Banking & Finance 2025

Last Updated October 09, 2025

Thailand

Law and Practice

Authors



Chandler Mori Hamada is a leading Thai law firm committed to achieving an international standard of practice for its international clients. The firm has a total of 100 lawyers and 80 non-legal professionals, with 20 of the lawyers, including six partners, being in the banking and finance practice group. This group has advised on some of Thailand’s and neighbouring countries’ most complex and high-value financings. The practice has significant experience acting for both lenders and borrowers in a wide range of financing transactions, including major power, infrastructure and real estate projects. It continues to focus on major cross-border transactions, supported by MHM’s offices across Asia – including in China, Indonesia (ATD Law, in association with Mori Hamada & Matsumoto), Japan, Myanmar, Singapore and Vietnam. The practice maintains long-standing relationships with all major commercial banks in Thailand as well as with well-known international financial institutions.

According to the Ministry of Finance, for Thailand’s economy to achieve sustainable and stable long-term growth, attention should be focused on three key areas:

  • infrastructure development, including sustainable energy use, digital investments and regional transportation connectivity;
  • skills development to prepare the workforce for the global economy; and
  • maintaining fiscal stability through prudent financial management.

Additionally, it is important to closely monitor key factors that could impact Thailand’s economy, such as global geopolitical conflicts, the political and economic situation of trading partners, global financial market volatility and so forth, which could affect Thai exports and the tourism industry.

The Monetary Policy Committee (MPC) of the Bank of Thailand (BoT) shifted to a more accommodative stance in late 2024. Following a period in which the policy rate was held steady at 2.5% per annum, the rate was gradually reduced to 1.50% by August 2025 to support growth amid inflation. The Thai economy is expected to grow by 2.3% in 2025 and by about 1.7% in 2026. Tourism and household consumption remain the key drivers, while exports and manufacturing have been weighed down by softer global demand and higher trade barriers.

Household leverage remains elevated and continues to be a policy focus. The authorities have emphasised responsible lending and proactive debt restructuring to safeguard financial stability. To alleviate financing constraints for smaller enterprises, the government approved the Portfolio Guarantee Scheme Phase 11 (PGS 11) in mid‑2024 with a guarantee limit of THB50 billion, aimed at expanding SME access to bank credit through the Thai Credit Guarantee Corporation.

Geopolitical developments continue to pose external risks to Thailand’s financial and economic stability. The ongoing war in Ukraine continues to influence global energy markets, though its inflationary impact on Thailand has moderated as oil prices have fallen. In late 2023, the Israel–Hamas conflict created temporary volatility in global markets but had little direct impact on Thai trade or tourism, given Thailand’s minimal exposure to the region. The impact of the border conflict with Cambodia has so far been limited to reduced border trade and labour concerns.

A more significant development in mid-2025 was the introduction of US tariffs averaging around 19% on Thai imports, which could negatively affect the country’s export and manufacturing outlook in the latter part of the year. Authorities are closely monitoring these developments and stand ready to deploy stabilisation measures if required.

Thailand’s high-yield bond market remains under pressure in 2024–25. Following earlier defaults and corporate scandals, the Securities and Exchange Commission (SEC) continues to enforce strict supervision of speculative-grade issuers, including early engagement with companies facing repayment difficulties. Investor sentiment remains cautious, resulting in a decline in new issuance, with many corporates turning to bank loans or delaying fundraising plans.

Real estate developer bonds are a particular area of concern, with maturities exceeding THB260 billion falling due between late 2025 and 2026. Regulators and market participants are considering measures to provide liquidity support or facilitate debt restructuring to mitigate systemic risks. While high-rated issuers continue to access the bond market successfully, lower-rated companies face challenges in attracting investor demand.

Traditional financial institutions, such as commercial banks and specialised financial institutions, continue to be the major credit providers in Thailand, especially when it comes to financing large corporate transactions. Non-banks and start-ups have become more prominent in the market for typical loans to individuals, such as personal loans and nano-finance. By having a more straightforward method for accessing loans with a less complicated process, such alternative credit providers can be a more convenient option for individuals and retail customers.

Digital Factoring Ecosystem

In the past, SMEs were generally unable to access factoring transactions because factoring business operators were concerned about the unreliability of invoices submitted by customers and their requests for double financing on the basis of the same invoices. Using central web services (CWS) technology, the BoT launched a platform for digital factoring. By using the central database of the platform, it is possible to verify the invoices of customers to prevent double financing issues. In recent months, the platform has built confidence among factoring business operators, more of whom have agreed to enter into factoring transactions; this makes factoring a more readily accessible means of obtaining funding for SMEs.

Peer-to-Peer (P2P) Lending

Lending by an individual or a juristic entity to an individual can be done on a licensed electronic P2P lending platform. The platform operator will act as an intermediary by matching lending and borrowing activities and arranging the execution of loan agreements. Furthermore, the platform operator will have to assess the borrower’s creditworthiness and client suitability, as well as procure the funds through a custodian or an escrow account.

This method of lending excludes the administrative costs that normal financial institutions have to bear, and the platform operator will be able to eliminate significant costs normally charged to the borrower for similar services. Using this financing technique not only allows the borrower to access funds via a simpler and faster method, but also offers investors an alternative way to manage excess funds in addition to saving.

Digital Lending

Digital lending is a financing technique that allows licensed personal loan business operators to employ digital technology and alternative data as part of their credit risk analysis. It helps customers who may not have a regular income or sufficient assets to serve as collateral for a loan but may have other online information that proves their ability to repay a loan to access a source of funds. Business operators are urged to proceed with the borrowing and repayment processes through an electronic platform, such as wire transfer or electronic money, to create a digital footprint that will be useful for customers when it comes to future financial products and services.

Crowdfunding

Crowdfunding, either by way of equity or debt, can be performed through a licensed funding portal. A borrower or an issuer will have to submit a business plan to the funding portal, which conducts a screening process and discloses relevant information online. Investors will then consider the published information, and if they decide to make an investment in the business, they will pay a subscription fee that will be held by an escrow agent. The borrower will then issue shares or debentures to investors and will be required to provide periodic updates on the progress of the business.

Holding Company (HoldCo)

A HoldCo normally generates income through equity ownership in other companies without engaging in its own operational activities. This arrangement establishes legal separation between the operating company’s assets and its owners, decreasing the owners’ liability in case the operating company faces financial difficulties. HoldCo financing involves the offering of loans to a HoldCo positioned above an operating company. This would typically be an arrangement used in infrastructure and energy project financing, particularly where HoldCos have more than one project.

Sustainable finance has become more firmly embedded in Thailand’s financial system. Thailand Taxonomy Phase 2 was launched in May 2025, expanding the classification framework to cover sectors including agriculture, manufacturing, construction and waste management.

In November 2024, the Thai government successfully issued its inaugural sovereign sustainability-linked bond (SLB), raising THB30 billion through a 15-year bond tied to national carbon reduction and electric vehicle targets. The issuance was oversubscribed and established a regional benchmark. Further sovereign SLBs are planned for 2025. Thai corporates have also actively issued green and SLBs, with growing investor interest. Banks are increasingly integrating ESG criteria into their credit assessments and offering sustainability-linked loans to corporates, aligning with regulators’ emphasis on sustainable growth and climate risk management.

Licensed commercial banks (Thai commercial banks, subsidiaries of foreign commercial banks and branches of foreign commercial banks) are authorised to provide financing to companies. In the case of non-banks, specific types of financing (eg, personal loans, nano-finance for occupational purposes and provincial retail loans (pico finance)) are regulated and subject to licensing requirements. Licence applications can be submitted to the BoT or the Ministry of Finance for consideration and approval. Non-banks conducting business that is not regulated, and that are foreigners under the Foreign Business Operation Act, are also required to obtain a foreign business licence.

