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Combining financial education and consumer
protection to promote financial inclusion:
global challenges and country practices
Thailand’s Experience
Securities and Exchange Commission of Thailand
16 December 2014
Tipsuda Thavaramara
Deputy Secretary-General
Overview: Challenges in Thailand
1
0
1
2
3
4
5
6
7
฿-
฿5,000
฿10,000
฿15,000
฿20,000
฿25,000
2000 2002 2004 2006 2007 2009
Household Income, Expenditure, and Debt to income ratio
Income Expenditure
Debt to income ratio
Year
Debt/Income
1) High household debt
Source: NSO
VS.have access to
have access to capital market
80%8.2%6 times more than income
2) Low access to capital market
formal financial institutions, mostly BANKS.
3) Passive participation
32% of all 1.04 million trading accounts
are ACTIVE
Thai investors prefer buy-and-hold &deposit-like products
Source: BOT
Source: SEC Thailand
Source: SET
FOCUS TODAYReasons behind
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Providing access: proactive approach
Mobile Application & Website: Start-to-Invest
Source: NBTC, ICT
149.6 % Mobile penetration,
HALF of mobile users
use smartphones
Potential 52 million internet users
Spending 50 hours a week
on the internet
Why sole DISCLOSURE would not work?
Investors
Can people choose?
2) Don’t read
1)Don’t know
Fact sheet
Just signJu
nk
3) Don’t care
3
Sellers
4) Don’t really
understand
At the same time,
product innovation brings new risks.
Wide income gap between the rich and the poor
4
Can people choose?
Why can’t we rely too much on RESTRICTION?
Cars
House
Financial Freedom
Kids
People need some risky products to generate growth
People should have
“Freedom of Choice”
& to reduce inequality
foreign equities high yield bonds
securitized products
REITs
ETFs
mutual funds
GMS-linked products
BUT must clearly understandrisks & accept consequences of their choices
Thailand is
currently ranked in unequal
distribution of wealth in the world.
6th
Source: Credit Suisse Global Wealth Report
Education is a tool
Before Current
what questions to ask
what they need to know
To inform investors:
key product specific risks
XSignature __________
WRONG ANSWER? Read the solution to learn more
Acknowledge specific risk 5
Investors
BUT!Notat theright
time mediumchannellanguage
InvestorsFinancial Services
By the time investors need
to make decisions
???
Example: Risk Warning for BASEL III Securities
I understand the characteristics, specific risks, and return related to Basel III securities. More specifically, I clearly understand that:
1. Basel III securities are riskier than general bonds.
2. Basel III securities do not have a liquid secondary market. Furthermore, the Bank of Thailand does not allow issuing bank to buy back the Basel III securities. Therefore, I acknowledge the difficulties of redeeming and reselling the product.
3. Issuing bank can impose special terms, such as restrictions on principle and interest payments. Since this is not considered as a default by the issuing bank, I will not have the right to take legal actions against the issuing bank.
4. I may be forced to convert my Basel III securities to equity at the price that may be higher than current market price, when issuing bank face financial difficulties.
5. I may lose all my investment and return in Basel III securities if the Bank of Thailand intervenes to rectify issuing bank’s financial difficulties
Signature ________________________
(investor)
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Going forward
Focus on
Behaviors & Biases
of investors
Sharpen our tools that equipped investors to make well-informed decision
Right amount of investor protection without hindering
freedom of choices & economic growth
7
GOAL