The Finance Ministry has to find cash to pump into state-owned banks as well as TMB Bank, in order to bring them into compliance with new criteria on loan-loss reserves.

Deputy Finance Minister Sommai Phasee said last week the ministry would soon meet with state-owned banks to discuss recapitalisation needs prompted by International Accounting Standard 39 (IAS 39).

An initial study found that the Small and Medium Enterprise Development Bank of Thailand, the Government Housing Bank and the Bank for Agriculture and Agricultural Cooperatives (BAAC) might have to supplement their capital bases, he said.

The ministry has enough funds to prop up these banks, he said. "We don't need to increase capital in one shot."

Pongsak Chewcharat, president of SME Bank, said IAS 39 would pressure his bank to seek a capital boost big enough to support operations for five years.

Without a recapitalisation, the bank has enough resources to run for one to two years, he said.

The bank was profitable on an operating basis last year, but its bottom line plunged into the red because of loan-loss provisioning, he said.

The bank is drafting a business plan to reduce non-performing loans, which reportedly could reach 30 per cent of total lending.

Thirapong Tangthirasunan, president of the BAAC, earlier said his bank needed to tap the capital market but did not reveal details.

A source said the Export-Import Bank of Thailand also planned to augment its capital.

However, its president could not be reached for comment.

The source said the Finance Ministry might dip into the national budget for these banks' recapitalisations.

The ministry - as the largest shareholder of TMB Bank with a 31.2-per-cent stake - would also have to find additional funds to exercise its rights if TMB Bank had to request financial help from its shareholders.

The bank is in discussions with its major shareholders on the capital issue. The Finance Ministry and Singapore's DBS Bank have informed the bank that they will back the plan to strengthen its capital base, Subhak Siwaraksa, CEO of TMB Bank, said earlier.

He did not provide further details of the capital-increase plan, but analysts put a figure of about Bt35 billion on it. TMB Bank lost Bt12.28 billion last year, taking its retained losses to Bt53 billion.

Woravit Chailimpamontri, deputy director-general of the Government Savings Bank, said his bank was in no need of capital as it has already set aside enough reserves to cover doubtful loans.

Wichit Chaitrong

The Nation