The Financial Sector Assessment Program (FSAP), established in 1999, is a comprehensive and in-depth assessment of a country's financial sector, jointly developed by the International Monetary Fund (IMF) and the World Bank. The program aims to examine the stability and soundness of the financial sector, as well as its potential contribution to the country's growth and development. The assessment covers various aspects of the financial system, including banking, securities and insurance sectors, payment and settlement systems, monetary and financial policy transparency, and anti-money laundering.
Thailand participated in the FSAP review on a voluntary basis for the first time in 2008 and the second time during 2018-2019. These assessments are crucial for the development of the financial sector in Thailand as they help to ensure alignment of regulatory frameworks and supervisions with the corresponding international standards. The formats of the recent assessments include (1) detailed report assessment (graded) and (2) technical note on specific areas to provide comments and policy recommendations that are appropriate for the development of regulatory frameworks in Thailand.
Capital Market Sector
Thailand's capital market is assessed based on the International Organization of Securities Commission (IOSCO) Principles, which aim to achieve three core objectives of securities regulations: (1) protecting investors, (2) ensuring that markets are fair, efficient and transparent, and (3) reducing systemic risks. IOSCO Principles comprise 37 Principles, which can be mainly separated into two main groups: principles for regulator and principles relating to market participants. The assessment grades are divided into four categories: (1) Fully Implemented, (2) Broadly Implemented, (3) Partly Implemented, and (4) Not Implemented. Most jurisdictions accept assessment grade of Broadly Implemented or above.
FSAP Results
The SEC has been preparing for the FSAP assessment since 2016 by conducting self-assessment, amending regulations and processes to close any regulatory gaps found deviated from the newly published IOSCO Principles (May 2017), and implementing recommendations from the previous assessment undertaken in 2008.
The SEC participated in the assessment during February 2019 and received the overall assessment result of Broadly Implemented or above for 35 out of 37 Principles. Such notable progress can be summarized into three main groups: (1) New Principles for the SEC, (2) Principles with significant improvements, and (3) Principles maintaining high grade.
(1) New Principles for the SEC: 9 Principles
- The SEC received Fully Implemented for 8 out of 9 Principles, including systemic risk management, regulatory perimeter review to keep abreast of developments and emerging risks, conflicts of interest management in capital market, auditor's independence, auditing standards, credit rating agencies, sell-side analysts, and hedge fund.
- The SEC received Broadly Implemented for Principle relating to auditor's oversight.
(2) Principles with significant improvements: 11 Principles
- staff professionalism and independence
- cooperation with domestic authorities to exchange information and discuss development and monitor systemic risks of Thailand's financial system. Such cooperation is conducted under three Regulators Working Groups, comprising the Bank of Thailand, the Office of Insurance Commission, and the SEC.
- cooperation with foreign authorities under IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Co-operation and the Exchange of Information (IOSCO MMoU), which helps to enhance preventive and deterrence measures of illegal practices in securities and derivatives markets.
- enforcement authority and effectiveness: civil actions for major violations, and support of class action under The Civil Procedure Code.
- enhancement of supervision on securities exchange through Amendment to the Securities and Exchange Act.
(3) Principles maintaining high grade: 15 Principles
- Maintaining Fully Implemented
o Collective Investment Schemes: eligibility, governance, organization and operational conduct, and supervision of investment management business; legal structure; and offering and sales of funds as well as the related disclosures that are material to the investors' decisions in trading units of funds.
o Issuer: requirements of financial and non-financial information for initial public offering and ongoing disclosures.
o Securities Business: regulations and standards in granting license, supervision, and internal function and operation.
Going forward
- The SEC is under consideration to implement recommendations from FSAP review as well as to study the changes in the capital market landscape and how the role of regulator should change to accommodate the current ecosystem, along with the mechanisms to implement FSAP comments and recommendations.
2008 Full assessment report:
2019 Full assessment reports: