Thailand's central bank cannot
afford to pay off
still massive
1997 crisis debt
By Jon Fernquest
Thailand's
central
bank is
currently losing money so it cannot afford to pay off the principal on Thailand's 1997 Crisis
debt.The central bank lost money because as it accumulated foreign exchange reserves over the years it had to "mop up liquidity" by issuing bonds, also known as sterilization.
The "Financial Institutions Development Fund" or "FIDF" is the name of the organisation within Thailand's central bank (Bank of Thailand, BOT) that manages this debt.
Previous articles have discussed the situation in detail (Read article #1 and #2).
Today's article begins after the vocabulary.
central
bank - the
main bank in a country that controls the supply of money in the economy
and provides financial services to the government and other banks (See Wikipedia)
afford - to have enough money to be able to pay for something มีเงินพอจับจ่าย ซื้อหา, ทุนพอ
pay off - pay part of the money you must pay (owe) to someone
massive - very large
principal - an amount of money loaned to others or invested in a business in exchange for regular interest payments (total amount paid back to lender from borrower = interest + principal)
interest - payments made for the use of another's money for a period of time
pay interest on principal - when the borrower pays the lender interest for the opportunity to use their money
reserve - kept for use for something or someone ที่จัดสรรไว้ สำรอง
reserve - something currently not being used but that can be used when needed สำรองไว้
foreign exchange, forex - foreign money or currencies received when exchanging your own country's currency for that of other countries (See Wikipedia)
reserves, foreign reserves, foreign exchange reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง
accumulated foreign exchange reserves - foreign exchange reserves added to over time to grow larger and larger
liquidity - the speed that an asset can be turned into cash (cash is 100% liquid, a savings account a little less, a time deposit a lot less) สภาพคล่อง
mop up - use a "mop" to wash or clean floor, absorb and remove water on the floor
mop up liquidity - absorb or remove excess money (or loanable funds) in the economy (from accumulating foreign exchange reserves, this is called sterilization)
sterilization, sterilize capital inflows - central bank operations to reduce the effect of foreign exchange on the country's money supply, any purchase of foreign exchange is accompanied by an equal-value sale of domestic bonds, and vice versa (Source for details see IMF)
Financial Institutions Development Fund (FIDF) - the fund under the central bank responsible for bailing out banks and other financial insitutions after the 1997 financial crisis (See fiscalizing FIDF's losses)
afford - to have enough money to be able to pay for something มีเงินพอจับจ่าย ซื้อหา, ทุนพอ
pay off - pay part of the money you must pay (owe) to someone
massive - very large
principal - an amount of money loaned to others or invested in a business in exchange for regular interest payments (total amount paid back to lender from borrower = interest + principal)
interest - payments made for the use of another's money for a period of time
pay interest on principal - when the borrower pays the lender interest for the opportunity to use their money
reserve - kept for use for something or someone ที่จัดสรรไว้ สำรอง
reserve - something currently not being used but that can be used when needed สำรองไว้
foreign exchange, forex - foreign money or currencies received when exchanging your own country's currency for that of other countries (See Wikipedia)
reserves, foreign reserves, foreign exchange reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง
accumulated foreign exchange reserves - foreign exchange reserves added to over time to grow larger and larger
liquidity - the speed that an asset can be turned into cash (cash is 100% liquid, a savings account a little less, a time deposit a lot less) สภาพคล่อง
mop up - use a "mop" to wash or clean floor, absorb and remove water on the floor
mop up liquidity - absorb or remove excess money (or loanable funds) in the economy (from accumulating foreign exchange reserves, this is called sterilization)
sterilization, sterilize capital inflows - central bank operations to reduce the effect of foreign exchange on the country's money supply, any purchase of foreign exchange is accompanied by an equal-value sale of domestic bonds, and vice versa (Source for details see IMF)
Financial Institutions Development Fund (FIDF) - the fund under the central bank responsible for bailing out banks and other financial insitutions after the 1997 financial crisis (See fiscalizing FIDF's losses)
Economics
BoT cannot afford FIDF liabilities
Borrowing costs spur B7.6bn operating lossParista Yuthamanop
26/03/2010
The Bank of Thailand recorded net operating losses of 7.6 billion baht at the end of 2009, due mainly to the borrowing cost of bond issues to mop up liquidity.
