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Published on April 7, 2008

The Bank of Thailand may allow the remaining five finance companies that failed to upgrade during the first phase of the Financial Sector Master Plan to become either commercial or retail banks.

Phong-adul Kristnaraj, the BOT's senior director for the Financial Institutions Monitoring and Analysis Department, said last week the companies could become upgraded banks via different methods. But new Thai players will not be allowed to set up in the banking system.

The central bank is providing the companies - Finansa Credit, Siam Industrial Credit, Bangkok First Investment And Trust, Advance Finance and American Express Finance (Thailand) - with an additional opportunity to continue in business after they failed to upgrade in the last round or did not apply to become banks.

The plan is part of the Financial Sector Master Plan phase II, which will be completed in the middle of the year.

If they do not want to become banks, they can maintain their existing business as finance companies. The BOT may also persuade them to become credit companies, providing loans without taking deposits, said the senior director.

"In fact, we want only banks in the system but we will not pressure them," he said.

Phong-adul said the five finance companies could join together to apply to become banks. Private companies or foreign investors could buy stakes in them and enter the application process for upgrade to banks.  

The approved finance companies must pass criteria involving shareholders' and financial background, and executives' qualifications and business plans.

"They should have not only money but also expertise, because we don't want the banks to go bankrupt again," Phong-adul.

Moreover, the BOT will also allow foreign full branches to open additional branches and upgrade to be subsidiaries.

However, the central bank will consider whether to allow new foreign players to enter the Kingdom's banking system.

Phong-adul said 34 Thai and foreign banks, with branches throughout the country, should be enough to meet the demand for financial services.

However, the BOT has to comply with international agreements on financial liberalisation, hence other players could enter the market.

Anoma Srisukkasem

The Nation