In general, foreign lenders are not restricted from providing loans to Thai residents, except when the loans are provided to individuals and can be classified as personal loans, nano-loans or pico loans. In such cases, loans from foreign lenders are subject to the BoT’s regulations.

There are no substantial restrictions on the provision of security or guarantees to foreign lenders, except for a provision of security under the Business Security Act B.E. 2558 (2015) to a foreign lender. In these cases, a foreign lender that is a commercial bank is required to grant a loan in syndication with Thai banks to be eligible to have security under this law (see 6.1 Enforcement of Collateral by Secured Lenders).

The purchase and remittance of foreign exchange are subject to the approval of authorised agents, usually commercial banks, for all bona fide transactions that do not fall within the restricted purposes outlined under the Exchange Control Act, B.E. 2485 (1942), as amended.

If a transaction falls within such restricted purposes, specific approval from the BoT must be obtained. In any case, the remittance and payment made under a loan or guarantee, and any other associated interest or fees, are not categorised as restricted purposes; therefore, a specific approval from the BoT is not required.

While the BoT’s approvals are granted on a case-by-case basis, such approvals have been routinely granted for all bona fide transactions, provided that the relevant supporting documents/agreements to prove a legitimate commercial purpose are submitted to the BoT together with other supporting documents, as required by the BoT.

There are no general laws imposing a restriction on the borrower’s use of proceeds from loans or any debt securities. Nevertheless, a borrower is prohibited from using proceeds connected with illegal activities.

In most loan agreements, the purposes of the loan proceeds are specified, and any deviation from such purposes would constitute a default, giving the lender the right to terminate the loan agreement.

Generally, the creation of a trust by a will or a juristic act is prohibited under Section 1686 of the Thai Civil and Commercial Code. However, a trust can be established for the purposes of securities, securitisation and capital market transactions under the Trust for Transaction in Capital Markets Act B.E. 2550 (2007). Accordingly, the concept of a trust established for general purposes is not recognised under Thai law, and the obligations of a person to hold anything in trust for any other person may not be enforceable, although analogous rights are recognised in certain transactions.

However, such unenforceability would not in itself affect the recognition of the validity of the particular transaction to which the person acting as trustee was a party.

Notwithstanding the foregoing, the appointment of an agent is commonplace in financing transactions in Thailand, and the concept of the principal-agent relationship is recognised under Thai law. In a syndicated loan, lenders usually appoint a security agent among themselves to hold security for and on behalf of a lender. There is no specific licensing requirement for acting as a security agent. However, mortgage registration does not allow the concept of a security agent; thus, each lender must enter into a mortgage agreement as a mortgagee.

Assignment

A loan transfer by way of the assignment of rights is usually made when loan disbursements have already been made in full, and no commitments are available under the loan agreement. As a result, only the right to receive loan repayments will be transferred.

An assignment of rights of the existing lender to the new lender must be made in writing. For an assignment to be valid against the borrower, a written notice must be given, or written consent must be obtained from the borrower. Following the assignment, the rights over the mortgage, pledge and business security agreement (BSA) existing on the loan, and the rights arising from a guarantee established for the loan, are automatically transferred to the new lender provided that the transfer of the mortgage and BSA is registered with the appropriate authorities. Nevertheless, the security interest over an assignment of rights under the project agreements, insurances, etc, which are not considered preferential rights under the law, will not be automatically assigned upon the assignment of the loan. Therefore, such assignment must be executed between the new lender and the borrower to ensure validity.

Although a guarantee or any security interests created by a third party will be automatically assigned to the new lender, it is advisable that the notice of assignment be delivered to the relevant guarantor and a third-party security provider to ensure that the assignment is duly acknowledged.

Novation

Where the loan has not been fully disbursed, its assignment may not be a viable option since the assignment only transfers the rights of the original lender to the new lender, and not the obligations. In this situation, a novation should be executed to ensure that the new lender remains liable for any further disbursements of the loan.

A transfer of rights and obligations of the existing lender to the new lender may be executed by way of novation, where a form of tripartite agreement is required to be entered into among the existing lender, the new lender and the borrower. Additionally, the parties may agree to transfer the security granted to the existing lender under the existing loan agreement to the new lender, provided that, if the security is provided by a third party, consent from such third party is obtained.

A loan participation, where the existing lender wholly or partially sell its interests in a loan to another lender, is also a viable option for a transfer of the loan, provided that the commercial bank assigns the loan to a financial institution that meets the requirements set out by the BoT.

Under Thai law, debt buybacks by the borrower result in the loan’s rights and obligations being vested in the same entity, and the loan will be extinguished. Even though the rights and obligations under the loan can be merged within the same entity, debt buyback arrangements are not commonly used in Thailand. Often, lenders and borrowers will enter into discussions to restructure and reduce the amount of debt to be repaid by the borrower should there be a situation where the borrower is unable to pay the debt in full.

For a debt buyback by a third party (ie, a sponsor), there is no specific law or regulation explicitly prohibiting the sponsor from buying back the borrower’s debts. Sponsors are legally permitted to repay the loan to the lenders (or purchase debt or claim rights against the borrower) and then subrogate the lenders’ rights as creditors. However, loan agreements can specify that the transferee of the lender must appear on an approved list of banks, thus making the debt buyback infeasible for the sponsor.

In public acquisition transactions, if an acquiror wishes to acquire shares of a target company that reach certain thresholds as specified by law, the acquiror must make a tender offer for all the issued shares of the target company. The offeror is required to indicate the source of funding in its tender offer documents as a method of demonstrating its ability to fund the tender. If the source of funds includes funds secured by debt financing from a financial institution, a commitment letter issued by the financial institution must be submitted as a supporting document along with the tender offer documents, which are to be publicly filed with the SEC.

There is no specific requirement for details or minimum particulars in the commitment letter; however, in practice, commitment amounts and an effective period for such commitment are specified. Loan agreements for certain funds can be executed thereafter with certain condition precedent documents set forth by the lenders, which are sometimes subject to lenders’ satisfaction.

There have been no significant legal and commercial developments affecting financing documentation. However, some market developments in the banking and financial sector are worth noting.

Virtual Bank

The BoT issued a comprehensive regulatory framework for virtual banks in early 2024. This framework sets out eligibility, governance, capital adequacy and risk management requirements for applicants, reflecting the BoT’s focus on financial stability and consumer protection. In mid-2025, the Ministry of Finance, on the BoT’s recommendation, approved three applicants to establish Thailand’s first virtual banks. These institutions are expected to commence operations within 2026 and will initially operate under a restricted phase, during which they must demonstrate sound risk controls, robust IT systems and effective governance before transitioning to full-scale operations. The policy objective is to enhance financial inclusion and increase competition in the Thai banking sector by leveraging technology-driven, branchless business models.

Leasing Regulation

A Royal Decree on hire-purchase and leasing businesses, effective June 2025, placed the automotive hire-purchase and leasing industry under the direct supervision of the Ministry of Finance and the BoT. The new framework requires licensing and imposes business conduct standards on operators, including clear disclosure of effective interest rates, fees and borrower obligations. It also strengthens borrower protections by regulating repossession practices and setting standards for contract fairness, with the aim of ensuring greater transparency and more responsible practices in the auto finance sector.

