The source said the newly drafted law would give the central bank the power to supervise and rescue financial institutions in difficult circumstances. At present the Finance Ministry and the BOT share the responsibility of managing troubled financial institutions.

Former finance minister Thanong Bidaya earlier proposed that the Finance Ministry be the sole agency charged with managing troubled financial institutions, but his idea was rejected.

The source said Pridiyathorn, who is a former director of the central bank, believed that the BOT should supervise financial institutions to prevent political intervention.

Managing financial companies in difficulty is a slow process under the present legislation, because the BOT has to wait for approval from the Finance Ministry before intervening.

However, the source said that Finance Ministry officials were against giving power over such matters to the central bank as they believed that the ministry would inevitably be linked to any actions taken by the BOT through the ensuing fiscal and budgetary burdens.

Under the proposal, the only responsibility left to the Finance Ministry will be to issue licences for new financial institutions.

Aside from the Financial Institutions Act, Pridiyathorn is expected to propose an amendment to the Bank of Thailand Act that would see the selection of the BOT's governor made through an independent process.

At present, the governor of the central bank is nominated by the Finance Minister.

The source said that in his opinion important decisions regarding the fate of troubled financial institutions should be shared by both the BOT and the Finance Ministry.

Wichit Chaitrong

The Nation