker baht to help counter rising US tariffs and maintain export competitiveness.
Similarly, Issara Boonyoung, chairman of the Thai Chamber of Commerce’s real estate development committee, advocated for rate cuts to support homebuyers and the sluggish housing sector and proposed more lenient debt classification and soft loan programmes to stimulate borrowing.
He explained that reducing interest rates would have widespread benefits. While it would ease the financial burden on existing borrowers, helping them manage their monthly payments during the economic downturn, it would also make it easier for new homebuyers to secure loans.
“The central bank plays a critical role in maintaining financial stability and guiding the economy through its current challenges,” he added.
In addition to rate cuts, the central bank could introduce soft loan programmes for businesses, households and individuals, providing access to low-interest loans across all sectors.
Furthermore, the regulator should revisit measures implemented during the pandemic, such as easing debt classification rules to lessen the strain on commercial banks or lowering the loan-loss provision requirement from 100% to 50% to help small borrowers who are struggling to access credit.
“When businesses face less financial pressure, the entire economy benefits,” Mr Issara said. “This, in turn, supports homebuyers, many of whom are employed by or own these businesses, improving their purchasing power.”
Coordination Amid Upheaval
Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), emphasised the need for closer coordination between the new governor and the Finance Ministry to guide the country through mounting economic challenges, particularly in light of the US’s proposed 36% reciprocal tariff threat.
Although the final punitive tariff rate remains subject to ongoing negotiations, Mr Kriengkrai urged both institutions to jointly formulate contingency measures to mitigate the impact on exporters and supply chains.
He also called on the government to develop scenario-based planning across different tariff levels and identify vulnerable industries in need of targeted support, such as export-oriented soft loan programmes.
“We want the Bank of Thailand and the Finance Ministry to work in unison to reinvigorate efforts to drive the Thai economy,” he said.
In his view, the immediate priority for the incoming governor should be to reduce policy interest rates. Lower rates would ease the financial burden on businesses, especially SMEs facing liquidity constraints and limited access to credit.
“We must lower financing costs for SMEs — they are a key engine for economic recovery,” he said.
Beyond interest rates, Mr Kriengkrai also underscored the importance of managing the baht’s value to support Thailand’s export- and tourism-driven economy. A moderate depreciation of the baht, he argued, would improve price competitiveness for Thai products abroad and attract more foreign visitors, generating higher revenues in both sectors.
He also urged the central bank to explore ways to encourage commercial banks to ease lending criteria to better support SMEs.
“With the economy slowing, the central bank must adopt policies that complement the government’s stimulus efforts and contribute to GDP growth,” said Mr Kriengkrai.
Prospective homebuyers chat with sales staff promoting a housing project during the recent House and Condo Expo. The immediate priority for the incoming governor should be to reduce policy interest rates, according to the FTI.
Sethaput: Set to step down on Sept 30