He also said he wanted to sell the FIDF's holding in Krung Thai Bank (KTB) and allow it to be a private bank rather than a state-owned institution. The FIDF holds a majority stake in KTB.

His comments go against caretaker Finance Minister Thanong Bhidaya's thinking, as Thanong once said he would like to maintain the FIDF as the authorities' financial rescue arm.

Pridiyathorn said the fund was waiting for compensation to be financed by government bonds to refinance its short-term debts in the repurchase market. The Finance Ministry will be the bond issuer.

It will also obtain more income from asset-management companies' debt collection, which will take more time due to the debt-restructuring process.

"The fund will be closed down when it can clear all the assets, but the debt-restructuring process may take about five years - or even seven years," he said.

The FIDF closing date is thus delayed from the previous schedule of winding up in the next few years.

Pridiyathorn said the fund's closure was not related to a plan to open the Deposit Insurance Agency (DIA).

He believes the agency will open in two years rather than this year or the next, due to legal procedures that still need to be gone through.

He said when the DIA starts operations, commercial banks could contribute 0.4 per cent of deposits and borrowings per annum directly to the agency instead of to the fund. With a blanket guarantee of deposits provided to depositors, commercial banks currently have to contribute 0.4 per cent of their deposits and borrowings regularly to the FIDF.

However, once the DIA is established, the blanket guarantee duty will be transferred to the DIA, which will gradually reduce the deposit guarantee over five years to a specified percentage of deposits. For example, a depositor of Bt1 million would get a 100-per-cent guarantee, while those with higher deposits would get a lower percentage.

The FIDF is also expected to sell out its stakes this year in three state-owned banks: KTB, BankThai and Siam City Bank.

He said he would not keep KTB as a state-run bank because he wants it to run efficiently without political intervention. The bank should be allowed to function in line with market mechanisms. If the government needs financing for its investment projects, it has many other channels it can use besides having KTB as the lender, said the governor.

"Whatever is owned by the private sector without being influenced by politics is good," he said. "Banks should have good resource allocations and should not be related to politics."

However, Pridiyathorn said he would sell the FIDF's stakes in the three banks when market prices were high enough, adding that the fund did not need to sell the shares this year. Prior to the recent stock market decline, the FIDF had planned to sell some of the banks' shares on the market.

Anoma Srisukkasem

The Nation