The interest rate charged on a loan shall not exceed 15% per year in general. According to the BoT’s notification on practices regarding interest, discounts, service charges and penalties for commercial banks, each commercial bank is entitled to announce its own maximum interest rate to be charged to its customers for Thai baht commercial loans above a cap of 15% per annum. The charging of interest on a foreign loan provided by banks or financial institutions registered and located in foreign countries is limited to 20% per annum.

Fees, penalties and other payments under a loan agreement that are in the nature of interest may be regarded as additional interest. If interest is charged at a rate in excess of the applicable ceiling, the entire interest charged may be held to be void and unenforceable.

Default Interest

The default interest rate can be agreed at a rate higher than the loan interest rate. However, the Thai courts can classify exorbitant default interest rates as penalties. The courts can use their discretion to reduce the default interest rate if they take the view that such default interest rate is disproportionately high.

In addition, the newly amended Thai Civil and Commercial Code prescribes that where debts are due in instalments, the default interest rate shall be calculated on the due but unpaid principal amount of such default instalment. Thus, default interest can be charged only on the principal amount of each instalment.

Under the Thai Civil and Commercial Code, interest on interest can be charged after it is overdue for more than one year, provided that the lender and the borrower have agreed in writing in advance, and that the entire debt shall be charged interest at a specified rate. In respect of financial institutions and non-banks under the supervision of the BoT, in 2022, the BoT issued a notification regarding practices for the calculation of interest for entities under its supervision meaning that, except for certain transactions, they may not accumulate the interest, service charges, penalties and expenses to a loan’s outstanding balance to recalculate the interest and penalties.

Related-Party Transaction (RPTs)

Under the Securities and Exchange Commission Act B.E. 2535 (1992) and relevant SEC regulations, listed companies may enter into certain transactions with a related party upon approval by the board of directors or the shareholders, as the case may be. Disclosure of such a transaction must be made to the Stock Exchange of Thailand. A financial contract that may fall within the scope of an RPT may include, among others, a guarantee agreement where a listed company agrees to guarantee the indebtedness of its affiliates or vice versa. In any case, disclosure is only required when the transaction value reaches the applicable threshold when compared to the net tangible assets of the relevant listed company, as specified in relevant SEC regulations.

Where a disclosure has to be made, the details that follow in relation to the agreement must be provided to the Stock Exchange of Thailand:

  • date and relevant parties to the agreement;
  • general explanation regarding the nature of the offer or receipt of financial assistance relating to the decision to enter into the transaction; and
  • the total value and criteria used for determining the transaction’s total value.

It is important to note that the disclosure requirement is not applicable where the listed company holds at least 90% of the total share capital of the affiliate.

Reporting Obligations in Relation to Anti-Money Laundering Laws

Under the Anti-Money Laundering Act B.E. 2542 (1999), Thai financial institutions are required to report to the Anti-Money Laundering Office (AMLO) a transaction that involves real property and machinery worth more than THB5 million. In respect of project financing transactions, execution of mortgage agreements (land/building/machinery) is usually required to be reported to AMLO, since the mortgage amount or transaction value would typically be the amount of the loan facility, which would be higher than THB5 million.

Upon entering into a mortgage agreement, financial institutions, including commercial banks, finance companies, securities companies, insurance companies and other business related to finance, are required to report to AMLO the following information:

  • transaction type;
  • date and relevant parties to the agreement;
  • details of the property; and
  • value of the transaction (mortgage amount).

Interest, other fees, expenses, charges, penalties and other payments made to an offshore lender are generally subject to a withholding tax of 15%. However, the withholding tax may be reduced or waived by virtue of a tax treaty between Thailand and the resident country of the relevant lender.

The payment of stamp duty on the following financing documents is a condition of entry into civil proceedings before the Thai courts:

  • loan agreements – stamp duty of THB1 for every THB2,000 or a fraction of the total amount of the loan, but not exceeding THB10,000;
  • guarantee agreements – stamp duty of THB10 of the total guaranteed amount exceeding THB10,000;
  • pledge agreements – stamp duty of THB1 for every THB2,000 or a fraction of the total amount of the loan, without limitation (note that if the loan agreement, which is a principal obligation, has been affixed with stamp duties, the relevant pledge agreements are not required to be affixed with the stamp duty); and
  • nominal duty on duplicates of dutiable instruments.

Stamp duties are required to be affixed within 30 days of bringing the document into Thailand if it is signed abroad, or within 15 days if it is signed in Thailand; otherwise, penalties will be applied for the late stamping. Furthermore, a dutiable instrument without a stamp cannot be admitted as evidence in Thai courts.

Additionally, the following fees apply to the registration of certain securities under Thai law with the relevant government body:

  • mortgage registration for land and/or building mortgage – 1% of the mortgage amount but not exceeding THB200,000;
  • machinery mortgage registration – THB1 per THB1,000 of the mortgage amount but not exceeding THB120,000; and
  • BSA registration – 0.1% of the secured amount but not exceeding THB1,000, except for the registration of security over land, where the fee shall be equivalent to the land mortgage registration fee.

There are generally no other tax concerns for foreign lenders apart from withholding tax, as mentioned in 4.1 Withholding Tax.

It should be noted that the tax treatment does not differ between money centre banks and non-money centre banks, or any foreign financial institutional lenders, under the Revenue Code. However, certain international financial organisations, such as the World Bank, International Finance Corporation (IFC) and Asian Development Bank (ADB), are not subject to withholding tax liabilities on interest, other fees, expenses, charges, penalties and other payments. This is provided that, in such particular transactions, the relevant international financial organisations do not operate in a commercial setting or with the purpose of seeking benefit in Thailand.

In Thailand, assets that can be provided as collateral are generally real estate, movable property, shares and claims. Security executed not in accordance with the formalities and perfection requirements may be considered invalid, void or unenforceable, as the case may be.

Real Estate

A typical form of security interest over land and/or buildings is a mortgage. A mortgage agreement must be registered with the competent official at the relevant land offices where such land/building is situated; otherwise, the mortgage is invalid. As mentioned in 3.5 Agent and Trust Concepts, since Thai law does not recognise the concept of trust, the mortgage agreement must be entered into between the mortgagor and the lenders or secured parties as mortgagees, and not by a security trustee, to ensure each lender’s preferential rights.

It is important to note that Thai law prohibits a third-party mortgagor from being liable for the remaining balance of a secured obligation when the mortgage is enforced, should the proceeds from enforcement not cover the amount due. Additionally, Thai law also prohibits a third-party mortgagor from acting as a guarantor while also acting as a mortgagor for the same underlying obligation.

Movable Properties

Pledges and BSAs over property are the most common forms of security over movable property. Pledges require the actual delivery of the pledged property to the pledgee; if the property is returned to the pledgor for any reason, the pledge is legally extinguished.

The Business Security Act allows the creation of security for movable property without the physical delivery of such assets to the security receiver. A BSA must be made in writing and registered via an online system with the Secured Transactions Registry Division. Due to this special feature of no actual delivery requirement, the use of the BSA over property prevails over the use of pledge of property in corporate loans.

Under the Business Security Act, the security receiver must be a financial institution, or any other person as prescribed under relevant Ministerial Regulations, including a foreign commercial bank that provides facilities in syndication with a financial institution as defined in the Financial Institutions Businesses Act B.E. 2551 (2008) – eg, Thai commercial banks. Under the Business Security Act, a foreign commercial bank that intends to be a security receiver must serve written notice of its intention thereof to the Department of Business Development, Ministry of Commerce with supporting documents proving that it is a commercial bank under the relevant laws in the jurisdiction of its registration/incorporation.

