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Published on August 9, 2007

Krung Thai Bank president Apisak Tantivorawong said the central bank had cautioned the banks not to loosen their risk-management practices during the slowdown, although they currently have sound management systems.

"The central bank warned the banks to be cautious about NPLs because the BOT has seen them as a rising trend," BankThai senior executive vice president Chamnarn Wangtal said yesterday.

The warning was given during the annual meeting between the BOT and the Thai Bankers Association (TBA), at which the economic outlook and routine bank operations were dicussed.

"It is an ordinary event that the current economic condition has bolstered the increase of NPLs. Consequently, the central bank asked us to take a close, serious look," said Chaiwat Utaiwan, president of Siam City Bank.

Tisco Bank CEO Pliu Mangkornkanok, however, said every bank had been keeping a close eye on NPLs.

"Export customers may be facing a tougher period than other customers," he said.

Apisak, who is also chairman of the TBA, said that despite the BOT's concerns, NPLs had only increased slightly and remained under control.

He is optimistic that NPLs will decline when the economy inevitably recovers. However, he said it was not possible for bad loans to fall to 2 per cent of total lending by the end of the year as planned.

As of June, net NPLs of the banking system, including credit foncier companies, were recorded at 4.41 per cent or Bt254.5 billion. The figure increased from Bt240.32 billion or 4.18 per cent at the end of the first quarter.

At the meeting, the BOT also informed the banks about the economic outlook in the second half and next year. The central bank be-lieves the economy will gradually pick up in the second half, before recovering significantly next year.

The improving economy is a result of higher-than-expected export growth and a slight rise in consumption and investment.

The BOT did not warn the banks about investment in US sub-prime mortgage loans or talk about the foreign-exchange market.

Apisak said the central bank did not ask the banks to boost their loan growth or cut interest rates further.

The BOT asked the banks to prepare for implementation of the Financial Master Plan Phase II, as its framework will be finalised in the first quarter of next year. The plan is expected to be fully implemented in 2014.

Moreover, the banks asked the BOT's permission to extend the deadline for their plan to sell stakes of more than 10 per cent in companies. They said they could not sell out some of their holdings because the companies have been in a restructuring process.

Anoma Srisukkasem,

Somruedi

Banchongduang

The Nation