"TMB Bank cannot pay interest on its hybrid securities because of its loss, which is in line with [the rules of the] Bank for International Settlements. As the hybrid securities are more like equity securities, foreign investors might think that [we regard] our capital adequacy ratio requirement of no great concern if we don't follow international standards," BOT Governor Tarisa Watanagase said yesterday.

Although the bank has already set aside about Bt200 million to make next month's coupon payment, the central bank will not allow it to do so, she said.

TMB Bank chief operating officer Kraithip Krairiksh said the bank would follow the central bank's instruction, though it already set aside money to pay the coupon rate for the hybrid securities.

Thailand's fifth-largest bank reported a net loss of Bt12.29 billion last year, following a net profit of Bt7.8 billion in 2005. In the first three months of this year, it posted a net profit of Bt220.17 million, compared with Bt2.13 billion in the same period last year.

Under Bank for International Settlements rules, banks are not obliged to make interest payments on their debt instruments if their bottom lines fall into loss.

Tarisa said the central bank had allowed TMB Bank to make a January coupon payment on the hybrid securities because the bank's loss at that time came from setting aside a one-time provision to comply with International Accounting Standard 39, even though the bank was able to set aside the provision in three parts.

Earlier, Moody's Investors Service downgraded its rating on TMB Bank's hybrid Tier-1 securities by two notches, from Ba2 to B1 with a stable outlook, to reflect its concern over possible non-payment of interest in July on the bank's $200-million perpetual non-cumulative Tier-1 securities.

Standard and Poor's cut its ratings outlook for the bank to negative due to uncertainties over its capital increase.

TMB Bank recently issued new shares to existing shareholders to raise around Bt35 billion to strengthen its capital adequacy ratio, which stood at 10.58 per cent of risk-weighted assets at the end of March.

Anoma Srisukkasem

The Nation