On 30 March 2016, the Bank of Thailand took another step in revising its exchange control regulations towards more liberalization, as part of the Capital Account Liberalization Master Plan Phase II. Below is our summary of the key changes.

  1. Exchange Controls

This section highlights changes made to the regulations on exchange controls — transactions between a commercial bank and a resident with regards to foreign currency.

  1. FX payments by and to commercial banks
    1. Non THB-related derivatives 

Previously, non-institutional and high net worth residents were required to make and receive payments under derivatives transactions entered into with a commercial bank in Thailand in Thai baht (THB), except for FX derivatives transactions, which the residents enter into with underlying foreign currency receivables or payables as required by the Bank of Thailand.

Under the new regulation, residents of any type are now permitted to receive from or make payment to a commercial bank, as counterparty, in foreign currency under a non THB-related derivatives transaction linked to an offshore underlying. Payment for this purpose covers, among others, net settlement amount, fees and posting collateral.

  1. FX loan or FCD account

Under the previous regulation, residents were allowed to purchase foreign currency for repayment of an FX "loan" to a commercial bank in Thailand. The scope did not cover related service fees payable in foreign currency.

The new regulation has made it clear that such permissible scope extends to the purchase of foreign currency for payment of service fees relating to a foreign currency loan obtained from the bank in Thailand. Also, residents can now withdraw foreign currency from their FCD account opened with a bank in Thailand for (i) payment to the account bank for service fees relating to that FCD account or (ii) payment to a commercial bank in Thailand, as lender, for service fees relating to an FX loan obtained from it.

  1. FX derivatives restrictions for banks

The Bank of Thailand circular letter No. ForGorNgor. (21)Wor. 39/2557, which imposed certain restrictions on commercial banks when dealing in FX derivatives, has been replaced by the circular letter No. ForGorNgor.(21)Wor. 18/2559, but only a few provisions were revised.

The key change to the regulation is with an FX derivatives transaction that is not related to the Thai baht (non THB-related derivatives). The previous regime required the bank's customer to make or receive gross delivery in Thai baht only, but now net settlement (in any currency) is required. The customer is exempt from this net settlement requirement if he has an underlying obligation or income in foreign currency, in which case gross delivery of foreign currency is allowed.

As an additional note, commercial banks can enter into FX derivatives with a Thai government body with cash or gross settlement either in Thai baht or foreign currency (previously only Thai baht was allowed)

  1. Investment in foreign currency instruments

Previously, Thai investors could remit foreign currency out of Thailand to make a payment for investment in foreign currency denominated instruments, which will be settled in foreign currency without THB quanto element embedded without prior approval from the Bank of Thailand. Under the new regulation, investors — institutional and retail — can now invest in THB quanto foreign currency-denominated instruments issued and offered onshore.

  1. Bank's constraints when dealing with non-FX derivatives, structured deposits, structured notes, credit derivatives linked to an offshore underlying with residents

The BOT circular letter No. ForGorNgor.(21)Wor. 19/2559 has replaced the circular letter No. ForGorChor. (23)Wor. 24/2552, and below are some of the key changes we wish to highlight.

  1. THB structured notes linked to exchange rate relating to THB

Under the previous regulation, a commercial bank, as issuer, could only offer THB-denominated structured notes (with payout calculated based on exchange rate relating to THB) to Thailand-based investors who have a corresponding underlying FX exposure. Now, banks can offer such notes to those without underlying FX exposure, provided the aggregate investment in such FX/THB-linked structured notes and the outstanding balance in deposits in FCD accounts of the investor do not exceed USD5 million.

  1. Structured notes/investment products denominated in foreign currency

Banks can now issue structured notes/investment products denominated in foreign currency and offer them to Thailand-based investors, subject to certain conditions, e.g., the underlying must be an offshore underlying of the notes and the investment limit of the Thailand-based retail investor (who does not make investment in the foreign currency denominated structured notes/investment products through an investment agent) when aggregating with the outstanding balance in his FCD account (onshore sourced without foreign currency obligation)2 is USD5 million.


This round of relaxations is only part of the Capital Account Liberalization Master Plan Phase II; further liberalization is expected throughout the year. Perhaps, the most anticipated is the amendment that will allow high net worth individuals (having liquid assets of THB100 million or more) and corporations (having liquid assets of an amount to be prescribed) to invest offshore without an intermediary.