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Unofficial Translation This translation is for the convenience of those unfamiliar with the Thai language

Please refer to the Thai text for the official version ------------------------------------------------------------------------

BANK OF THAILAND 12 July B.E. 2549 (2006) To Managers

All Commercial Banks registered in the Kingdom of Thailand1

No. BOT. PPD. (21) Wor. 936/2549 Re: Dispatch of Guideline on Consolidated Supervision

Following the Bank of Thailand Circulation No. PPD. (21) Wor. 580 /2549 dated 28 April 2006 Re: Dispatch of draft Guideline on Consolidated Supervision, 2nd edition, to financial institutions for hearing and comments,

BOT has considered the comments from the financial institutions and revised the Guideline in the section of the consolidation of financial statements and the prescription on ratio of credits granted, investments, and contingent liabilities to capital fund. BOT would like to dispatch the final draft Guideline on Consolidated Supervision to the financial institutions to be used as a Guideline for the reorganization of financial group and preparation of all operations to comply with the Guideline that shall be enforced by law in the future. The financial institutions shall proceed as following:

1. The financial institution shall review the shareholdings structure of financial group in accordance with the Guideline on Consolidated Supervision and submit the application for the establishment of financial group to BOT according to details prescribed in transitory provision. The financial institution shall submit all required documents to BOT within 2 months from the date on this Circular. Should the financial institution need discussion regarding shareholding structure, please contact the Financial Institution Applications and Special Examination Department, Supervision Group.

1 Excluding IBFs and Retail Banks

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2. After the approval, the financial institution shall prepare the consolidated supervision report as specified by BOT in excel file form for the test of computation of capital fund and ratio of credits granted, investments, and contingent liabilities to capital fund for 1 year period. The financial institution shall prepare the first reports using the data of all companies in the group as of 31 December 2005 and submit to BOT by December 2006.

3. BOT shall assess the effect of consolidated supervision by using the submitted reports to consider for the revision of Guideline and report forms before enforcing the Guideline in the future.

Thus, BOT hereby submit the final draft Guideline on Consolidated Supervision for the financial institutions to cooperate and comply in the trial period as mentioned. Best regards, Pridiyathorn Devakula (M.R. Pridiyathorn Devakula) Governor The Bank of Thailand Enclosure: The Guideline on Consolidated Supervision Prudential Policy Department Tel. 0-2283-5806, 0-2283-5869, 0-2283-5867, and 0-2283-6829

Consolidated Supervision July 2006 Prepared by Operational and Liquidity Risk Division Prudential Policy Department Financial Institutions Policy Group Bank of Thailand Tel: 0-2283-5806, 0-22835869, and 0-2283-6829 Fax: 0-2283-5938 Email: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]

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Table of Contents Subject Page Section 1 Introduction 4 Section 2 Structure and Approval of the Financial Group 5 The Financial Group Structure 5 Regulation regarding the Parent Company 7 Regulation regarding Investments of the Financial Institution 10 Approval for the Financial Group 12 Approval for Structure Change of the Financial Group 13 Section 3 Regulation regarding Consolidated Supervision 14 Capital Adequacy 14 Risk Supervision 18 Ratio of Credits granted, Investments, and Contingent Liabilities to Capital Fund 20 Section 4 Examination 23 Section 5 Transitory Provision 24 Procedures for Financial Institutions with Existing Financial Group 24 Glossary 30

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Attachments 1. Examples of the Financial Group 33 2. Examples of the Financial Group Structure 34 3. Fit and Proper Criteria of Directors and Senior Managements of Holding Company 36 4. Supervision of the Company in which the Financial Institution or the Parent Company holds more than 10 percent of the Total Amount of the Company’s shares sold 37 5. Regulation regarding the Supervision of Venture Capital Business 39 6. Chart of Credits granted, Investment, and Contingent Liabilities 42 7. Example of the Supervision of the Financial Group 43 Case of a Financial Institution as the Parent Company Case of a Juristic Person as the Parent Company 8. Application to the Establishment of the Financial Group 44 9. Letter of Consent to Concede to the Financial Group and Agree to Comply with the Guideline on Consolidated Supervision 58 10. Letter of Acknowledgement on the Regulation on Consolidated Supervision and Responsibility of the Parent Company of the Financial Group 59 11. Letter of Acknowledgement on the Regulation on Consolidated Supervision and Responsibility of the Parent Company of the Financial Institution in Thailand 60 12. Report form 62 Financial Institution as the Parent Company Other Juristic Person as the Parent Company

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Section 1

Introduction

Background and Importance of Consolidated Supervision 1. According to the increase of competition in financial sector, both in domestic and

international setting, Financial Institutions (FIs) need to reform their businesses to allow them to operate in wide ranges of business, particularly in the form of networking or a financial group, to increase the flexibility in business operation to satisfy the variety of customers’ demand, and to reduce the operational cost. Because of the reformation, FIs encounter higher risk than their traditional operation, which might significantly affect their reputation and sustainability. As a result, this might assault depositors’ confidence and affect the overall economic system as it had taken place before.

2. In order to strengthen the stability and sustainability of the overall FI system and develop the supervisory framework for Thailand’s FIs in accordance with their current operation, and improve the supervisory standard to meet the international best practices, BOT needs the regulation on consolidated supervision to systematically supervise financial groups1 in Thailand.

Purpose of Consolidated Supervision 3. To supervise financial groups to maintain stability and proper operation, especially for

unregulated business entities.

4. To prevent any kinds of risks occurred in financial groups that may affect FI’s financial conditions and stability and its depositors’ trust.

Principles of Consolidated Supervision 5. The focus of both consolidated basis and solo basis is the concern for the overall financial

status and performance of the financial group, together with concerning the financial status

1 The meaning of financial group varies in different countries; please see Glossary for the meaning according to this Guideline on Consolidated Supervision and other related definitions.

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and performance of each individual FI, in order for the FI and the financial group to operate and maintain stability.

6. The second objective is to support the financial group in conducting its business to take into account any kinds of risks that might affect the overall stability of the FI and the financial group, especially risks arising from the conduct of business of unregulated entities.

Role of BOT in Consolidated Supervision 7. Prescribe the supervisory policy and regulation according to the consolidated supervision

approach.

8. Supervise the business operations of the FI and the financial group according to the consolidated supervision approach, focusing on the overall stability of financial system and maintaining depositors’ trust.

9. Coordinate with other functional supervisory agencies both domestically and internationally in order to evaluate the stability and to effectively supervise the business operations of the financial group.

Section 2

Structure and Approval of the Financial Group

The Financial Group Structure

A Financial group includes FI, its parent company, subsidiaries, and affiliated companies. Every company in the financial group can only undertake financial business and other supporting business2.

10. For a financial group to have proper and certain structure and business scope, which support its overall stability and effectiveness of the group, and which do not hinder effective supervision, BOT therefore defines the financial group’s structure into two (2) main groups:

2 The meanings of financial business and supporting business are in Glossary and examples of the financial groups are in Attachment 1.

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10.1. The financial group where the parent company is a FI3:

10.1.1. The financial group where the parent company is a FI registered in Thailand: Companies under consolidated supervision are the FI as the parent company and its subsidiaries.

The financial group stated above includes one which the major shareholder is the Ministry of Finance or the Financial Institutions Development Fund (FIDF) or other government agencies.

10.1.2. The financial group where the parent company is a FI registered overseas: Companies under consolidated supervision are the FI registered in Thailand and its domestic and overseas subsidiaries.

In order to supervise the financial group in Paragraph 10.1.2, BOT may impose additional regulations or conditions as deemed appropriate to the group if its parent company, the FI, or overseas head office is not supervised on consolidated basis or if BOT considers the regulation supervising the parent company or overseas head office to be insufficient or below BOT’s standard.

10.2. The financial group where the parent company is a juristic person which is non-FI4:

10.2.1. The financial group where the parent company is a juristic person, which is non-FI, registered in Thailand: Companies under consolidated supervision are the FI, its parent company, subsidiaries, and affiliated companies.

