Reform shields Thai system

The smaller number of businesses in the sector, the less complicated financial market and different policy implementation have shielded the Kingdom from any immense impact from the US financial turmoil, a senior official said.

Such changes will ensure that the Kingdom does not experience anything like Wall Street has been going through, most recently with long-established investment banks Goldman Sachs and Morgan Stanley seeking approval to become commercial banks.

Sorasit Soontornkes, a Bank of Thailand assistant governor, said the first phase of the financial master plan had been drafted to get the system in order and allow more consumers to access banking services.

The reforms were the result of the 1997 financial crisis, when 56 Thai finance companies and a number of commercial banks went bankrupt. Only commercial banks are now allowed to conduct all activities, as universal banks.

Finance companies and credit foncier companies have been forced to upgrade into universal banks, become retail banks with limited business activities, become credit companies - or go out of business.

There are two business models under the financial master plan - holding companies or banks as parent companies. This is different from the models in the United States, where there are a number of different kinds of financial institutions.

The Thai models allow the central bank to closely monitor banks through its consolidated and risk-based supervision.

"The scheme has a better and tightened standard, with only a single law," Sorasit said.

Vorapol Socatiyanurak, vice chairman of the National Economic and Social Advisory Council, said he did not agree with the US Federal Reserve's approval of the requests by Goldman Sachs and Morgan Stanley to become commercial banks.