Introduction to the Thai Bank Museum The Evolution of Money The Evolution of Banking The Prototype for Thai banks Siam Commercial Bank’s Advance to the present
Introduction
The Evolution of Banking
The inauguration of banking in Thailand
The Father of Thai Banks

Foreigners administered these branches because Thais lacked sufficient banking knowledge. On the other hand, the Europeans recognized that their lack of knowledge of local customs, traditions, languages, trade practices, and asset evaluations, hampered them in dealing with Thai and Chinese traders.

To remedy the problem, they engaged local Chinese businessmen to make contacts, negotiate, provide credit analyses, evaluate risks, and collect debts for them. Called compradors, these agents were well known and trusted by local businessmen, were in good financial standing, and held deposits in the banks for which they worked.

Occasionally, these mediators were compelled to guarantee loans by using their own bank accounts as surety. They received nominal salaries but the bulk of their earnings came from commission fees calculated as a ratio of the loan amounts. This comprador system enabled Thai and Chinese traders to borrow from the foreign banks. Despite the high cost of acquiring such loans, customers had no other option since the alternative was pawnshops.

In addition to the comprador system, the foreign banks implemented a system of inter-bank account debits which were carried out each working day evening. To handle the growing volume of payments—and because Thai currency then comprised only a variety of coins (which were generally in short supply)—these banks began producing their own banknotes, the first of which was put into circulation on 21 May 1889.

At first, the banknotes were narrowly circulated; only traders used them. As citizens became more familiar with them, however, they came into common circulation. The public referred to them as “Bank”, which meant “money made from paper”. In 1902, the government issued its own Tanabat (paper money). Despite this improvement, people today still call government banknotes “Bank”.


For more than a decade, the three foreign banks controlled all currency exchange related to Siam’s foreign trade. Recognizing the threat that such foreign domination posed to Thai sovereignty, the minister of the Royal Treasury, H.R.H. Prince Mahisara, decided that the time was ripe for Siam to establish its own financial institution to handle currency transactions. In 1904, at the behest of his brother, King Chulalongkorn, he founded a small commercial bank called the Book Club.


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