10.2.2. The financial group where the parent company is a juristic person, which is non-FI, registered overseas: Companies under the consolidated supervision are the FI and its domestic and overseas subsidiaries.

3 Examples of the financial group structures are in Attachment 2. 4 Examples of the financial group structures are in Attachment 2.

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Regulation regarding the Parent Company 11. Types of the parent company classified by its business category are as follows:

11.1. Parent company that is a FI

11.2. Parent company that is a juristic person which is non-FI. In principle, companies in a financial group shall only undertake financial business or supporting business. However, at the beginning, BOT shall allow a juristic person which is non-FI to be the parent company of the group such as:

11.2.1. Regulated entity that BOT consider the supervisory standard of its functional supervisory agency to be acceptable such as securities company, and life insurance company, etc. Such parent company shall seek approval from its supervisory agency to be the parent company of the financial group.

11.2.2. Holding company with qualifications and business scope in accordance with BOT prescriptions.

Holding Company 12. A holding company shall be non-operating holding company of which the main objective is

to have control over other companies rather than return on investment.

Qualifications of Holding Company 13. Due to the fact that the parent company has an important role on the stability of the business

operations both in providing the financial support and setting the financial group’s policy, BOT has specified the necessary qualification of the holding company who wants to be the group’s parent company as follows:

13.1. The company has to be registered in Thailand.

13.2. The company has a sound financial status and ability to raise sufficient capital in order to support the business operations of the group.

13.3. Fit and proper criteria of the major shareholders or the ultimate shareholders of the holding company shall be similar to that of the major shareholders of the FI for which BOT considers on a case by case basis.

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13.4. Qualification of directors and senior managements shall be in accordance with BOT prescription5 and shall be approved by BOT.

Business Scope of a Holding Company as the Parent Company of the Financial Group 14. A holding company that is the parent company of the financial group can only engage in the

following businesses:

14.1. Invest6 and lend to its subsidiaries within the financial group.

14.2 Any investments in other businesses that give the holding company the power of control must be financial or supporting business and must be approved by BOT. In addition, if investing in Venture Capital business (VC), the holding company must comply with the regulation regarding the supervision of VC, as prescribed in Attachment 5.

14.3. Investments in any companies that are not in the financial group have to be no more than 10 percent of the total amount of such company’s share sold. In addition, total investments in all companies shall not exceed 10 percent of shareholder’s equity of holding company.

14.4. Manage fund for itself or its financial group.

14.5. Raise fund by any means for business operations of companies in the group and itself, including debenture issuance, except by means of deposit taking or any other business of similar nature.

14.6. Provide supporting services to companies in the group, other FIs, specialized FIs, and BOT.

14.7. Engage in any other businesses approved by BOT.

5 Fit and proper criteria of directors and senior managements of the holding company are in Attachment 3. 6 Including both direct and indirect shareholdings, related person, and including all shareholdings with power of control.

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Obligations of the Parent Company in the Financial Group 15. In order for a financial group to have effective and stable business operations and in line with

the Regulation regarding Consolidated Supervision, the main responsibilities of the parent company of the financial group are as follows:

15.1. Set business strategies and policies of its financial group and report to BOT yearly or when there is any change.

15.2. Set risk management policies which include business continuity management for its financial group, controlling and monitoring system and report to BOT yearly or when there is any change.

15.3. Control and supervise companies in the group to ensure the compliance with BOT regulations and policies of parent company.

15.4. Provide financial support to companies within the group or resolve of the problems of the financial group to ensure that the financial group could maintain minimum capital according to BOT regulations.

15.5. Inform BOT of any change that may increase the business risk significantly, especially in the case that it may affect the financial positions and reputation of the financial group.

15.6. Keep and prepare sufficient information of the financial group both for individual company and overall of the group for BOT examiners to conduct their examination such as financial statements and other important financial documents, etc.

Regulations Regarding Investments of the Financial Institution 16. In case that a FI intends to purchase or hold a company’s shares in excess of 10 percent of the

total amount of such company’s shares sold; the FI must seek for BOT approval before the purchase or investment. BOT shall count both direct and indirect shareholdings by the FI and related person7 of the FI in that company. In addition, BOT shall count the aggregate

7 The meaning of related person is in Glossary.

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shareholdings in any companies that the FI has power of control8. FI shall be considered to have control over a company if the FI has power to control, directly or indirectly, the majority of shareholders’ vote or power to appoint and remove at least a half of the board members; regardless whether the FI actually holds only a small percentage of the company’s shares or holds no share.

Example of Indirect Shareholdings 17. In case that board members, shareholders who hold more than 5 percent of total amount of

the company’s shares sold9, and individual performing the duty like a board member, including related person of such persons hold shares in any company, it is assumed to be an indirect shareholdings of the FI, except that the FI is able to prove that the shareholdings of such individual have not been held on the behalf of the FI or is not an indirect shareholdings of the FI.

18. FI is prohibited to invest in a company more than 10 percent of total amount of such company’s shares sold, except with the approval of BOT10:

18.1. Investment in companies within the financial group.

To set up the financial group, the FI must invest in companies in order to have business control and the company must have the following specifications:

18.1.1. Engage in financial business as specified by BOT. In case that the FI invests in VC, BOT shall approve only the high potential FI to invest in this business because of high risk of VC business. In addition, the FI must follow regulation regarding the supervision of VC as prescribed in Attachment 5.

18.1.2. Engage in supporting businesses as specified by BOT and provide services to the FI, its financial group, other financial groups, other FIs, specialized FIs and BOT. However, subsidiaries and/or affiliated companies conducting such as information technology business, research business, law consulting

8 The meaning of power of control is in Glossary. 9 Excluding shareholdings of government agencies and FIDF. 10 The permissible investment is in Attachment 4.

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business, and asset appraisal business can, to some extent, provide services to public since BOT acknowledges that these businesses need high capital investment or specific knowledge and experiences. Nevertheless, the major proportion of their revenues, as compared to the total revenues, shall be generated by providing services mainly to the FI, its financial group, other financial groups, other FIs, specialized FIs, and BOT.

However, if a FI intends to invest in the subsidiaries located overseas; the FI shall ensure that the FI is able to supply and submit the information of those subsidiaries to BOT as required.

18.2. Investment in companies that the FI have no power of control.

18.2.1. BOT shall consider permitting the investment of the FI in any financial companies without having any power of control if such investments in those companies had been approved before. However, these companies are not counted as companies in the group and the FI shall deduct the investments in those companies from its capital fund.

18.2.2. Investment in supporting businesses beneficial to the business operations of the FI and the overall FI system, for example, National Credit Bureau Co., Ltd, National ITMX Co., Ltd, WTA Co., Ltd, Rural Capital Partners Co., Ltd, S.W.I.F.T. Co., Ltd, Thai Rating and Information Services Co., Ltd.(TRIS).

18.3. Investment in Trouble Debt Restructuring (TDR) companies. BOT shall consider on a case-by-case basis as deemed appropriate.

Approval for the Financial Group 19. To grant approval for the establishment of the financial group, the FI or the parent company

must submit the application to BOT, and BOT shall consider the request based mainly upon the stability of the FI and business advantages of the financial group.

20. Regulations and procedures for submitting the application for the establishment of the financial group are divided into two main cases:

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20.1. Case of a FI as the parent company

20.2. Case of a juristic person, non-FI, as the parent company, according to Paragraph 11.2.

Case of a FI as the Parent Company 21. A FI who intends to be the parent company of the financial group must submit the application

for the establishment of the financial group to BOT. Together with the application; the FI must also submit supporting documents, as follows:

21.1. Organization chart of the financial group structure and group management guideline, including the reasons and necessity for the establishment of such structure.

21.2. Details of all subsidiaries in the group (documents of financial and general information) including shareholdings structure, management structure, financial position and operating result of every subsidiary.

21.3. Future policy and business strategy of the financial group (in 3-year term).

21.4. Risk management policy of the financial group.

21.5. The FI, which the parent company registers overseas, must submit all stated documents to BOT with additional documents as follows:

21.5.1. Documents from the parent company, which is the FI registered overseas, indicating the consolidated supervision regulation of home supervisor which the parent company is complied with.

