Bank of Thailand
1.4.3 Cash management system efficiency improvement Improvement plan on cash management efficiency
This policy was to increase an efficiency of cash management system and reduce overall operating costs. In 2014, the achievements were as follows:
1) Commercial banks and financial institutions followed the framework of Cash Operations Pooling System, merged all cash centers into five groups, and also increased the standards of cash centers to meet the BOT’s defined criteria.
2) BMG reviewed the quality standards for banknotes as well as distributed the guidelines to cash handlers. The trainings were conducted to commercial banks officers.
3) BMG and financial institutions were considering alternative models for resource sharing, aiming to increase efficiency of the system.
1.4.4 Sustainable Competitiveness development
Roadmap towards Thailand Quality Award (TQA)
With the continuous improvement of our process management under TQA criteria, BMG aims to achieve sustainable competitiveness as a world-class organization. As a result, BMG has been awarded with Thailand Quality Class (TQC) in 2014.
1.4.5 Human resource focus Employee engagement plan
The policies on promoting employee engagement and work-life balance were implemented to increase employee performance. Consequently, the employee engagement and satisfaction level rose from year 2013 and stayed above the target result.
2. Reserve Management and Operations
The Bank managed the country’s international reserves based on the principle of prudence and financial soundness, as well as liquidity, in order to achieve a desirable return within the investment guidelines and risk profiles, as such the pursuit of the investment policy for the past year had to pass through thorough consideration by Investment Sub-Committee and Financial Risk Management Sub-Committee with the approval from the Risk Management Committee.
To optimize investment returns within acceptable risk, the Bank closely monitored factors that affect asset price movements, such as developments in financial markets and the global economy, including policy responses of countries in which the Bank invests. This served to support the assessment of future asset prices and risk environment, and created opportunities to achieve higher returns and lower financial risk. With strict adherence to the principle of safety and liquidity, the Bank had continued to pursue its policy in investment diversification by expanding eligible asset classes and countries out of traditional universe.
During the year 2014, major portfolios under BOT management include Liquidity Portfolio, Investment Portfolio and Long-term Investment Portfolio. And to further enhance the reserves management efficiency, BOT has employed several types of analytical models such as quantitative models and macro-economic models in assessing structural changes in the invested assets and countries. In addition, BOT continues to expand into new asset classes by employing both internal and external resources. BOT has also consistently been developing various investment tools to improve return generating capabilities, as well as to reduce risk and minimize operating expenses.
3. Monetary Operations
The BOT implements the Monetary Policy Committee’s (MPC’s) policy interest rate decisions by managing system liquidity through various monetary instruments. The monetary operations are designed to meet the liquidity needs of the system (for required reserves and settlement balances) in order to ensure that the liquidity condition remains appropriate and supportive of money market rates that are consistent with the policy rate. These will help enhance the efficiency and effectiveness of the market mechanism and monetary policy transmission in the long run. The BOT’s monetary operations also aim to foster the development of financial markets as well as strengthen financial stability.
In 2014, Thailand’s financial markets faced heightened volatility caused by both domestic and external factors. One of the key domestic factors was political uncertainty during the first half of the year. The political situation later improved after an adoption of the interim constitution and the subsequent establishment of the interim government. Nonetheless, economic recovery was slower than expected as a result of weak domestic consumption and investment as well as worsening export sector. On the external front, uncertainty and divergent paths of monetary policies in advanced economies led to volatile capital flows. Significant improvement in the US economy prompted the Federal Reserve to gradually reduce the size of its bond purchasing program, and the Quantitative Easing measure finally came to an end in October. The Fed also gave forward guidance on interest rate hikes, while the European Central Bank and the Bank of Japan have adopted more accommodative policy stances. In addition, geopolitical risks in several regions together with the collapse of commodity prices, especially the oil price, adversely affected investors’ sentiment in emerging markets including Thailand.
In 2014, excess liquidity in the Thai financial system increased by 97.4 billion Baht, due mainly to government spending. The BOT thus absorbed the excess liquidity through open market operations which comprise four main instruments, namely, the issuance of the BOT bonds and bills, bilateral repurchase transactions, foreign exchange swap transactions, and outright purchases and sales of government securities.
3.1 Bank of Thailand bonds and bills
The issuance of BOT bonds and bills continued to be the principal instrument used to absorb structural liquidity surplus in the system. This has fostered the development of the bond market by enhancing its