AIG Retail Bank Says parent will inject Bt14 bn to affirm strength

"With Bt19 billion in deposits combined with Bt14 billion of support money from our parent and credit from other banks, we have enough liquidity," said Charly Madan, president and CEO of the bank.

AIG Retail Bank, a subsidiary of the American International Group AIG, was recently established as a niche retail bank with a head office in Bangkok and 10 branches.

The local bank suffered a loss of confidence among its depositors after its US parent sought an emergency US government loan of US$85 billion (Bt2.9 trillion).

AIG Retail Bank is part of the AIG Consumer Finance Group and consists of AIG Retail Bank and AIG Card.

The AIG Consumer Finance Group, which owns 99.55 per cent of the bank, has already transmitted some of the Bt14 billion into Thailand, Madan said.

The transaction assures the bank that its parent remains committed to running a commercialbank business in Thailand.

The bank will incur a cost for this money, but it is still cheaper than deposits, he said.

The bank managed to get back some of the deposits after it confirmed its financial strength, so net withdrawals were less than 10 per cent.

As well, the bank has Bt3.4 billion of capital after Bt1.6 billion was raised in March. Its capital adequacy ratio is 24.8 per cent, far higher than the regulatory minimum of 8.5 per cent and higher than the market average.

The bank has good growth prospects, because it can approach customers of all AIG member companies. Already 10 per cent of American International Assurance (AIA) employees have become its customers, and it could double that by crossselling.

AIG Retail Bank has been operating as a local commercial bank under Bank of Thailand regulations, with a Thai banking licence, since March 6, 2007. It started business in 1961 as Bangkok Investment Finance and Securities and was renamed AIG Finance in 1998. Its loan portfolio has been built up to Bt17 billion.

A source said USbased AIG wanted AIA in Thailand to send US$2 billion back home, since the local unit has "excess liquidity". But Thai authorities didn't allow the request due to strict regulations for fund transfers.

Chantra Purnariksha, secretarygeneral of the Office of the Insurance Commission, said AIA had asked for a little bit of extra money for foreign remittance in the past few months before AIG's financial col¬lapse in the US. It is a normal annu¬al export of funds.

She declined to disclose how much money AIA proposed to remit, saying her office had ordered officials to inspect the company's request closely.

It is normal practice among multinational insurers to repatriate money, she said. Many factors are considered, such as the company's financial reserves, insurancereserve fund and net profit, before such transfers are allowed.

"We can confirm it has not pulled out the money to assist the parent company in the US," she said.

AIA Thailand has 92 per cent of its assets located in the Kingdom.