21.5.2. Documents from the parent company, which is the FI registered overseas, indicating that the parent company acknowledges that it has to comply with Regulation regarding Consolidated Supervision prescribed by BOT and acknowledges the responsibilities of the FI registered in Thailand as prescribed by BOT as it is the parent company of the financial group.

Case of a Juristic Person, non-FI, as the Parent Company, according to Paragraph 11.2 22. A juristic person which intends to be the parent company of the financial group must submit

the application for the establishment of the financial group to BOT via its FI which is a subsidiary of the financial group. The application of establishment shall include documents

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that contain the same information as the case of the FI as a parent company and additional documents as follows:

22.1. Letter indicating that the juristic person is allowed to be the parent company of the financial group from its functional supervisory agencies such as the Securities and Exchange Commission of Thailand or Department of Insurance, as the case may be.

22.2. Document indicating financial position and operating result of the juristic person.

22.3. Letter from the parent company indicating that it acknowledges that it has to comply with Regulation regarding Consolidated Supervision prescribed by BOT and acknowledges the responsibilities of being the parent company of the financial group as prescribed by BOT.

BOT may request the FI or the juristic person which is the parent company and applies for the establishment of the financial group to submit any other additional documents or information, if necessary.

Approval for Structure Change of the Financial Group 23. In the case that a financial group would like to change its structure after BOT approval, for

example, it would like to have power of control in a company so that the new company is included in the financial group, the FI or the parent company must seek approval from BOT before proceeding the change by submitting the application to BOT via the FI together with the document indicating the following details:

23.1. Reason(s) of the intended action.

23.2. In the case of adding a new company into its financial group, the FI must submit in the new company’s information such as financial position and operating results, shareholdings structure, and list of board members and senior managements, etc.

23.3. Action plan of the submitted information.

24. In the case of removing any company that was once allowed to be a member from the financial group, the FI or the parent company via its FI must notify BOT within 15 days from the day of transferring the company’s share out and resubmit new shareholding structure of the financial group to BOT.

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Section 3

Regulation regarding Consolidated Supervision

25. Companies within the financial group shall comply with Regulation regarding Consolidated Supervision in all aspects that specified by BOT. At the beginning, BOT shall indicate the financial group to comply with regulation on capital adequacy and credit risk. BOT shall determine other regulations such as regulation on market risk, liquidity risk, and the preparation and reporting of financial group’s information in the next stage.

Regulation regarding Group’s Capital Adequacy 26. Currently, BOT supervises capital adequacy of the FI only on solo basis, i.e. specifies

minimum capital to absorb risks of the individual FI. Nonetheless, since FIs nowadays have increasingly changed in the business operations in financial groups which engage more in financial businesses and supporting businesses, BOT has considered this change and realized that the minimum capital that the individual FI has to maintain under the solo basis may be insufficient to absorb higher risks of the financial group business. Consequently, BOT has specified that the group should also maintain minimum capital under consolidated basis in order to enhance the stability and prudence of the FI system in Thailand.

27. In addition to the regulation on capital adequacy under consolidated basis, the FI shall still maintain its capital under the solo basis. Furthermore, for other companies, which are under the supervision of other functional supervisory agencies such as the Securities and Exchange Commission of Thailand, shall still follow their regulations.

Financial group capital fund is the capital used as financial reserve to absorb risks of the financial group, which shall not be less than the minimum level as specified by BOT.

28. The financial group capital fund is determined as the total amount of the capital fund from all companies in the group which derived from consolidated financial statements prepared in accordance with accounting standards. The parent company shall consolidate its financial statements with the companies that it has power of control over and holds at least 50 percent of the total amount of each company’s shares sold, and adjust all intra-group transactions

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according to normal accounting procedures in order to prevent double counting of capital fund.

Preparation of Consolidated Financial Statements 29. The financial group, either has a FI or a juristic person as the parent company, must prepare

consolidated financial statements in accordance with the procedures prescribed in accounting standards as follows:

29.1. Full consolidated financial statement refers to consolidated financial statement of the parent company and all subsidiaries of which parent company holds at least 50 percent of the total amount of their shares sold except life and non-life insurance companies.

Companies that the parent company has power of control but holds less than 50 percent of the total amount of their shares sold are exempted from the consolidation of financial statements.

29.2. Solo consolidated financial statement refers to consolidated financial statement of the FI and all subsidiaries in solo consolidation group.

Subsidiary in the solo consolidation group refers to a subsidiary that operates as a credit institution11, and conforms to all the following qualifications: 1. The FI directly holds at least 75 percent of the total amount of its shares sold. 2. Business operations of the subsidiary is under direct supervision of the FI. 3. There is no restriction on legal practices or international funds transfer between the subsidiary in this group and the FI, except that restriction is waived by BOT. 4. The FI shall have sufficient capital to invest in that subsidiary, i.e. the FI can maintain regulatory capital level after the deduction of investments in that subsidiary from its capital fund.

11 The company that operates as a credit institution is an asset management company (AMC) or engages in leasing business, factoring business, hire purchase business, credit card business, and personal credit business, etc.

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FI shall choose not to include any qualified company stated above in the solo consolidation group. In case the financial group has no subsidiary that meet the above qualification, it has no obligation to prepare solo consolidated financial statement. In addition, BOT shall reserve the right not to permit any given company to be in the solo consolidation group.

Calculation of the BIS Ratio (Capital Fund to Asset and Contingent Liability Ratio)

Calculation of Capital Fund 30. The parent company has to calculate capital fund for both full consolidation group and solo

consolidation group. The capital fund of each group is used for the supervision of capital adequacy and BIS ratio and for the computation of ratio of credit granted, investments, and contingent liabilities to capital fund, which shall be present in the next section.

31. The parent company shall use information from consolidated financial statements, both solo consolidation and full consolidation, to calculate capital fund for each capital component which is the same as the capital fund calculation in solo basis according to BOT Notification Re: Stipulation on maintenance of capital fund by commercial banks registered in Thailand (In case that the financial group is exempted from the preparation of solo consolidation financial statement, its capital fund on solo consolidation shall be equal to capital fund on solo basis of the FI). Furthermore, minority interest arising from consolidated financial statement is allowed to be counted as part of capital fund if this minority interest is truly part of other shareholders who have no relationship with the FI. The parent company shall grant approval from BOT before including any items of the parent company and subsidiaries in Tier 2 capital which is the same condition as BOT prescribed for FIs.

32. Both types of capital in Paragraph 31 have to be subtracted by adjusting items similar to those in solo basis according to BOT Notification Re: Stipulation on maintenance of capital fund by commercial banks registered in Thailand. In addition, they have to be subtracted by the total investments in companies in which the FI or the parent company hold their shares directly and indirectly over 10 percent of the total amount of the company’s shares sold as following12:

12 Items to be deducted from capital fund are in Attachment 4.

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32.1. Investment in financial and supporting business companies in which the FI or the parent company hold their shares over 10 but below 50 percent of the total amount of such companies’ shares sold, except for investments in supporting business companies which are beneficial to business operations of the FI and the overall FI system, for example, National Credit Bureau Co., Ltd, National ITMX Co., Ltd, WTA Co., Ltd, Rural Capital Partners Co., Ltd, S.W.I.F.T. Co., Ltd, Thai Rating and Information Services Co., Ltd.(TRIS).

32.2. Investment in life and non-life insurance companies both with and without power of control.

32.3. Investment in companies which are not authorized to hold shares in excess of 10 percent of the total amount of such companies’ shares sold.

The investments, mentioned above, are excluded of investment in trouble debt restructuring companies approved by BOT and investment in liquidation-in-progress companies. The investments to be deducted mentioned above shall be subtracted from capital fund of both full consolidation and solo consolidation. The subtraction of 50 percent is for Tier 1 capital and another 50 percent is for Tier 2 capital. However, if there is no or insufficient Tier 2 capital, the total subtraction is then for Tier 1 capital. Furthermore, BOT may determine any additional conditions for the calculation of group capital fund thereafter.