Shares

Shares are considered rights represented in an instrument and can be secured as collateral by way of a pledge. When pledging shares in a company, in addition to the physical delivery of the share certificates to the pledgee, a record of the pledge along with the name and address of the pledgee must be registered in the share register book of the company to ensure the pledge is valid against the company and third party.

Claims and Other Assets

Certain claims, such as deposits in bank accounts, rights to receive proceeds, rights under agreements and intellectual property, can be provided as collateral under a BSA.

In a project finance transaction, it is also common practice for a borrower to agree in advance to conditionally assign its rights under project-related contracts, rights to receive proceeds under insurance policies, etc, for the purpose of providing collateral to secure loan obligations in favour of a lender. However, the assignee will not be considered a secured creditor in bankruptcy proceedings.

An assignment of a right is not valid unless it is made in writing, and such assignment can be set up against the debtor or third persons if written notice thereof has been given to the debtor, or if the debtor has consented in writing to the assignment.

Rights Over Leasehold Assets

The Rights Over Leasehold Asset Act B.E. 2562 (2019) introduced a new type of legal interest over land and/or buildings that is capable of mortgage registration, namely, the right over a leasehold asset (Sap-Ing-Sith). Rights over a leasehold asset are similar to leasehold rights, whereby the owner of an immovable property registers with the relevant land office a right over a leasehold asset or the right to use the immovable property in favour of another person (the “leasehold right-holder”). The maximum duration of the registered right over a leasehold asset is 30 years. Rights over a leasehold asset can only be registered over land represented by a title deed, land with buildings constructed on land represented by a title deed and condominium units under the Condominium Act B.E. 2522 (1979).

Traditionally, a person who could be a mortgagor in relation to real estate was limited to the owner of the land and/or building. However, pursuant to the Rights over Leasehold Asset Act, a leasehold right-holder is able to mortgage its rights over the immovable property that has been registered as a right over a leasehold asset.

Note that, in contrast to the limitation of a foreigner to hold ownership of land, a foreigner is allowed to be a leasehold right-holder and can subsequently mortgage such right in favour of the mortgagee.

There is no concept of a floating charge in Thailand. The closest available security option is business security, which can cover the present and future assets of the security provider without requiring it to deliver any of its assets to the security receiver.

Business security can be created over a whole business.

However, the key difference between floating charges and security over the whole business under the Business Security Act is the Thai legal requirement to register all assets secured under a BSA over the whole business, and the requirement to notify the security receiver of any changes in the details of the secured assets.

Contrary to the floating charge concept, where the specification of a class of asset charged to the chargee is required only once, and re-registration for future assets acquired by the chargor – or assets disposed of in the ordinary course of business – is not required, the Business Security Act requires that security providers notify the security receiver when they acquire new assets so that the registration of the security can be amended.

Nevertheless, a party may agree to set a threshold of changes that require notification; for example, the duty to notify will apply only if inventory increases or decreases by 20%. As a result of this stringent requirement and the uncertainty of enforcement, to date, a BSA over a whole business has rarely been used in Thailand, especially in relation to large commercial loans or project financing transactions.

There is no restriction in giving downstream, upstream and cross-stream guarantees under Thai law, and the arrangement can be structured to allow one company to secure another company’s debt. A guarantee provided by publicly listed companies or their subsidiaries to secure the debt of another company that shares the same controlling shareholder(s) or person(s) with management power is considered an RPT that may require approval from the board of directors or shareholders, and may be subject to reporting requirements (depending on the size of the transaction).

There are no specific restrictions on the target to grant guarantees, security or financial assistance for the acquisition of its own shares. However, if the provision of a guarantee, security or financial assistance by the target for the acquisition of the target’s shares is considered an RPT, certain requirements must be met, as outlined in 5.3 Downstream, Upstream and Cross-Stream Guaranties.

Requirement for a Licence

A foreign entity (which includes a Thai-incorporated entity for which the shareholding structure is majority or wholly owned by a foreign entity) is considered a “foreigner” under the Foreign Business Operation Act B.E. 2542 (1999). That foreign entity is restricted from providing guarantees or any security to secure a third party’s debts, since provisions of a guarantee or security to secure a third party’s debt are considered as provision of services under Annex 3 of the Foreign Business Operation Act. In such cases, a foreigner is required to obtain a foreign business operation licence before providing a guarantee or any form of security in Thailand. A foreign business licence is to be granted for each transaction individually, and the foreigner is required to apply for the licence every time it is required to provide security or a guarantee.

Thai Guarantee Law Limitations

As a result of the amendment to the Thai Civil and Commercial Code, the Thai guarantee law imposes certain limitations on the provision of guarantees, such as:

  • an individual guarantor is prohibited from the provision of guarantees as a primary debtor;
  • in the event of an extension of time granted by the creditor to the debtor for the secured obligation, the guarantor’s obligation shall be extinguished, unless the guarantor consents to such extension of time at the time of or after such extension;
  • in the event that the creditor reduces the amount of the secured obligation, interest, compensation or any other charges, and if the payment after deduction has been made by the debtor and/or the guarantor, the guarantor shall be free from the guarantee; and
  • when a debtor defaults, the creditor must deliver a written notice to the guarantor within 60 days from the date that the debtor defaults – if the creditor fails to do so, the guarantor is released from interests, compensation and any other charges relating to such obligation after the 60-day period has ended.

Any provision in the guarantee agreement contrary to the guarantee law limitations will be rendered void and unenforceable.

Full repayment of a secured obligation (a loan) will legally extinguish all ancillary obligations or security agreements related to such secured obligation.

If the security is registered with a competent official (ie, security created under a mortgage and BSA), the registration of release shall be made to reflect the actual extinguishment of the underlying loan agreement. For other types of security, a notice of release is usually served to the relevant obligors, and, in case of a pledge, the pledged property shall be returned to the pledgor.

With respect to security that requires registration (ie, a mortgage and BSA), the security interest that was registered first has priority over interests registered later. Assets subject to a mortgage can subsequently be collateralised under the BSA and vice versa. However, an asset subject to collateral under the BSA cannot subsequently be pledged; otherwise, the pledge will be invalid.

In bankruptcy proceedings, under Section 96 (1) of the Bankruptcy Act B.E. 2485 (1942), a secured creditor who has preferential rights over an asset may waive its priority by agreeing to relinquish such asset given as security for the benefit of all creditors, and may apply for repayment of the debt in full. Nevertheless, it is uncertain whether the secured creditor can contractually waive its preferential rights over the secured assets prior to bankruptcy proceedings.

With respect to unsecured debt, contractual and structural subordination are feasible in Thailand. In bankruptcy proceedings, a contractual subordination provision is recognised under Section 130 bis of the Bankruptcy Act, and, as a result, the subordinated debt shall be payable after all other unsecured debts are repaid in full.

There is no concept of priming liens in Thailand. In general, security interest duly created in favour of a lender will give such lender preferential rights over other creditors that cannot be primed by any other lenders. Where the security is created in favour of multiple lenders, the security interest would rank according to the time of registration, as mentioned in 5.7 Rules Governing the Priority of Competing Security Interests.

However, rights to enforce the security of a secured creditor may be subject to the right of retention of other creditors. A right of retention allows a person who possesses another’s property to retain it until an obligation relating to the property is performed. The right may be exercised against the whole of the property until the obligation is completely fulfilled. Certain conditions must be satisfied for the right to arise:

  • there must be an obligation owed to the possessor, by the borrower or the property owner, which has become due;
  • in the case of insolvency of the borrower or the property owner, the right may be exercised even if the debt has not become due;
  • the obligation must arise in relation to the property itself; and
  • the possession must have commenced lawfully.

