BOT highlights good governance to foreign full branch banks

The central bank's permission will be a legal necessity for appointment of bank directors and senior management, similar to Thai commercial banks.

The central bank yesterday had talks with the foreign full branches to inform them about the principle, in accordance with new Financial Institutions Business Act.

BOT assistant governor Krik Vanikkul said that good governance was an important issue in the banks' management because it would ensure the banks would have loyal and competent executives.

"We have experienced the financial crisis. If we did not have austere regulations, it would be like having a fence with the cows missing'," Krirk said.

Under the former law, foreign full branches were not bound to ask for permission from the central bank for the appointment of directors and senior management executives.

They could appoint directors and senior management staff by themselves as long as the executives' qualification met the "fit and proper" criteria. That was because their capital requirement was different from Thai banks.

Before the 1997 financial crisis, finance companies were not required to ask permission from the BOT when they appointed the executives.

The central bank, however, brushed up the criteria, forcing finance companies to comply with the goodgovernance regulation.

In 2004, the central bank introduced the "fit and proper" criteria to encourage good governance in the banking system. This would help strengthen the banking system, economic stability and longterm benefit for the people.

It realised that the industry played a crucial role for the entire economy and the benefit of people, including depositors, customers and minor shareholders.

Thai banks' top executives need to be free from any financial problem with financial institutions. They must not have been demoted or sued by the central bank and the Securities and Exchange Commission.

They must also not have unreliable personal background and any instances of fraud or negligence in the performance of their duties.