Calculation of Asset and Contingent Liability 33. The FI has to weigh each asset and contingent liability item in the consolidated financial

statement, including investment in supporting businesses beneficial to overall business operations of the FI and the FI system as in Paragraph 18.2.2, investment in trouble debt restructuring companies as in Paragraph 18.3, and investment in liquidation-in-progress companies, by the risk associated to each item. Preliminarily, the FI shall use the same risk-weight as in solo basis for each asset and contingent liability item. For some items that risk-weight are not specified, the risk-weights are assumed to be equal to 1. For investments, which are already deducted from capital fund in Paragraph 32, the risk-weights are assumed to be equal to 0.

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BIS ratio 34. The BIS ratio for both full consolidation and solo consolidation group shall be maintained at

the minimum of 8.5 percent.

Risk Supervision 35. Currently, the structure of shareholdings of the FI is increasingly complicated. Relationship

between the FI and companies in the group may cause several types of risks. In addition to financial risks arising from financial support among group companies, there are some other risks arising such as credit risk, market risk, operational risk, and reputation risk. A trouble in one company may spread out to FI or other companies in the group, particularly, if that company is the one which needs market confidences. This situation shall be resulted in liquidity problem and eventually confidence and stability of the FI and its financial group. Thus, the parent company needs to realize all risks related to individual company in the group and overall risks of the financial group, and also be able to manage those risks.

Risk Management of the Financial Group 36. In order for the FI and the financial group to understand and realize overall risks of the

financial group and risks from intra-group transactions, and be able to manage, control, and monitor risk properly and effectively, the parent company needs to establish risk management system as follows:

36.1. The parent company shall prepare risk management policy for the financial group according to the Guideline on risk management in Circular No. BOT. SVG. (03) Wor. 227/2548 dated 4 February 2003, and its amendments. Risk management policy shall be composed of overall risk management of the financial group and risk management for intra-group transaction. The risk management policy shall be approved by the board of the parent company and be submitted to BOT when there is significant change in key components or operations of the group.

36.2. Overall risk management policy of the financial group shall cover at least the following details:

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36.2.1. Identification of key types of risks of the financial group and each company.

36.2.2. Identification of processes and methods of risk assessment and measurement of the financial group.

36.2.3. The control and risk management of the financial group, for example, identification of level of risk tolerance, clear scope of delegated authorities.

36.2.4. Business Continuity Plan such as action plan in case of an incident happened which may impact the financial group and the action plan to resume the critical business functions to normal operations in an ordering manner. Also, identify clearly a person in charge in each process.

36.3. Risk management policy for intra-group transaction shall cover at least the following details:

36.3.1. Intra-group transaction which shall not have extra or special conditions from normal business practice at the same level of risk.

36.3.2. Level of the intra-group transaction for significant transactions.

36.3.3. Conditions concerning guarantee that companies in the group provide for unrelated individuals.

36.3.4. Other conditions concerning intra-group services.

36.4. The financial group shall have a committee that is responsible for the financial group risk management to control, monitor, examine, and supervise companies in the group so as to follow the group policy and BOT regulation.

Risk Monitoring and Internal Control 37. Risk of the financial group shall be lowered if the group has good and effective controlling

and monitoring as well as internal control system, along with good governance. Therefore, in order for the group to manage risk effectively, BOT determines the following:

37.1. The parent company establishes effective internal control and monitoring system sufficiently.

37.2. The board which is accountable for risk management shall regularly evaluate group’s risk management system and report to the board of the parent company at least once

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a year in order for the board of the parent company to monitor group’s management precisely and continually. In case that there is any occurrence in which it may affect the group’s stability, the risk management committee shall report to the parent company’s board immediately.

37.3. The parent company needs to review the risk management policy as deemed necessary and suitable, or when there is significant change in the group. The change shall be approved by the parent company’s board and reported to BOT.

38. BOT may order the FI to maintain the capital above the minimum requirement if the FI has insufficient or ineffective risk management and internal control system.

Ratio of Credits Granted, Investments, and Contingent Liabilities to Capital Fund

Intra-Group Transactions 39. Risk of financial group might occur, directly and indirectly, through the operations of the

parent company or any companies in the group. Intra-group transactions can also generate several types of risks to the group such as credit granted, shareholdings, purchase/sale of assets, guarantee, investment in securities, and intra-group services, etc. Consequently, it is necessary to limit risks to the appropriate level. Preliminarily, BOT shall supervise the cited risk by setting up limit of intra-group transactions which is by specify the level of ratio of credits granted, investments, contingent liabilities to capital fund among companies in the group. The companies are divided into two groups which are13:

39.1. Companies within the solo consolidation group refer to subsidiaries stated in Paragraph 29.2.

13 Chart of credits granted, investments, and contingent liabilities is in Attachment 6.

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Companies within the solo consolidation group FI can grant loan, invest, and make contingent liabilities to subsidiaries within the solo consolidation group without any limit. However, subsidiaries in this group shall comply with any regulations related to credit granted as the FI, i.e. principles and practices in credit granted, asset classification, and provisions, as well as other regulations thereof. In case subsidiaries are under the supervision of other functional supervisory agencies on this issue, they are not required to comply with this regulation.

39.2. Subsidiaries outside the solo consolidation group refer to all companies in the group except for companies in Paragraph 39.1.

Companies outside the solo consolidation group FI and subsidiaries in the solo consolidation group can grant loan, invest, and make contingent liabilities to all companies outside the solo consolidation group totally not exceed 25 percent of total amount of capital fund of the solo consolidation group14. However, this is not applicable to investments in subsidiaries of which are already deducted from capital fund.

Ratio of Credits Granted, Investments, and Contingent Liabilities to Capital Fund to Large Exposure 40. Risks of the financial group may concentrate in one group or one business sector which shall

affect group’s stability. Thus, it is essential to limit level of risk to an individual group. BOT considers that it is necessary to stipulate an additional ratio of credits granted, investments, and contingent liabilities to any person to its capital fund on consolidated basis in addition to that of solo basis as follow:

14 Computation method of intra-group transactions is in Attachment 8, case 1: the case of a FI as the parent company.

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Large Exposure FI and all companies in the financial group can grant loan, invest, and make contingent liabilities to any person15 totally not exceed 25 percent of total amount of capital fund of the full consolidation group16.

In addition, BOT may revise the computation principle for large exposure of the group thereafter.

41. Items to be including in credits granted, investment, and contingent liabilities shall be in accordance with BOT Notification Re: Stipulation on ratio of credits granted, investments, and contingent liabilities to any person of commercial banks registered in Thailand.

42. In case subsidiary companies are under the supervision of other functional supervisory agencies, they shall comply with the regulations prescribed by their functional supervisory agencies. However, the ratio of total credits granted, investments, and contingent liabilities to any person shall not exceed 25 percent of total amount of capital fund of the full consolidation group.

Section 4

Examination

43. BOT shall examine the operations of the financial group by focusing on risk management system of the group. BOT shall consider the following as significant issues:

43.1. BOT shall evaluate overall risk management system of the financial group whether it is appropriate and covers all risks of all businesses.

15 Credits granted, invest, and make contingent liabilities to one person shall include that to related person of that person. 16 Computation method of ratio of credits granted, investments, and contingent liabilities to large exposure is in Example 1, the case of a FI as the parent company.

- 23 -

43.2. BOT may order the parent company, subsidiaries, and affiliated companies to submit additional information for the purpose of financial position and performance examination.

43.3. BOT may conduct onsite examination on any companies in the group, which are parent company, subsidiaries, and affiliated companies, to obtain the actual performance and financial position of the company and to ensure that such companies have proper risk management system and process.

43.4. BOT may order the FI to have an external auditor to examine any companies in the group and to submit the auditor’s report to BOT.

