Price Regulation and Tacit Collusion in the Interbank Electronic Bulk and Retail Credit Transfer Services: Thailand's Experience

Abstract

Price control is often perceived as a convenient tool to protect consumers’ interest as it is simple and visible. However, when the state sets a maximum price of a product or service in a potentially competitive market, it may unintentionally undermine competition in the market and may even facilitate tacit price collusion. This paper illustrates such regulatory fallacy in the case of the electronic interbank credit transfer service in Thailand, where the Bank of Thailand sets the maximum rates that a commercial bank may charge its customers. It also provides a follow-up of the central bank's regulatory amendments following the findings of the report.