As a result, a person who has the right of retention is legally entitled to withhold the secured property, and may not be required to deliver such property to the secured creditor until the obligations owed to them by the borrower or the property owner are duly performed. In any case, a person who has the right of retention is not entitled to enforce the property and apply the proceeds towards the performance of the borrower’s – or the property owner’s – obligation in the same manner that a mortgagee, a pledgee or secured creditors may have.

Further, in respect of real property, where a debtor owes any of the following duly registered obligations, a creditor of such obligations shall have preferential rights over the mortgagee:

  • preservation of real property; or
  • hire of work in relation to property situated on real property.

In other words, a creditor of debt obligations in relation to the aforementioned transactions owed by the landowner shall have priority over a mortgagee of the same land.

In addition, in rehabilitation proceedings, a lender who has provided financial support to the borrower, during the period when the borrower was undergoing rehabilitation proceedings, is not required to submit an application for debt repayment under the rehabilitation proceedings and shall not be subject to the repayment terms under the rehabilitation plan (not subject to any debt haircut). Instead, such lender may enforce its loan in accordance with relevant terms in the financing documents, subject to automatic stay or moratorium. Although new lenders may have priority over other unsecured creditors who have applied for debt repayment, the security interest provided in favour of existing creditors cannot be prejudiced in any manner.

Normally, collateral enforcement is triggered by an event of default under the relevant loan agreement.

Security enforcement typically involves the following methods:

  • public auction through legal procedures with a court order;
  • out-of-court public auction; and
  • foreclosure.

When enforcing a mortgage or BSA, public auctions through legal procedures with a court order are usually required, except when the mortgagor or the security provider consents to the enforcement of the secured asset; in this case, an out-of-court public auction may be conducted.

For enforcement of a pledge, the pledgee may enforce the pledged property by a public auction without court procedures.

The foreclosure of secured assets is a viable option; however, it is uncommon in practice due to the requirement that the debtor have outstanding interest payments for at least five years and that the value of the secured asset not exceed the outstanding unpaid debt. If there is an agreement in advance allowing the lender to dispose of secured assets contrary to the foregoing, such as a private execution agreement, the agreement is invalid.

Under a BSA, there are also special provisions for the enforcement of deposit claims and security over the whole business. Whenever the security receiver of a deposit claim is a financial institution, the enforcement procedures can be carried out immediately through direct settlement for those deposits, followed by a subsequent notice (without obtaining consent) to the security provider. For the whole business collateral, a third-party security enforcer appointed in advance by the parties will be responsible for enforcing and disposing of the whole business.

The choice of foreign law agreed upon by the parties as the governing law of the loan will be recognised and applied by Thai courts, but only to the extent that such law is proven to the satisfaction of a Thai court (satisfaction is within the discretion of the court) and is not considered contrary to Thailand’s public order or good morals by the court. The scope of a court’s discretion on public order or good morals has not yet been definitively established.

A provision that allows the courts of a foreign jurisdiction to have exclusive jurisdiction to settle any dispute may not be enforceable in Thailand. However, Thai law is silent on the effect of irrevocable submission to the jurisdiction of a foreign court, waivers concerning objection to venue or the appointment of agents for service of process for the purposes of proceedings before such courts. There is no precedent case under Thai law ruling such submission, waiver or appointment invalid.

An express waiver of sovereign immunity made in writing may be effective in Thailand.

A judgment of a foreign court will not be enforced by the Thai courts but may, at the sole discretion of the Thai courts, be admissible as evidence in an action in the Thai courts.

An award rendered by an arbitral tribunal is recognised and enforceable in a Thai court under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Thai Arbitration Act B.E. 2545 (2002). Arbitral awards are enforced by Thai courts upon due application of a party seeking to enforce the award. Generally, Thai courts will not re-examine the merits of the dispute since they have already been examined and decided on by the arbitration tribunal. However, a Thai court may refuse to recognise and enforce an arbitral award based on several grounds, as prescribed in Section 40 of the Thai Arbitration Act (eg, if the court views that the arbitral award is contrary to Thai law, public order or good morals).

Due to Thai laws generally prohibiting foreigners from owning title to land, there are very few exceptions where foreign lenders can enforce security over land by foreclosure. However, there are no restrictions that could affect a foreign lender’s ability to enforce its rights under a loan or security agreement.

Bankruptcy Proceedings

Under bankruptcy proceedings, upon a receivership order, an unsecured creditor will be prohibited from enforcing any of its rights in respect of claims against an insolvent debtor outside of the insolvency proceedings and shall submit an application for repayment in order to be repaid.

A secured creditor may opt to enforce its security outside of bankruptcy proceedings. However, if the proceeds from enforcement of secured property do not cover the whole amount of debt, the secured creditor will not be able to apply for the repayment of debt in respect of the outstanding amount. A secured creditor may also choose to file an application for repayment. In such case, the secured creditor will be entitled to any debt shortfall after enforcement of the secured property.

Rehabilitation Proceedings

When the bankruptcy court accepts the petition for rehabilitation proceedings, an automatic stay or moratorium is levied to protect the debtor against actions by creditors such as litigation, enforcement of security and bankruptcy proceedings. As such, secured creditors would be unable to enforce their security outside the rehabilitation proceedings, unless otherwise approved by the bankruptcy court.

Creditors whose rights are restricted by the moratorium may submit a request to the bankruptcy court for an order to amend, modify or annul the limitations on their rights on the grounds that the restrictions are not necessary for the rehabilitation proceedings or that they do not sufficiently protect secured creditors’ rights.

In the context of a corporate debtor’s bankruptcy, Section 130 of the Bankruptcy Act outlines a specific hierarchy for the payment of debts, as follows:

  • expenses incurred by the official receiver in the management of the debtor’s property;
  • fees for the collection of property;
  • fees incurred by the plaintiff creditor as well as lawyers’ fees, as determined by the court or the receiver;
  • taxes and duties due within six months prior to the receivership order and money that employees are entitled to receive prior to the receivership order in return for the service performed for the employer debtor;
  • other debts; and
  • subordinated debts.

In instances where there is insufficient money to fully satisfy the debts within a given tier, a pro rata distribution will be made among the creditors in that tier.

The secured creditors will have preferential rights over their secured assets, as mentioned in 7.1 Impact of Insolvency Processes. Any debt shortfall after enforcement of the secured assets will be classified as “other debts”.

The period of insolvency proceedings in Thailand typically depends on many factors. If the bankrupt entity has no assets, when such entity is declared bankrupt the bankruptcy process would take approximately one year from the initiation of the bankruptcy proceedings until the bankruptcy court orders the case to be closed.

On the other hand, if the bankrupt entity holds assets, when such entity is declared bankrupt creditors may notify and request the official receiver to confiscate the debtor’s assets and proceed to sell those assets at public auction. The period of insolvency, where the debtor has assets, depends on the number of assets held by the debtor and whether each of the assets is successfully sold at auction. If the assets were not sold at auction, the auction process will be re-initiated, with the assets being discounted each time until they are sold. The period when the auction takes place also depends on the number of auction cases. Typically, the auction occurs once every three to four months. As a result, an insolvency process where the debtor has assets may take three years or more after bankruptcy proceedings have been initiated.

The recovery rates for unsecured creditors in Thai insolvency proceedings are varied. Given that secured creditors typically have the right to enforce their security over the debtor’s assets first, what remains for distribution among unsecured creditors is often limited. Consequently, the recovery rates for unsecured creditors are generally minimal.