43.5. In case companies in the financial group are under the supervision of functional supervisory agencies such as securities companies or insurance companies; BOT shall coordinate with the functional supervisors so that BOT can assess overall risks and estimate capital adequacy of the group.

43.6. In case BOT finds that the financial group has insufficient risk management, BOT may order the financial group to maintain additional capital above the minimum requirement or to take or to omit any action.

Section 5

Transitory Provision

Procedures for the Financial Institutions with existing Financial Group 44. For the implementation of the Guideline on Consolidated Supervision, BOT preliminarily

asks the FI for cooperation to comply with the Guideline in the section of groups’ capital adequacy and ratio of credits granted, investments, and contingent liabilities to capital fund. FIs shall proceed as follow:

Restructuring of Shareholdings Structure 44.1. Currently, the FI is allowed to hold shares over 10 percent of the total amount of

such companies’ shares sold in many companies. However, the current practice to allow the FI to hold shares in subsidiaries differs from that practice prescribed in the

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Guideline on Consolidated Supervision. The FI shall examine that in which company that the FI currently holds more than 10 percent of the total amount of companies’ shares sold and then restructure the shareholdings as follows:

44.1.1. Restructuring the shareholdings structure in accordance with the regulation prescribed in Paragraph 18.

44.1.2. In case the FI holds shares but has no power of control in company engaging in financial or supporting business and intends to include that company in the financial group, the FI shall submit the request to BOT to hold shares in that company to such amount that it can exercise control. BOT shall consider the request as deemed necessary and appropriate. However, the FI should increase its shareholding in that company until reaching 50 percent of the total amount of the company’s shares sold in order to be able to include the minority interest in that company as capital fund of the financial group.

44.1.3. For companies in which BOT does not permit the FI to invest in, BOT has no policy to extend the shareholding in those companies as it used to. Thus, the FI shall dispose of those shares to the level not exceeding 10 percent of the total amount of the companies’ shares sold within three-year horizon started from the approval date of the establishment of the financial group. However, for shares obtained from trouble debt restructuring, the FI shall reduce those shareholdings within specific time period which is approved by BOT on a case by case basis.

44.1.4. Liquidation-in-progress companies are not classified as companies in the group, so the FI does not have to consolidate their financial statements for the calculation of capital fund. The FI is not required to deduct the investment amount from its capital fund but is required to calculate risk-weighted asset using normal risk weight for the calculation of the BIS ratio.

44.1.5. For the FI whose parent company is a juristic person as in Paragraph 11.2., the parent company shall review shareholdings in all companies and restructuring the shareholdings structure in accordance with the same regulation as the case of a FI is the parent company. Provided that there are

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companies that are unqualified to be in the group, the parent company shall dispose those shares as similar to the case of a FI as the parent company.

Request for the Establishment of the Financial Group 44.2. The FI shall submit the request to establish a financial group using the application

form for the establishment of the financial group17 and submitting the application within two months from the date on BOT Circular Re: Dispatch of Guideline on Consolidated Supervision. The FI shall inform all the name-lists of companies which the FI or the parent company holds shares both directly and indirectly over 10 percent of the total amount of the company’s share sold. If the FI can verify that shareholdings of any person are not indirectly held for the FI, the FI shall clarify the reason for excluding that indirect shareholding. The FI shall submit the application form for the establishment of the financial group by using the form in Attachment 8 and the additional documents as follows:

44.2.1. In case of a FI is the parent company

1) The existing shareholdings chart of the financial group and the new shareholdings chart of the financial group which is in accordance with the regulation on consolidated supervision.

2) Overview of management of the financial group.

3) List of shareholders of companies in the group18 (For listed companies, the FI shall submit the first 20th names of shareholders and all names of indirect shareholders. For non-listed companies, the FI shall submit all names of shareholders).

4) Commercial Registration Certificate of all companies in the group.

5) Memorandum of Association of all companies in the group.

6) Internal rules or regulations of all companies in the group.

17 FI shall submit the application by using the form for the establishment of financial group is Attachment 8. 18 The companies stated in 3) – 7) are not including FI and AMC.

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7) Financial statements of all companies in the group as of 31 December 2005.

8) Minutes of the board meeting of the FI and all companies in the group which indicated the consent to concede to the financial group.

9) Letter of consent to concede to the financial group and agree to comply with the Guideline on Consolidated Supervision19.

Nevertheless, the FI may submit the documents in No. 8) and 9) after submitting the application for the establishment of the financial group but no later than three months from the date on BOT Circular Re: Dispatch of Guideline on Consolidated Supervision.

44.2.2. In case of the a juristic person is the parent company

The parent company of the financial group shall submit the application form to establish the financial group via the FI which is a subsidiary in the group. The parent company shall also submit all additional documents, which is similar to the case of a FI is the parent company, along with Letter of acknowledgement on Guideline on Consolidated Supervision and responsibility of the parent company of the financial group20.

44.2.3. FI shall submit documents in Paragraph 21.3, 21.4, 21.5 to BOT within three months from the date that BOT approves the establishment of financial group.

44.3. Report preparation of consolidated supervision

After BOT approves the establishment of the financial group, the FI or the parent company shall prepare the consolidated supervision report in excel file21. The total of eleven reports covering five aspects shall be prepared for the calculations of capital fund and other ratios as follows:

19 Example of the Letter is in Attachment 9. 20 Example of the Letter is in Attachment 10. 21 Details are in the report form.

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1) Report on investments within the financial group.

Report on investments within the financial group (Report No. SorNgor. / NorBor. 1)

2) Report on consolidated financial statements

Report on consolidated financial position of the solo consolidation group (Report No. SorNgor. / NorBor. 2.1)

Report on consolidated financial position of the full consolidation group (Report No. SorNgor. / NorBor. 2.2)

Report on consolidated revenues and expenses of the solo consolidation group (Report No. SorNgor. / NorBor. 2.3)

Report on consolidated revenues and expenses of the full consolidation group (Report No. SorNgor. / NorBor. 2.4)

3) Report on regulatory capital

Report on regulatory capital of the solo consolidation group (Report No. SorNgor. / NorBor. 3.1)

Report on regulatory capital of the full consolidation group (Report No. SorNgor. / NorBor. 3.2)

4) Report on BIS ratio (ratio of capital fund to asset and contingent liability)

Report on BIS ratio (Report No. SorNgor. / NorBor. 4.1)

Report on BIS ratio (Report No. SorNgor. / NorBor. 4.2)

5) Report on credits granted, investment, and contingent liabilities

Report on credits granted, investment, and contingent liabilities to company in the group (Report No. SorNgor. / NorBor. 5.1)

Report on credits granted, investment, and contingent liabilities to group of debtors / large exposure (Report No. SorNgor. / NorBor. 5.2)

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Report submission 44.4. The FI shall submit the above reports to BOT as follows: (Except for Report No.

SorNgor. / NorBor. 1)

44.4.1. For the first trial period, the FI shall prepare the reports based on information in financial statements as of 31 December 2005 and submit to BOT within December 2006.

44.4.2. For the following periods, the FI shall prepare the reports based on information in financial statements at the end of December and June. For the month of June, the FI is allowed to use un-audited financial statements. The FI shall submit the reports to BOT within 6 months from the last day of reporting month. The FI shall submit the reports starting from 31 December 2006.

Preparation of Information System for reporting to BOT 44.5. After the trial period, BOT will use the evaluation results to revise the Guideline on

Consolidated Supervision, the FI shall submit their data through Data Management system which BOT expects to start trial period of data submission through this system around year 2008. Thus, the FI shall prepare information system to support data reporting to BOT by that time.

Evaluation of the Implementation 44.6. BOT shall evaluate the effect of the implementation of consolidated supervision

during the trial period after the FI submits the reports. If the results reveal any practical difficulty, BOT shall consider revising the Guideline on Consolidated Supervision if deem necessary. During the trial period, if it appears that financial group cannot comply with the regulations on the BIS ratio or ratio of credits granted, investments, and contingent liabilities, it shall not be considered unlawful. However, the FI shall consider the effect of consolidated supervision once the Guideline is actually come into force.

