Revelations from the Fiscal Policy Office (FPO), depicting the repercussions of escrow legislation in the past 15 years, accentuate the hefty value of escrow service transactions during this time. An FPO informant who chose to remain anonymous divulged that an astronomical 867 billion baht of transactions, with a significant chunk being capital market transactions, was recorded in this span.
The Escrow Account Act, rolled out in 2008, was a cornerstone in the upsurge of escrow service transactions. From its inception until the second quarter of this year, the gross value of such transactions breached an impressive 867 billion baht. A breakdown of this cumulative transaction value reveals that a whopping 862 billion baht or a mammoth 99.5% was associated with capital market transactions.
In stark contrast to this, product and service purchase transactions constituted a minuscule 0.38% of the total, amounting to a paltry 3.3 billion baht. Astonishingly, real estate transactions, a sector which the escrow legislation has a keen focus on, tally up to an underwhelming 852 million baht, representing just 0.10% of the aggregate transaction value.
The FPO’s source highlights the surprisingly low engulfment of escrow services within the real estate realm, a trend persisted over the full 15-year window. This brings into focus a critical purpose of the Escrow Account Act – to avert potential fraudulent practices jeopardising business transactions and economic stability. Serving as a safeguard for both buyers and sellers, the law requires the nomination of a dispassionate, third-party hub to ensure all contract-bound parties’ interests.
An escrow account performs as a relationship where stakeholders within transactions, real estate acquisitions for instance, consent on a payment via a provisional account administered by a third party, coined an escrow agent. The mandate of this agent includes scrutinizing the fulfilment of contractual obligations by all participants until the contract’s conditions have been attained.
The chosen escrow agent is tasked with overseeing the money, property, securities, or other assets tied to the contractual responsibilities, warranting the successful transition of ownership or related rights. When governed by the law, only commercial banks and finance companies hold the requisites to function as escrow agents, and can legally levy a fee for their services.
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