Published on January 18, 2006

The Bank of Thailand (BOT) will not allow Siam City Bank (SCIB) to increase its foreign-ownership ceiling, says SCIB president Arun Chirachavala.

Arun said that recently, some potential foreign investors who wished to invest in SCIB shares met with the central bank to discuss whether SCIB’s foreign-ownership limit could be raised beyond the current ceiling of 25 per cent of total capital. SCIB’s foreign ownership has already reached that.

Arun quoted the central bank as saying it would permit Thai banks to expand foreign ownership only in a crisis situation. The central bank permitted foreign banks to acquire up to 75 per cent in some Thai banks in the wake of the 1997 financial crisis.

In addition, most large banks were given approval by the central bank shortly after 1997 to raise their foreign-ownership limit from 25 per cent to 49 per cent. However, SCIB and other Thai banks did not raise their ceilings.

“If the BOT allows Thai banks to raise the ceiling for foreign shareholding [in the current normal situation], they should do so for the entire industry. It should not be done only for some banks,” said Arun.

The Finance Ministry is currently considering the draft of a new banking law, part of which would increase foreign ownership for all Thai commercial banks to 49 per cent.

Aside from SCIB, BankThai is another Thai bank with a foreign-ownership limit of 25 per cent. However, a major shareholder in both banks is the Financial Institutions Development Fund (FIDF), which owns 47.6 per cent of SCIB and 49 per cent of BankThai. The FIDF also holds a 56.4-per-cent stake in Krung Thai Bank, the country’s largest state-owned bank.

However, the fund plans to sell its stake in these three commercial banks this year, before shutting itself down completely by the end of next year.

Arun said the SCIB was welcoming strategic partners, but a final decision depended mainly on the FIDF. The fund said recently that this year would be good timing for selling its shares in these banks. The fund has several choices of bank-share liquidation schemes. They may sell shares to specific investors as a private placement, existing banks’ shareholders as a right offering or general investors as a public offering.

Currently, SCIB’s four largest foreign shareholders are Barclays Bank with 4.97 per cent, followed by State Street Bank and Trust Co (2.75 per cent), Nortrust Nominees Ltd (2.29 per cent) and Somers (UK) Ltd (1.64 per cent). Foreigners who have invested in the bank via non-voting depository receipts (NVDRs) represent 4.99-per-cent ownership.

Somruedi Banchongduang, The Nation

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