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Coordination among Companies in the Group 44.7. During the trial period, FI which has a juristic person quoted in Paragraph 11.2 as the

parent company shall coordinate with companies in the group including the parent company and affiliated companies, and inform as well as acknowledge them about the Guideline on Consolidated Supervision and the regulations that they have to comply with. The FI shall coordinate with the companies in the group to submit the required data to BOT for the enforcement of the Guideline.

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Glossary

(1) Consolidated Supervision refers to the supervision of the FI and its financial group for the overall strength and stability of the FI and its financial group both qualitative and quantitative aspects. The focus is on risks occurred from general operations of the financial group, which may affect the companies within the financial group and the FI itself, no matter if the risk is accounted on the books of the FI or companies in the group or not.

(2) Financial institution refers to a commercial bank, a finance company, and a credit foncier company.

(3) Financial Group refers to the business group that has a relationship with a financial institution in the form of parent company, subsidiary, or affiliated company. All companies within the financial group must engage only in financial business or supporting business, and cannot engage in commercial or other types of business.

(4) Financial Business refers to business that offer financial products or services, such as, commercial banking business, finance business, credit foncier business, securities business, life insurance business, holding business which invest only in its financial group, hire purchase business, leasing business, asset management business, factoring business, non-life insurance business, financial advisory business, investment advisory business, securitization business, credit card business, personal loan business, money payment and transfer business, credit granting business, future exchange business, venture capital business, and other businesses subsequently prescribed by BOT.

(5) Supporting Business refers to business with the following criteria: 1) Engage in functional tasks that are normal banking operations or tasks that are

directly support the operations of FI (back office) in order for the FI to achieve its objectives. 2) Provide services to the FI, its financial group, other financial groups, specialized

FIs, and BOT, except for information technology business, research business, law business, and asset appraisal business which, to some extent, can be provided to public. However, the stated businesses shall mainly provide services to the FI, its financial group, other financial groups, specialized FIs, and BOT comparing to total revenues.

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(6) Company refers to limited companies, public companies, limited partnership, registered common partnership, or the other juristic persons.

(7) Parent Company refers to the company that has power of control over the business of other companies.

(8) Subsidiary refers to (a) A company over which another company has power of control. (b) Subsidiary of the company in (a) in every step all along the line.

(9) Affiliated Company refers to a subsidiary sharing the same parent company as another subsidiary company, also including subsidiary of affiliated company in every step all along the line.

(10) Power of Control refers to 1) An individual holding more than 50 percent of the total amount of shares sold,

directly or indirectly, in a company; or 2) An individual having authority to exercise control over the majority vote at a

shareholders’ meeting of a company, directly or indirectly or for any reason; or 3) An individual having authority to exercise control over the appointment or

remove of half number of directors, directly or indirectly, in a company. In a case where a person hold, directly or indirectly, 20 percent or more of the total

shares sold in a company, it is to be assumed that the person holding the aforementioned shares as has power of control in a company unless such a person is able to prove that there is no power of control or other person is holding more shares.

(11) Related person refers to a person who is related to another person in one of the following characteristics:

1) A spouse, father, mother, or foster parents; 2) A child or adopted child, unless it can be proven that there is no relationship; 3) A company in which that person or the person in 1) or 2) has managing

authority; 4) A company in which that person or the person in 1) or 2) has authority to control

the majority vote in the shareholders’ meeting;

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5) A company in which that person or the person in 1) or 2) has authority to control the appointment or dismissal of directors;

6) A subsidiary of the company in 3) or 4) or 5); 7) An affiliated company of the company in 3) or 4) or 5); 8) A principal or agent qualified under the prescription specified by BOT. In a case where a person hold, directly or indirectly, 20 percent or more of the total

shares sold in a company, it is to be assumed that the person holding the aforementioned shares as has power of control in a company unless such a person is able to prove that there is no power of control or other person is holding more shares.

(12) A Person with Managing Authority refers to 1) Manager, deputy manager, assistant manager, director who is the management of

the FI or company, depending on the case, or a person that holds similar position or has equivalent managing authority.

2) Individual or juristic person that FI or the company has managing authority, fully or partially, by way of contract

3) Individual who has the power to exercise control over or dominate the manager or director of the FI or company of which subserviency in terms of policy formulation and business operation to is mandatory.

- 33 -

Attachment 1

Examples of the Financial Group

Example 1

Example 2

FI

Company A (FI’s Subsidiary) Company B (FI’s Subsidiary)

Affiliated Company of FI

Juristic Person (Parent Company)

FI (Parent Company)

Company A (FI’s Subsidiary) Company B (FI’s Subsidiary)

- 34 -

Attachment 2

Examples of the Financial Group Structure

1) Financial group that has the FI registered in Thailand as a parent company

2) Financial group that has the FI registered overseas as a parent company

Subsidiary

Subsidiary

Financial Company

Subsidiary Branch Overseas

FI

Life Insurance Company Subsidiary

Securities Company Non-life Insurance Company

Supporting Company

Overseas FI

Subsidiary Subsidiary Subsidiary

Subsidiary

Subsidiary Branch

Subsidiary

Subsidiary

Financial Company

Overseas

FI


Securities Company Non-life Insurance Company

Supporting Company

Consolidated Supervision

- 35 -

3) Financial group that has a juristic person, non-FI registered in Thailand, as a parent company

4) Financial group that has a juristic person, non-FI registered overseas, as a parent company

Subsidiary

Subsidiary

Subsidiary

Financial Company

Overseas

FI


Securities Company Supporting Company

Financial Supportive Company

Holding Company or Other Financial Company

Non-life Insurance Company

Subsidiary

Subsidiary

Subsidiary

Financial Company

Overseas

FI


Securities Company Supporting Company

Supporting Company

Holding Company or Other Financial Company

Non-life Insurance Company

- 36 -

Attachment 3

Fit and Proper Criteria of Directors and Senior Managements of Holding Company

“Senior management” means manager, deputy manager, assistant manager, or a person who holds similar position or has equivalent managing authority, or a person who is under contract with the holding company to have complete power over its management.

Qualifications Has been known with good management capability from the past to present; Has behaved or worked with integrity and honesty; Has not been involved in an act of deception against others or the general public, has

not failed to exercise due care in overseeing business, has not been known to engage in business practice that is unfair or untrustworthy, has not shown a lack of ethics or professionalism in the conduct of business;

Has not or never been an insolvent person; Has no problem in servicing personal loans taken from financial institutions; Has never been imprisoned on the final judgment of a court, unless an offense with

carelessness or light penalty; Has never been removed from a management position of a financial institution by

BOT or SEC; Has never been charged with or filed a complaint against on grounds of fraud or

dishonesty by BOT, SEC, other government agencies, or overseas regulatory bodies, unless such the exemption has been granted by BOT.

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Attachment 4 Supervision of the Company in which the Financial Institution or the Parent Company holds more than 10 percent of the Total Amount

of the Company’s shares sold Holds shares less than 50 percent Holds shares at least 50 percent Types of

business Has Business

Control Approval

Consolidated FS

Deduct from Capital Fund

Reduce shares to 10%

Consolidated FS



Remarks

Yes Yes No Deduct No Yes No No Financial business No Yes No Deduct No - - -

Yes Yes No Deduct No No Yes No Insurance business No Yes No Deduct No - - -

Yes Yes No Deduct No Yes No No VC business

No Yes No Deduct No - - -

Shall also conform to the Venture Capital regulation

Yes Yes No Deduct No Yes No No Should increase shareholdings to 50%

No yes No No but use risk weights

No - - - Approve only for the companies which are beneficial to business operations of the FI and the overall FI’s system

Supporting business

No No No Deduct Within 3 years

- - -

- 38 -

Holds shares less than 50 percent Holds shares at least 50 percent Types of business

Has Business Control

Approval

Consolidated FS



Consolidated FS



Remarks

Other businesses

Yes or No No No Deduct Within 3 years

No Yes Within 3 years

Trouble Debt Restructuring (TDR)

Yes or No Case by case Basis

No * * No * * * If approved, the FI shall not deduct out of its capital fund but use risk weights and shall reduce its shareholding as to the approved condition. If not approved, the FI shall deduct out of its capital fund and immediately reduce its shareholdings.

