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Published on December 28, 2007

"Banks should not reduce credit standards to prevent any problems from cropping up in the future although economic growth should help reduce non-performing loans," Deputy Governor Bandid Nijathaworn said yesterday.

Economic recovery spurred by both consumption and investment will lead to faster loan growth than this year's pace of 2.5-2.6 per cent, he said, but declined to state a figure.

The battle for consumer and SME loans would be fierce, while the wholesale business has already been seized by large banks, he said.

The Financial Institutions Business Bill, passed recently by the National Legislative Assembly and awaiting royal endorsement, authorises the central bank to set limits on loan expansion to any industry if it realises that the lending would affect the whole economy.

For now, the central bank has just asked for cooperation from commercial banks to be prudent in lending.

"We could put additional principles in details for any loan approval like we did with home loans. This aims to correct the country's economy," Bandid said.

The central bank also warned banks to keep an eye on risk management even though plenty of business opportunities would open up next year. Possible threats include foreign market volatility, which could buffet their investment and lending abroad.

All banks should ensure their risk management system is in line with strategies and risks as well as build up good governance practices, Bandid said.

Credit-risk management remains the most important issue in the banking system, he said.

Although the capital market is becoming an alternate source of financing, particularly for big companies, banks remain as the channel for SMEs, he added.

Anoma Srisukkasem

 The Nation