Business rehabilitation procedures outside of insolvency proceedings are available in Thailand. Either the debtor or the creditor has the right to submit to the court a petition for a business rehabilitation. If it appears that a debtor is insolvent or unable to pay its debt, is indebted to one or more creditors for a definite amount of not less than THB10 million – regardless of whether such debt is due immediately or not – and there are reasonable prospects of rehabilitating the debtor’s business, the court will usually accept the petition for rehabilitation proceedings.

Application for Repayment

As soon as the court issues an order to initiate the rehabilitation proceedings and appoints the planner (nominated by the one who filed the rehabilitation petition or by the creditors), all creditors (including foreign creditors) are required to file debt repayment applications, together with all supporting documents, against the debtor with the official receiver within one month from the date on which the order appointing the planner is published in the government gazette. Failure to file a claim by the end of such period (which is not extendable, and where no exceptions are provided for foreign creditors) will result in the creditor forfeiting its claim against the debtor.

Business Rehabilitation Plan

After the plan has been prepared by the planner, a creditors meeting must be held for approval of the plan. The proposed plan must be approved by either:

  • creditors holding at least two-thirds of the outstanding debt value and more than half the number of total creditors from each class of creditors; or
  • creditors holding two-thirds of the outstanding debt value and more than half the number of total creditors from at least one class of creditor, and creditors holding 50% of the outstanding debt value of all classes of creditors.

Upon approval by the creditors and the court, the plan will be considered to be binding on all creditors who submitted an application for repayment, whether voting for or against the plan and regardless of being absent during the voting. If creditors have not filed an application for repayment of debt, these creditors will forfeit their rights to repayment unless the rehabilitation plan states otherwise, or the court cancels the order for business rehabilitation.

In any case, the creditors will always have the right to claim the full amount of debt from any guarantor, joint debtor or third-party security provider, since they are not bound by the rehabilitation plan.

The major risks to lenders when obligors become insolvent are the risks of the financing transaction or any related action thereof being subject to revocation under undue preference provisions pursuant to the Bankruptcy Act and the Thai Civil and Commercial Code.

In a case where it appears that the borrower, security provider or guarantor becomes insolvent and is subject to bankruptcy proceedings, other creditors or the official receiver may be entitled to ask the court to cancel any payment made or provision of any security by the borrower, the security provider or the guarantor to the lender with knowledge that it would prejudice other creditors. There is a legal presumption that if the payment or the provision of security is made during a period of one year before the initiation of the bankruptcy proceedings and thereafter, the borrower, the security provider or the guarantor – and the lender – knew that such action would be prejudicial to the other creditor(s).

In addition, in the bankruptcy proceedings of the borrower or security provider, the court has the power, upon the application of the official receiver, to order the cancellation of the transfer of property or any act carried out by the borrower or security provider, or carried out with the borrower’s or the security provider’s consent, three months before the bankruptcy petition or thereafter with the intent to give any creditor an advantage over other creditors.

Project financing continues to be active in the renewable energy sector. Thailand’s second round of renewable energy auction awarded approximately 2,145 MW of new generation capacity under long-term feed-in tariff power purchase agreements lasting 20–25 years. The combination of stable tariff structures and project scale underpins the sector’s bankability.

Beyond renewable energy, data centres have become a growing focus of project finance. Supported by government incentives and increased demand for digital infrastructure, financing structures now include syndicated loans and project-based facilities. There is also a clear shift towards aligning data centre financings with green and sustainability-linked principles, particularly where energy-efficiency and renewable power are integrated.

The Public-Private Partnership Act B.E. 2562 (2019) came into force in March 2019. The Act streamlines the process of investment partnerships between the public and private sectors. It is applicable to various types of projects, ranging from infrastructure transportation to public services, energy, telecommunications, hospitals, schools and exhibition centres.

In 2018, the Eastern Special Development Zone Act, B.E. 2561 (2018) was enacted. This Act creates an expedited process for the approval of public-private partnership projects within the so-called Eastern Seaboard.

Apart from the Eastern Seaboard initiative, under the Public-Private Partnership Project Preparation Plans for 2020–27 (the “PPP Plans”), there are 135 PPP projects in the pipeline, with investment costs of over THB1.18 trillion, to be executed within an announced timeframe.

There is no legal requirement for any of the project documents to be governed by Thai law. The parties can agree to project documents being governed by a foreign law, including English and New York law, and disputes may be resolved in any foreign court – or by international arbitration.

In all circumstances, if a governmental authority is a party to the project documents, it is generally necessary for the project documents to adhere to standard terms/templates, with Thai law being the governing law and disputes resolved by the Thai courts. For example, where an offtaker of power projects is a state-owned Thai electricity utility enterprise, or where an owner of project land is a governmental authority, the power purchase agreement and land lease agreement would typically need to be drawn up in accordance with standard terms, allowing only limited room for negotiation, with Thai law stipulated as the governing law and disputes resolved solely by the Thai courts.

Under Thai law, foreigners are generally prohibited from owning real property, both surface and subsurface, including any water resource that is represented by a title deed. Consequently, foreign lenders may not be able to foreclose on real property secured in their favour following an enforcement event. Exceptions may apply, such as where land has been acquired under Board of Investment incentives or in respect of condominium units.

Given this drawback, in the case of syndicated financings, foreign lenders normally rely on separate security sharing arrangements, whereby proceeds from the enforcement of real property will be shared among all lenders on a pro rata basis based on each lender’s outstanding commitment.

With respect to water rights, there are no restrictions on foreigners applying for the use of water resources, unless the water resource is located on private land where ownership is subject to foreign ownership restrictions. There is no private ownership of public water resources, and the use of such water is subject to the relevant official’s permission.

It is important to note that where security is created over shares, if the foreign pledgee opts to foreclose on the pledged shares, such foreclosure will result in the borrower becoming a foreign entity (majority-owned by a foreigner). Consequently, such entity may not be able to carry on its business if its business operation is considered a restricted business for a foreigner, unless a foreign business licence is obtained. See 5.5 Other Restrictions. Similarly, where a security is created over a ship and the foreign mortgagor forecloses on the mortgaged ship, the ship will need to be deregistered and to exit Thai waters.

In structuring deals, several types of risk need to be carefully considered by lenders and their advisers. To ensure lenders’ protection, specific issues relating to cashflow projections, project operations and the identities of relevant counterparties should be taken into account.

The project company is usually a limited liability company newly set up as an SPV for the construction and operation of a project. Certain businesses, such as service businesses, are prohibited from being operated by a company wholly or majority owned by foreigners, except when a business licence is issued to allow the operation of such foreign businesses.

Bank loans are a major source of project financing in Thailand. The structure of the financing can be either bilateral or syndicated financing, depending on the risk exposure of the project. Lenders normally require capital contribution commitments by the project’s sponsors up to a certain ratio, with no or only limited recourse. Security packages range from security over fixed assets to mere contractual rights of the project owner under project-related agreements. Export and import credit financing is used to support the export of products and services from Thailand as well as the import of overseas products and services into Thailand. Forms of financing include a letter of credit, packing credit, trust receipt and shipping guarantee.

Issuance of bonds is another common way for companies to raise funds for investments in projects. There has been an increase in the issuance of green bonds, social bonds and sustainability bonds in the Thai bond market. These bonds are intended for investment or the refinancing of loans for projects that are environmentally friendly, with the objective of promoting social and sustainability initiatives. Nowadays, SLBs are more prevalent where issuers set a sustainability performance target whereby interest payment of the bonds will tie with their – or their subsidiary’s – performance in achieving such target.