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Attachment 5

Regulations regarding the Supervision of Venture Capital Business

1. Fundamental and Rationale According to the increased competition in financial business, FIs have expanded their

businesses into several sectors such as venture capital business (VC). Since VC is one of the high-risk financial businesses; FIs who would like to engage in this business shall concern on the capability on investment and risk associated in order not to affect the overall stability to FIs. Concerning on this issue, BOT therefore specifies the regulation for the investment in Venture Capital.

2. Investors BOT shall not allow the FI to directly engage in VC, but shall allow only high potential FI or

parent company of financial group to have its subsidiary engaged in VC. However, the FI or the parent company may invest in VC either with or without business control.

3. Business Scope The nature of VC is a long-term investment business in which VC and the business owner are

partnerships in potential high growth business. VC provides financial support and advisory to the invested company so that the invested company can grow rapidly and prompt to be listed in the stock exchanges such as The Stock Exchange of Thailand or MAI Stock Exchange, etc. After the invested company has been listed, VC shall sell out the investment in that company in order to realize capital gain.

4. Types of Businesses Permissible to Undertake by Venture Capital Business VC is allowed to invest in all types of businesses with high growth potential. The invested

company shall have no relationship with the FI, the parent company, or its financial group.

5. Maximum Investment Period for Venture Capital Business VC shall not invest in any company more than 5 years from the date of investment. If VC

cannot dispose of its invested shares after 5 years, it shall be assumed to be the long-term investment, not venture capital investment. Consequently, that VC would then be considered as company outside

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the financial group, the FI shall then reduce its shareholdings in that VC to the amount not exceeding 10 percent of total shares sold of VC.

6. Capital Fund 6.1. If FI or parent company has business control in VC and holds more than 50 percent

of total shares sold: 6.1.1. The FI or the parent company shall include VC in its consolidated financial

statements. 6.1.2. If VC cannot dispose of its shares in the invested company within 5 years,

the FI or the parent company shall deduct the investment amount in the invested company out of capital fund.

6.2. If FI or parent company has no business control in VC or has business control but holds up to or less than 50 percent of total shares sold: 6.2.1. The FI or the parent company shall deduct the investment amount in VC out

of capital fund. 6.2.2. If VC cannot dispose of its shares in the invested company within 5 years,

the FI or the parent company shall deduct the investment amount in the invested company out of capital fund.

6.3. The deduction of capital fund as in 6.1 or 6.2 applies to capital fund of both full consolidation group and solo consolidation group. A half of the deduction goes to Tier 1 capital, and the rest goes to Tier 2 capital.

7. Credit Granting, investment, and Contingent Liabilities FI shall grant credit, invest, and make contingent liability to VC and all other companies, all

along the line, in which VC has its investment by not exceeding 5 percent of Tier 1 capital of the FI.

8. Others 8.1. FI shall prepare risk management policy for the investment in VC, for example,

maximum amount (limit) for the investment in all VC, continually monitoring and evaluating the result of VC investment.

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8.2. Director and management of the FI are prohibited from day-to-day operation of the invested company, but may appoint the expert to manage the business so as to recover from the rehabilitation and make profit in the short period.

8.3. The company in which VC invested in is prohibited from using FI’s symbol or name, or misleading the public that the company is related to the FI.

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Attachment 6

Chart of Credit Granted, Investment, and Contingent Liabilities

Solo-basis capital

Solo Consolidation capital

Credit lending to the principal debtor 25% of Tier 1 capital

Solo-basis capital + MI of subsidiaries at least 75% - Investment in subsidiaries less than 50% - Investment in insurance business - Investment in other businesses

Credit lending to the companies outside solo consolidation group 25% of capital fund of solo consolidation group

Solo-basis capital + MI of subsidiaries at least 50% - Investment in subsidiaries less than 50% - Investment in insurance business - Investment in other businesses

Credit lending to the principal debtor 25% of capital fund of full consolidation group

Tier 2 Capital

=

Tier 1 Capital

+

=

=Full Consolidation capital

- 43 -

Attachment 7

Examples of the Supervision of the Financial Group

I. Case of a Financial Institution as the Parent Company

II. Case of a Juristic Person as the Parent Company

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Attachment 8

Application to the Establishment of the Financial Group

Bank _______________________________

Date_______________________

To: The Governor, the Bank of Thailand

The Bank has examined the shareholdings of the Bank, the parent company, and related companies both directly and indirectly, including the power of control and all shareholdings in very step all along the line and has already reorganized the financial group’s structure to be in line with the current business operations in order to comply with BOT Circulated Letter No. BOT. PPD. (21) Wor. 936/2549 dated 12 July 2006 Re: Dispatch of Guideline on Consolidated Supervision.

The Bank then would like to apply for the establishment of the financial group in which Bank / Company _________________________________ is the parent company of the financial group as in the details prescribed by BOT and shown in the documents required by BOT. Also, the Bank has listed all names of companies in which the Bank, the parent company, and related companies hold more than 10 percent of the total amount of such companies’ shares sold.

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No. 1 Companies within the financial group Show name lists of all companies in which the parent company has power of control for the establishment of the financial group, by counting total direct and indirect shareholdings over total amount of that company’s shares sold.

Shareholdings (%) Company’s name Types of business As of

requested date Requested

to have 1. Parent company (details in Attachment 8-1) 2. Subsidiaries within the solo consolidation group (details in Attachment 8-2)

2.1 2.2 2.3 3. Subsidiaries outside the solo consolidation group (details in Attachment 8-2)

Financial business 3.1 3.2 3.3 Supporting business 3.4 3.5 3.6 3.7

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No. 2 Companies outside the financial group Show shareholdings in companies in which the parent company holds, directly and indirectly, shares in total more than 10 percent of total amount of such companies’ shares sold.

2.1 Companies which the parent company intends to continue holding their shares (details in Attachment 8-3).

Show shareholdings in financial companies in which the parent company has no power of control but intend to continue holding their shares.

Shareholdings (%) Company’s name Types of business As of

requested date Requested

to have 1. 2. 3. 4. 5.

2.2 Companies which the parent company shall reduce shareholdings (details in Attachment 8-4).

Show shareholdings in companies in which the parent company shall reduce shareholdings to not exceeding 10 percent within 3 years from approval date of the establishment of group.

Plan to reduce shareholdings (%)

Company’s name Types of business

Shareholding as of requested

date (%) Year 1 Year 2 Year 3

Remarks

1. 2. 3. 4. 5.

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2.3 Trouble Debt Restructuring companies (TDR) Show shareholdings in trouble debt restructuring companies according to BOT’s regulation


Shareholdings as of requested date (%)

The last day of the extension period

1. 2. 3. 4. 5.

2.4 Liquidation-In-Progress companies Show the shareholding proportion in the Liquidation-In-Progress companies


Shareholdings as of requested date (%)

Remarks

1. 2. 3.

No. 3 Other additional details to be notified

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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The Bank guarantees that all the information disclosed in this application are true and the accompanying documents are certified. (Signature) __________________________ Authorized person (_________________________) Title______________________ Remarks

1. If the blank’s width provided is insufficient, please kindly expand it but remain the application format

2. The application for the establishment of the financial group and its supporting documents shall be sent to the Financial Institution Applications and Special Examination Department, Supervision Group, Bank of Thailand, 273 Samsen Rd., Bangkhunprom, Pranakorn, Bangkok 10200

3. Bank of Thailand may request additional data in addition to the data stated in the application for the establishment of the financial group and the supporting documents

- 49 -

Attachment 8-1 Details of the Parent Company

Company’s name (Thai) ________________________________________________________________ (English) ________________________________________________________________ Head office address no. ___________ Street ______________________________

Sub district _____________________ District ______________________________ Province _____________________ Zip code ______________________________ Telephone _____________________ Fax ______________________________ Registered as public company no. ________________ Date ________________

Registered as limited company no. ________________ Date ________________ Types of business _________________________________________________________

Business scope _________________________________________________________ Registered capital _________ shares Total shares dold ____________ shares

Shareholders’ name Show all shareholders’ names (both direct and indirect shareholding) in each group except for the case of the listed companies in the stock exchange, which can be shown only the first 20 major shareholders (both direct and indirect shareholding) in each group.

