Such risk results from the maturity transformation process mentioned above – that is to say, from the fact that loans extended by banks are typically tied up for longer than customer deposits. Banks can increase interest rate risk exposure by, for instance, extending repricing maturities. 7 This chart illustrates how the banks’ appetite for interest rate risk has increased since the beginning of the low interest rate period (slide 9). It shows the net present value loss which the domestically focused banks would incur on average if the interest rate level were to rise by 200 basis points. This loss is considered in relation to the banks’ equity capital. The chart underlines that this loss potential has been very high for several years. It also makes clear that these banks have taken on additional interest rate risk since the introduction of negative interest. 5 6  7  In the case of mortgages, the affordability assessment typically also includes assumptions on maintenance costs. Cf. SNB (2016): Financial Stability Report 2016, www.snb.ch/en/mmr/reference/stabrep_2016/source/stabrep_2016.en.pdf. In a supplementary survey on the mortgage market which the SNB has been conducting since 2011, the 25 largest banks with a cumulative share of the domestic mortgage market of over 80% are asked to provide information about loan-to-value and loan-to-income ratios for new mortgages in the following segments: owner-occupied residential real estate, and residential investment property held by commercial borrowers and private individuals.
Tongurai Limpiti: Future of Thai banking system – the road towards AEC 2015 Keynote address by Ms Tongurai Limpiti, Deputy Governor for Corporate Support Services and Banknote Management of the Bank of Thailand, at the IDC Financial Insights, Thailand Financial Services Summit 2012, Bangkok, 8 November 2012. *  *  *  Good morning, ladies and gentlemen. It is an honor to join all of you today and I would like to thank the IDC Financial Insights for inviting me to deliver a keynote address at this event. The title of my remark today is about “Future of Thai Banking System: the Road towards AEC 2015”. I think that this issue is appropriate and timely as we are now approaching a new face of regional economic integration, or the ASEAN Economic Community, which will come into effect in 2015. To be aware of its impacts and to identify company positions and strategy in responding to its impacts would be of a great benefit. I hope that this event will provide a very good opportunity for us to share experiences and views on the way to move forward. With the given time, I will use this opportunity to touch on three topics which are current situation of Thai banking system and the new challenges from AEC, the impacts of AEC on financial institutions, and the role of central bank.