While there is no particular legislation dealing with the ownership of natural resources in Thailand, under the Thai constitution, the state possesses the power to manage, utilise, organise and safeguard natural resources. Since regulations concerning natural resources vary by type of natural resource, should a person aim to obtain the rights to any particular natural resource, they must comply with the relevant laws enacted for that resource. Regarding beneficiation, there are no regulatory requirements that restrict the beneficiation of minerals in Thailand before export.

The Office of Natural Resources and Environmental Policy and Planning Environment is the main regulatory body that imposes a requirement to conduct an environmental impact assessment or an environmental health impact assessment for certain types of projects under the Enhancement and Conservation of National Environmental Quality Act B.E. 2535 (1992).

The Department of Industrial Works oversees various environmental, health and safety issues, such as electrical system safety, chemical and radioactive safety, workplace safety, fire hazard safety and general management of air and water pollution, as well as the submission of Environmental Safety Assessments in accordance with the Factory Act B.E. 2535 (1992).

In addition to the two major regulators, there are various governmental agencies responsible for environmental, public health and safety issues, including:

  • the Hazardous Substance Control Bureau, which is responsible for the management of hazardous substances, namely, oil, gas and fuel;
  • the Department of Energy Business, which is responsible for the operation and construction of large oil storage facilities;
  • the local authorities, which are responsible for construction and public safety; and
  • the Department of Health, which is responsible for general public sanitation.        
Chandler Mori Hamada

31st and 36th Floors
Sathorn Square Office Tower
98 North Sathorn Road
Silom
Bangrak
Bangkok 10500
Thailand

+66 2 009 5000

+66 2 009 5080

business-development@morihamada.com chandler.morihamada.com
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Trends and Developments


Authors



Chandler Mori Hamada combines an international standard of practicing law with decades of local experience in the Thai legal environment. The team of more than 100 lawyers in Thailand is internationally recognised for its legal expertise in antitrust and competition, aviation, banking and project financing, capital markets, corporate and M&A, data privacy and data protection, dispute resolution, energy, natural resources and infrastructure, insurance, labour and employment, real estate, REITs, regulatory and public policy, restructuring and insolvency, tax, and technology, media and telecommunications. Chandler Mori Hamada is a member of the World Law Group, a global law firm network comprising over 60 leading independent law firms with more than 21,000 lawyers.

Overview of Thailand’s Banking and Financial Market

Thailand’s banking sector has continued to demonstrate resilience despite ongoing economic headwinds. According to the Bank of Thailand (BoT), overall loan growth has slowed, with large corporate loans showing expansion while SME and consumer loans have declined amid heightened credit risks. Although non-performing loans (NPLs) have increased slightly, the NPL ratio has remained stable, reflecting prudent risk management across the sector.

Currently, the banking and financial market is concentrating on sectors that are driven by government support, technological advancement and Thailand’s commitment to environmental sustainability – most notably digital banking, renewable energy and infrastructure. The digital finance sector is particularly dynamic, with both operators and consumers showing strong interest in fintech and virtual banking solutions. This momentum was further highlighted by the BoT’s recent approval of Thailand’s first virtual bank licensees, which include ACM Holding Company Limited, a consortium of Krung Thai Bank, AIS and PTT Oil and Retail Business (PTTOR), as well as a group led by SCB X in partnership with WeTechnology and KakaoBank.

Meanwhile, renewable energy and infrastructure projects are attracting increased financing, reflecting Thailand’s ongoing commitment to sustainability and infrastructure development. The data centre sector is also experiencing robust growth, driven by strong demand for digital infrastructure, cloud services and AI capabilities. Such a rising trend aligns with the requirements for green loans and sustainability-linked lending of financial institutions, although project operators remain subject to rigorous scrutiny and must continue to meet strict requirements to ensure ongoing compliance with ESG standards set by financial institutions. In contrast, the automotive and traditional manufacturing sectors have weakened, affected by global supply chain disruptions and reduced demand. The retail and hospitality segments also continue to face challenges due to tighter credit conditions and slow income recovery, prompting banks to adopt a more cautious approach to lending.

Thailand Taxonomy Phase 2 (Final Version)

The working group on sustainable finance – comprising the Department of Climate Change and Environment, the BoT, the Securities and Exchange Commission (SEC), the Stock Exchange of Thailand and other relevant agencies – has released the final version of Thailand Taxonomy Phase 2. This new phase expands the Taxonomy, which covered only energy and transport in Phase, to also include the agriculture, construction and real estate, manufacturing and waste management sectors, all of which are key sources of greenhouse gas emissions. Developed through extensive consultations and a public hearing process, Taxonomy Phase 2 reflects stakeholder feedback, including calls for environmental certification standards and guidance tailored to the Thai context. The framework sets out six environmental objectives: climate change mitigation, climate change adaptation, sustainable use of water, sustainable use of resources and the transition to a circular economy, pollution prevention and control, and biodiversity conservation and restoration. The final document will be available for download from 27 May 2025, together with a seminar titled “Thailand Taxonomy 2.0: Driving the Thai Economy Towards Sustainability” aimed at promoting awareness and adoption. The initiative is expected to serve as a central reference point for policymakers, investors, and businesses in defining and supporting environmentally sustainable activities, thereby advancing Thailand’s transition to a sustainable economy.

Thailand’s Draft Financial Hub Act: Elevating the Nation to a Regional Financial Center

The Thai government has advanced the Draft Financial Hub Act with the goal of positioning the country as a leading financial hub in Asia and beyond. The Cabinet approved the bill in principle in early February 2025, a move that reflects Thailand’s ambition to strengthen its role in international finance. The draft legislation spans nine chapters and 96 sections, setting out a comprehensive framework for governance, regulation and incentives to attract global players.

The draft law defines eight categories of targeted financial businesses: commercial banking, payment services, securities, futures trading, digital assets, insurance, reinsurance brokerage, and other financial or supporting services as designated. A common condition for these business categories is that these entities may serve only non-resident clients, thereby helping to protect Thailand’s domestic markets while encouraging cross-border activity. Some exceptions are permitted, including reinsurance arrangements with Thai insurers, interbank transactions for risk management and collaboration with local operators to facilitate overseas investment.

A key feature of the draft is the creation of a dedicated “one-stop authority” (OSA) to serve as the central agency for licensing, oversight and policy co-ordination. This body will streamline administrative processes, enhance efficiency and support the development of a robust financial ecosystem. Supervision will be exercised by a board chaired by the Minister of Finance, with the participation of major regulators to ensure compliance with domestic regulatory requirements as well as alignment with international standards, particularly in areas such as anti-money laundering and financial governance.

The Act also introduces significant incentives to attract foreign investment. These include competitive tax benefits, exemptions from foreign ownership restrictions in designated zones, and the right for approved businesses to bring in foreign experts and their dependents under simplified visa and work permit procedures. Property ownership rights are also extended to cover both business and residential use. Collectively, these incentives are designed to create an environment conducive to global operations while maintaining strong regulatory safeguards.

In addition to the financial benefits, the Act outlines rules for the classification of operators under Thailand’s foreign exchange laws, under which operators within the financial hub are treated as non-residents. This will allow greater flexibility in foreign exchange transactions but also requires strict compliance with measures to prevent speculation against the Thai baht. This balance aims to enhance global competitiveness while protecting financial stability within the country.