As of Requested Date Shareholder’s name Types of Relationship with FI and other

companies in the group Number of

Shares Percentage

1. Group of Individual / Corporate…. 1.1 Mr. 1.2 Company 2. Mr. 3. Group of Individual / Corporate…. 3.1 Mr. 3.2 Company

Total

- 50 -

Names of Directors, Managing Director, Independent Directors, and Senior Management as of the requested date

First and Last Name Title Nationality Relationship and position involving the FI and other companies in the Group

Financial Position and Operating Result at the End of Year 2005

Total assets (million Baht) Total liabilities (million Baht) Shareholders’ equity (million Baht) Net income (million Baht) Return on assets (%) Return on equity (%) Ratio of total capital fund to weighted assets and contingent liabilities (%) of the financial group (approximately)

Other additional details to be notified

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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(Attachment 8-2) Details of the Company within the Financial Group (each company)

2.1 Company’s name (Thai) ________________________________________________________________ (English) ________________________________________________________________ Head office address no. ___________ Street ______________________________



Business scope _________________________________________________________ Registered capital _________ shares Total shares sold ____________ shares

Shareholders’ name Show the parent company (both direct and indirect) and other persons shareholdings separately. In case of listed company, show the first 20 major shareholders and all indirect shareholders of the parent company. In case of non-listed company, show all shareholders.

As of requested date

Requested to have

Shareholders’ name Types of Relationship with the FI and other

companies in the Group Shares % Shares % Parent company’s shareholdings 1. 2. Total Other persons’ shareholdings 1. 2. Total Grand total

- 52 -

Reasons of excluding some indirect shareholders ______________________________ ___________________________________________________________________________ ___________________________________________________________________________

Plans to reduce its shareholdings ____________________________________________ ___________________________________________________________________________ ___________________________________________________________________________




Total assets (million Baht) Total liabilities (million Baht) Shareholders’ equity (million Baht) Net income (million Baht) Return on assets (%) Return on equity (%)


____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

- 53 -

(Attachment no.8-3) Details of the Company outside the Financial Group, with no power of control

but intended to continue the shareholdings (each company) 3.1 Company’s name

(Thai) ________________________________________________________________ (English) ________________________________________________________________ Head office address no. ___________ Street ______________________________



Business scope _________________________________________________________ Registered capital _________ shares Total shares sold ____________ shares



Requested to have


companies in the Group Shares % Shares % Parent company’s shareholdings 1. 2. Total Other persons’ shareholdings 1. Total Grand total

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Reasons of the shareholdings without power of control ___________________________ ___________________________________________________________________________ ___________________________________________________________________________






____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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(Attachment no.8-4) Details of the Companies outside the Financial group,

which the Parent Company shall reduce its Shareholdings (each company) 4.1 Company’s name

___________________________________________________________________________



Requested to have


companies in the Group Shares % Shares % Parent company’s shareholdings 1. 2. Total Other persons’ shareholdings 1. 2. Total Grand total


Plans to reduce its shareholdings ____________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

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____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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The Bank also submits the additional documents as follows:

1. The existing shareholdings chart of the financial group as of the requested date.

2. The new shareholdings chart of the financial group requested.

3. Overview of management of the financial group such as the policy approval and the representative of the parent company to be management or committee in subsidiaries, etc.

4. Copy of the lists of shareholders of all companies in the group of total ____ companies.

5. Copy of commercial registration certificate of all companies in the group of total ____ companies.

6. Copy of memorandum of association of all companies in the group of total ____ companies.

7. Copy of internal rules and regulations of all companies in the group of total ____ companies.

Documents in 4-7 shall be certified by the registrar, Ministry of Commerce.

8. Audited financial statements of all companies in the group at the end of year 2005 of total ____ companies.

9. Minutes of the boards’ meetings with approval resolution to be a part of the financial group from the FI and all companies in the group of total ____ companies.

10. Letter of consent to concede to the financial group and agree to comply with the Guideline on Consolidated Supervision of total ____ companies.

11. Letter of acknowledgement on Guideline on Consolidated Supervision and responsibility of parent company of financial group.

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Attachment 9

Letter of Consent to Concede to the Financial Group and Agree to Comply with the Guideline on Consolidated Supervision

Date_____________________


Re: Acceptance to be a part of the financial group and agree to comply with the Guideline on Consolidated Supervision

With reference to the Bank of Thailand Circular No. BOT. PPD. (21) Wor. 936/2549 dated 12 July 2006 Re: Dispatch of the Guideline on Consolidated Supervision, requiring all companies within the financial group to concede to the financial group and follow BOT Guideline on Consolidated Supervision.

I, Company , who engages in business and who is the subsidiary / the parent company of the financial group of Bank / Company , have acknowledged the regulation required by BOT and concede to be a part of the financial group of Bank / Company ,. Besides, I agree to comply with the BOT’s guideline and the policy of the parent company including risk management, internal control, credit lending, data submission, and reporting.

Also, I have sent the minutes of the board’s meeting with approval resolution to be part of the financial group of Bank / Company .

Best regards,

(Signature) __________________________ Authorized person (_________________________) Title______________________

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Attachment 10

Letter of Acknowledgment on the Regulation on Consolidated Supervision and Responsibility of the Parent Company of the Financial Group

Date_____________________


Re: Acknowledgment on the regulation on consolidated supervision and responsibility of the parent company of the financial group

With reference to the Bank of Thailand Circular No. BOT. PPD. (21) Wor. 936/2549 dated 12 July 2006 Re: Dispatch of the Guideline on Consolidated Supervision, indicating the responsibility of the parent company of financial group in the consolidated supervision regulation.

I, Company , who is the parent company of Bank , have acknowledged the regulation on consolidated supervision and the responsibility that I should conduct as the parent company of the financial group as indicated in above mentioned letter such as setting up policy and strategic plan for the financial group, risk management of the group, supervising and supporting the subsidiaries within the group to be able to run their businesses with efficiency, preparing data reports of the group and submitting to BOT as required, etc. Besides, I will perform in accordance with the Guideline on Consolidated Supervision and provide support to Bank in complying with above mentioned regulation.

Best regards,


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Attachment 11

Letter of Acknowledgment on Regulation on Consolidated Supervision and Responsibility of the Parent Company of the Financial Institution in Thailand

Date_____________________


Re: Acknowledgment on the responsibility of being the parent company of financial institution in Thailand

With reference to the Bank of Thailand Circular No. BOT. PPD. (21) Wor. 936/2549 dated 12 July 2006 Re: Dispatch of the Guideline on Consolidated Supervision, stipulating the financial institution whose parent company is the financial institution registered overseas to have its parent company to affirm the acknowledgement of the regulation on consolidated supervision and supervise the financial institution in Thailand to take the role of being the parent company in accordance with BOT’s Guideline on Consolidated Supervision.

I, (the overseas parent company’s name) , located at (address) , who is the parent company of (the name of the financial institution in Thailand) , have acknowledged the consolidated supervision regulation and the responsibility that (the name of the financial institution in Thailand) should conduct as the parent company of the financial group as indicated in above mentioned letter such as setting up policy and strategic plan for the financial group, risk management of the group, supervising and supporting the subsidiary companies within the group to be able to run their businesses with efficiency, preparing data reports of the group and submitting to BOT as required, etc. Besides, I affirm that I will support (the name of the financial institution in Thailand) to be able to efficiently take the role as the parent company of the financial group in accordance with the Guideline on Consolidated Supervision.

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Best regards,


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Attachment 12

Report Form

I. Financial Institution as the Parent Company

II. Other Juristic Person as the Parent Company