As a result, the central bank is not in a position to help pay some of the principal for the liabilities of its Financial Institutions Development Fund (FIDF) this year, said Arkabusk Krairiksh, an assistant governor.
liabilities
- amounts of money that are owed by to another, debts หนี้สิน
(liabilities + owners' equity = assets)
spur - to cause something to happen ก่อให้เกิด (See glossary)
recorded net operating losses -
bond - borrowing money by issuing a financial or investment security, an agreement by a government or an organization to pay back money that an investor has lent plus a fixed amount of interest by some date in the future (See Wikipedia)
issues - subjects that need to be considered ประเด็น
spur - to cause something to happen ก่อให้เกิด (See glossary)
recorded net operating losses -
bond - borrowing money by issuing a financial or investment security, an agreement by a government or an organization to pay back money that an investor has lent plus a fixed amount of interest by some date in the future (See Wikipedia)
issues - subjects that need to be considered ประเด็น
Under an agreement reached eight years ago on the shared burden for the FIDF liabilities, the government was required to offset the interest burden of the FIDF's bonds.
The FIDF incurred liabilities exceeding one trillion baht from bailing out banks and finance companies during the 1997-98 financial crisis.
Mr Arkabusk said the main factor behind the central bank's operating losses last year was 12 billion baht in interest expenses on bond issues to manage money market interest rates.
burden
- a serious or difficult responsibility that you have to deal with
ภาระ (See glossary)
offset - reduce by moving in the opposite direction (See glossary)
interest - payments made for the use of another's money for a period of time
incur - do something so that you owe money to another person, or do something to lose money (examples: incur charges, incur costs, incur a debt, incur an expense, incur a loss)
debt incurred - money that you began owing someone
exceeding - passing a limit, going beyond
bailout - help by giving money to prevent failure and bankruptcy ช่วยไม่ให้ธุรกิจล้มละลาย (Seeglossary)
bankrupt - when business is bad, debts cannot be paid, and business cannot operate anymore, assets are sold off by a court (liquidation) (See Wikipedia)
finance - to provide money for something จัดหาเงินทุนให้
crisis - an urgent, difficult or dangerous situation วิกฤต
factor - a fact or situation which influences the result of something ปัจจัย
money market - buying and selling short loans between banks and other financial institutions (examples: certificates of deposit = money borrowed for short periods, and treasury bills = government short-term borrowing)
offset - reduce by moving in the opposite direction (See glossary)
interest - payments made for the use of another's money for a period of time
incur - do something so that you owe money to another person, or do something to lose money (examples: incur charges, incur costs, incur a debt, incur an expense, incur a loss)
debt incurred - money that you began owing someone
exceeding - passing a limit, going beyond
bailout - help by giving money to prevent failure and bankruptcy ช่วยไม่ให้ธุรกิจล้มละลาย (Seeglossary)
bankrupt - when business is bad, debts cannot be paid, and business cannot operate anymore, assets are sold off by a court (liquidation) (See Wikipedia)
finance - to provide money for something จัดหาเงินทุนให้
crisis - an urgent, difficult or dangerous situation วิกฤต
factor - a fact or situation which influences the result of something ปัจจัย
money market - buying and selling short loans between banks and other financial institutions (examples: certificates of deposit = money borrowed for short periods, and treasury bills = government short-term borrowing)
The rise in foreign reserves to $138 billion last year from $111 billion in 2008 reflected net gains in foreign exchange income and the bank's forex management. The increase cost the bank 67 billion baht in an unrealised loss in 2009 from the baht's strengthening. The central bank also had an audited loss of 81 billion baht on equities last year.
Foreign reserve management generated a profit, but it turned to a loss after converting to baht. The dollar weakened by 4.7%, the yen 6.8% and the euro 2.1% against the baht," said Mr Arkabusk.
X reflected Y - X
was explained by Y (you saw X happening and it was because of Y)
income - money gained, money coming into a business, household or organisation
audited - to have your accounting records examined for accuracy
equities - stock shares in a company that represent partial ownership of the company หุ้น
generated - created
profit - money that you make from selling goods and services after all your costs have been paid กำไร
converting - changing from using one system to another system
income - money gained, money coming into a business, household or organisation
audited - to have your accounting records examined for accuracy
equities - stock shares in a company that represent partial ownership of the company หุ้น
generated - created
profit - money that you make from selling goods and services after all your costs have been paid กำไร
converting - changing from using one system to another system
The bank had 8.5 billion baht in profits in the currency reserve account from a 25% rise in gold prices last year. It had 857 billion baht in capital at the end of last year.
The Finance Ministry has said it is considering an adjustment in the agreement with the central bank so the FIDF principal can be reduced. Finance Minister Korn Chatikavanij said the ministry might propose amending the Currency Act so the government can tap the central bank's idle funds. Current law stipulates the central bank cannot transfer funds other than operating results booked under annual benefit accounts. The central bank has recorded a net operating loss for several years.
currency
- a widely used the money accepted for exchange of goods in an economy
เงินตรา (See Wikipedia)
account - an arrangement with a bank to keep money there and take some out
capital - money invested in a business (See glossary)
ministry - a government department dealing with an area of activity กระทรวง
amending - making changes to a law, agreement, etc. การแก้ไขกฎหมาย
tap - use
idle - not being used ซึ่งยังไม่ได้ใช้การ, หยุดนิ่ง, ไม่ดำิเนินการ
funds - money needed or available to spend on something เงินทุน
stipulates - states clearly what must be done and how it must be done
transfer - to official arrange for someone else to be the owner of something โอน
results - what is produced in the end by an activity or task
annual - happening once a year ประจำปี
accounts - the accounting records of a company, the records of money paid, received or owed over a period of time by a company
book -
operating results booked under annual benefit accounts -
account - an arrangement with a bank to keep money there and take some out
capital - money invested in a business (See glossary)
ministry - a government department dealing with an area of activity กระทรวง
amending - making changes to a law, agreement, etc. การแก้ไขกฎหมาย
tap - use
idle - not being used ซึ่งยังไม่ได้ใช้การ, หยุดนิ่ง, ไม่ดำิเนินการ
funds - money needed or available to spend on something เงินทุน
stipulates - states clearly what must be done and how it must be done
transfer - to official arrange for someone else to be the owner of something โอน
results - what is produced in the end by an activity or task
annual - happening once a year ประจำปี
accounts - the accounting records of a company, the records of money paid, received or owed over a period of time by a company
book -
operating results booked under annual benefit accounts -
The ministry also considered issuing zero-coupon bonds for the central bank's subscription to offset the FIDF's principal. The ministry set aside 65 billion baht in its 2009 annual budget to pay the interest on the FIDF bonds.
Governor Tarisa Watanagase said the central bank and the ministry had not agreed on any new measures yet.
issue
- offering
securities (stock shares, bonds) for sale,
officially giving something to people ออกคำสั่ง
zero-coupon bonds - "a bond that is issued at a deep discount from its value at maturity and pays no interest during the life of the bond" (See Wikipedia)
subscription - apply for or agreeing to buy securities (stock shares, bonds)
budget - the amounts of money that an organisation has available to spend on different things during a period, the plan for spending during a period of time within a company or organization (See Wikipedia) เงินประมาณ
measures - actions taken to solve a problem (things done to solve a problem or achieve a goal) มาตรการ
zero-coupon bonds - "a bond that is issued at a deep discount from its value at maturity and pays no interest during the life of the bond" (See Wikipedia)
subscription - apply for or agreeing to buy securities (stock shares, bonds)
budget - the amounts of money that an organisation has available to spend on different things during a period, the plan for spending during a period of time within a company or organization (See Wikipedia) เงินประมาณ
measures - actions taken to solve a problem (things done to solve a problem or achieve a goal) มาตรการ
(Source: BoT cannot afford FIDF liabilities, Borrowing costs spur B7.6bn operating loss, Parista Yuthamanop, 26/03/2010, link)