Ultimately, the Draft Financial Hub Act is more than just a piece of legislation; it is a strategic instrument to accelerate Thailand’s integration into the global financial system. By attracting international financial institutions, promoting technology and knowledge transfer, and upskilling Thai professionals, the law is expected to foster innovation and generate long-term economic benefits. Once it has completed the full legislative process, it could become effective in the near future, marking an important step in Thailand’s journey towards becoming a recognised international financial centre.

Responsible Lending Regulation

The BoT issued a new Notification re: Responsible Lending in January 2025, replacing the 2023 version. This regulation is intended to enhance the stability and transparency of the Thai financial system by establishing clear standards for loan quality assessment, provisioning and reporting. Key provisions include updated definitions of NPLs and restructured loans, requirements for timely and accurate loan classification, and guidelines on the recognition of losses and provisioning for impaired assets.

Financial institutions are required to implement robust internal controls and risk management practices to identify and address credit deterioration at an early stage. The BoT also emphasises the importance of fair treatment for borrowers undergoing debt restructuring, including the need for transparent communication and appropriate restructuring solutions tailored to the borrower’s financial capacity. The notification further sets out reporting obligations to the BoT to ensure regulatory oversight and consistency across the sector. Overall, these measures are designed to support prudent lending practices, promote financial discipline and strengthen the resilience of Thailand’s financial market.

Temporary Relaxation of LTV Rules by the BoT

The BoT announced a temporary relaxation of loan-to-value (LTV) requirements in response to the ongoing slowdown in the real estate sector. Following consultations with property developers and financial institutions, the Monetary Policy Committee (MPC) and the Financial Institutions Policy Committee (FIPC) agreed that easing LTV rules would help support the property sector and related businesses by alleviating the issue of high housing supply overhang. Although the measure may only provide limited stimulus to the broader economy, it is not expected to significantly increase risks to financial stability as lending conditions remain tight, and banks are continuing to exercise caution in granting loans.

The Committees emphasised that this easing is temporary, since Thailand’s LTV rules are already relatively relaxed compared to international standards. Maintaining LTV requirements remains important to ensure sound lending practices, prevent borrowers from taking on debt beyond their repayment capacity and reduce risks of speculative activity in the property market.

A key measure under the temporary relaxation is the setting of the LTV cap at 100% for housing loans in the following cases:

  • where security is valued at less than THB10 million, starting from the second house loan onwards; and
  • where security is valued at THB10 million or more, starting from the first house loan onwards.

This relaxation applies temporarily to loan contracts signed between 1 May 2025 and 30 June 2026.

Guiding Principles on AI Risk Management

The BoT has issued draft Guiding Principles on Artificial Intelligence Risk Management, setting out a regulatory framework for the responsible use of AI in the financial sector. Recognising the increasing adoption of AI in banking and payment services, the guidelines aim to balance innovation with the need to safeguard financial stability, ensure consumer protection, and maintain customer confidence in the financial system.

The draft applies to financial institutions governed by the Financial Institutions Business Act as well as to payment service providers under the Payment Systems Act. It supplements existing supervisory frameworks on IT risk management, third-party risk, data governance and market conduct by addressing risks specific to AI technologies, such as autonomous learning and complex decision-making processes.

The framework is organised into two principal components: (i) governance and (ii) development and security. Governance requires institutions to establish clear oversight mechanisms, including accountability of directors, a clear scope of their roles and responsibilities throughout the AI life cycle and regular policy reviews. These structures are expected to reflect internationally recognised principles of accountability, transparency and ethics.

The component on development and security emphasises effective risk management at every stage of the AI life cycle, from design and training to deployment and monitoring. Institutions must ensure the quality and integrity of training data, mitigate potential biases and maintain resilience against cyber threats such as adversarial attacks or data poisoning. Furthermore, outcomes produced by AI systems should be explainable, reliable and consistent among groups of customers.

The BoT opened the draft for public consultation in June 2025, inviting comments from financial service providers and other stakeholders. The initiative reflects the BoT’s intention to align domestic supervisory standards with global best practices, fostering innovation while maintaining prudence, accountability and stability within Thailand’s financial system.

Turning Crypto in to Thai Baht to Boost Tourism

The TouristDigiPay project has been introduced as a new option for foreign tourists who hold digital assets (cryptocurrencies) to conveniently convert them into Thai baht for use in Thailand. The system operates through licensed digital asset service providers and e-money operators under the supervision of the SEC and the BoT. It will initially be launched in a regulatory sandbox for 18 months, starting in the fourth quarter of 2025, allowing authorities to test and evaluate the model before wider adoption.

The mechanism is designed to be straightforward: tourists transfer their crypto to an approved provider, convert it into Thai baht and receive the funds in an e-Money account under their own name. They can then use this e-Money to pay merchants in Thailand, while merchants only receive Thai baht – not cryptocurrency. Tourists may reconvert unused e-money into digital assets, which will be transferred back to their original digital wallet upon return.

To prevent or mitigate risks, the initiative makes clear and emphasises that it does not make cryptocurrency legal tender or an official means of payment in Thailand. Instead, it functions strictly as a conversion channel. Service providers must comply with strict KYC (know your customer) and CDD (customer due diligence) rules, in line with Thailand’s anti-money laundering laws, to ensure transparency and mitigate illicit financial activity.

Alongside the government initiative, Kasikornbank (KBank) is piloting its own application called Q Wallet, built on blockchain via the Quarix platform by Orbix Technology. With Q Wallet, foreign tourists can convert USDC (a USD-backed stablecoin) into THBS, a digital token pegged to the Thai baht. This allows direct payments through Thailand’s QR code payment system without the need for a local bank account. The pilot, which also operates under a regulatory sandbox until 31 December 2025, involves over 100 merchants such as restaurants, hotels, spas and cafes. Transactions are free of payment fees, and the blockchain ledger ensures transparent recording of transactions.

TouristDigiPay and Q Wallet mark an important step for Thailand in strengthening its position as a regional hub for digital finance. They demonstrate strong collaboration between regulators and private institutions to modernise the country’s financial infrastructure.

Chandler Mori Hamada

31st and 36th Floors
Sathorn Square Office Tower
98 North Sathorn Road
Silom
Bangrak
Bangkok 10500
Thailand

+66 2 009 5000

+66 2 009 5080

business-development@morihamada.com chandler.morihamada.com
Author Business Card

Law and Practice

Authors



Chandler Mori Hamada is a leading Thai law firm committed to achieving an international standard of practice for its international clients. The firm has a total of 100 lawyers and 80 non-legal professionals, with 20 of the lawyers, including six partners, being in the banking and finance practice group. This group has advised on some of Thailand’s and neighbouring countries’ most complex and high-value financings. The practice has significant experience acting for both lenders and borrowers in a wide range of financing transactions, including major power, infrastructure and real estate projects. It continues to focus on major cross-border transactions, supported by MHM’s offices across Asia – including in China, Indonesia (ATD Law, in association with Mori Hamada & Matsumoto), Japan, Myanmar, Singapore and Vietnam. The practice maintains long-standing relationships with all major commercial banks in Thailand as well as with well-known international financial institutions.

Trends and Developments

Authors



Chandler Mori Hamada combines an international standard of practicing law with decades of local experience in the Thai legal environment. The team of more than 100 lawyers in Thailand is internationally recognised for its legal expertise in antitrust and competition, aviation, banking and project financing, capital markets, corporate and M&A, data privacy and data protection, dispute resolution, energy, natural resources and infrastructure, insurance, labour and employment, real estate, REITs, regulatory and public policy, restructuring and insolvency, tax, and technology, media and telecommunications. Chandler Mori Hamada is a member of the World Law Group, a global law firm network comprising over 60 leading independent law firms with more than 21,000 lawyers.

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