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Although Finance Minister Surapong Suebwonglee dismissed rumours that he planned to sack the BOT's governor Tarisa Watanagase, his decision last week to investigate the recapitalisation of BankThai fanned the speculation further. This is because the decision to recapitalise BankThai is largely under Tarisa in her capacity as chairman of the Financial Institutions Development Fund, which oversees BankThai.

Matichon said the conflict started with Siam City Bank, another financially troubled bank under the FIDF. Siam City Bank's shareholders' meeting in April agreed to name two new directors; one of them is Chidchai Wannasathit, one of 111 banned politicians from the now-defunct Thai Rak Thai Party. After Chidchai was surprisingly appointed, the bank's board was also looking for another new director to fill a vacated seat. Chidchai chaired the selection committee and there were rumours Nipat Pukkanasut, former Finance deputy permanent secretary, who is currently adviser to Surapong, would be named - but Nipat was set to be named the chairman of the bank.

The rumour brought questions about Nipat's qualifications because he currently has two pending legal cases: the Government Savings Bank case regarding the acquisition of shares in Bangkok Bank of Commerce, and a charge by public prosecutors that he is unusually rich.

Surapong insisted that the legal cases should not be cited as guidelines in the nomination. But the FIDF board, as the biggest shareholder in Siam City Bank, was not convinced. It thus called an urgent meeting asking the Siam City Bank board to reconsider the decision. Later, the Siam board decided to backtrack on the plan. Now, the mission to seek "pay back" begins, said Matichon.

The next issue is BankThai. It started with Prime Minister Samak Sundaravej's comment on TV on May 6, criticising the FIDF for recapitalising the bank to the tune of Bt8 billion before selling it to foreigners.

The BOT later conceded that it planned to sell BankThai. But Surapong's advisory team didn't agree with the central bank's plan and proposed that the BOT merge three banks - TMB Bank, Siam City Bank and BankThai - instead. Surapong also set up a committee to investigate the damage caused by the recapitalisation. Matichon said the allegation regarding the recapitalisation seemed a bit vague because over the past ten years, several governments used public money to rescue financial institutions, including state-run Krung Thai Bank and TMB Bank, which was under the Finance Ministry.

Sommai Phasee, former deputy finance minister, once suggested that the Finance Ministry investigate TMB's executives because of alleged mismanagement in loan approvals. But the ministry failed to do so and later sold the bank to ING Group.

As for Surapong's allegation over BankThai's mismanagement by investing in subprime assets, the FIDF set up a committee to look into the matter and found the investment did incur some loss, but no one could foresee the US subprime crisis.

Matichon summed up that the Finance Ministry and the central bank should call a truce before the banking system collapses, even though conflict between the ministry and the central bank has happened many times before during previous administrations. At times, the conflicts led to the sacking of the central bank's governor. However, every time a conflict arises, the credibility of the financial institutions tends to be eroded by the war of words between politicians. It is the case now. And the war of words should end before it affects the confidence of investors and disrupts the plan to sell BankThai. If the FIDF could not find investors to buy BankThai, it would have to shoulder the financial burden by recapitalising BankThai again.

On the Finance Ministry's plan to merge three banks, Matichon asked if the finance minister's advisory team has thought about the source of the money to recapitalise the prospective bank. Besides, there would be the question of employment after the merger of the three banks. Matichon's economic team ended by asking if the Finance Ministry has thought about these issues which have to be dealt with after the big merger?