purchase-and-assumption transactions and other forms of resolution (on a 'least cost' basis).
A formalized funding line should be established with the MoF or the BoT (on a
government-indemnified basis). A cost-benefit analysis could be undertaken over the medium-term
on the merger of the DPA and FIDF, given the parallels in their respective functions.
37. The early intervention and resolution frameworks for SFIs should be aligned broadly
with those for commercial banks. The BoT has the power to require preventive or corrective
actions of an SFI but only with the approval of the MoF. Policies and procedures for early
intervention and resolution should be established, including recovery planning. There is no
established resolution regime for SFIs. The resolution framework of SFIs should be formalized, along
with the development of a funding arrangement for ELA and bringing retail deposit-taking SFIs
within the deposit insurance scheme. Resolution plans should be established.
DEVELOPMENTAL CHALLENGES
A. Funded Pension Scheme
38. The private, funded pension system is inadequate to meet the needs of an aging
population, and incentives lead to low participation and suboptimal investment allocations.
The Thai system offers the same tax benefits to an individual pension plan (RMF) as it does to a
collective plan (PVD), giving company executives a disincentive to create collective schemes. As a
result, there is a low participation in the collective, private PVDs. AMCs and fund committees have
limited incentives to pursue optimal investment strategies, leading to overly conservative
investments and resulting in inadequate pensions for retirees. The payout phase of the PVD scheme
includes incentives for participants to take lump-sum payouts at retirement, leading to significant
risk of old-age poverty. Thus, it is important to revise the incentive structure to favor collective PVD
plans over individual plans, encourage default investment portfolios that provide adequate
pensions, set inflation-linked annuities as the default payout option, and limit lump-sum payouts.
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