BOT ready to help troubled state banks

IBank, SME Bank given 6-month deadline

The Bank of Thailand is ready to support the Finance Ministry in tackling the problems of the specialised financial institutions (SFIs) owned by the state.

The Fiscal Policy Office (FPO) has given a six-month deadline to both the Islamic Bank of Thailand (IBank) and the Small and Medium Enterprise Development Bank to clear their bad assets before deciding to inject money into them.

BOT Assistant Governor Salinee Wangtal said yesterday that the central bank had been closely monitoring the operations of all these SFIs and reported to the ministry on a substantial basis.

The BOT is happy that the ministry is taking the cases of these banks seriously and is willing to support its moves, she said.

The Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives are still financially healthy.

While the ministry has considered relaxing some rules governing these banks, this is not important. The real issue is whether their lending has hurt their performance or caused losses, Salinee said.

Some of these SFIs such as IBank should be continued as they are designed to serve specific customer groups. Other countries have the same kinds of banks and they can perform well, she added.

FPO executives yesterday met with IBank executives after its non-performing loans showed a rising trend. As of December 31, its NPLs were Bt24 billion or 20 per cent of the loan portfolio. The executives of IBank proposed solutions to reduce the bad loans.

Somchai Sujjapongse, director-general of the FPO, said his office and the State Enterprise Policy Office would send a special team to work on the NPLs at IBank day by day as part of debt restructuring. After six months, the FPO will submit a proposal for a capital increase at the bank to the Finance Ministry for consideration.

The FPO believes IBank can solve its huge bad-loan problem after its executives showed figures and business plans to the office. Human resources are a critical element to speed up debt-restructuring.

"Some NPLs are under legal process, while some are under negotiation and some are under restructuring, so IBank must keep moving forward and we will follow them and closely monitor the plan every week," Somchai said.

IBank is still operating normally especially in the retail loan business, but will be more cautious about granting corporate loans. On the deposit side, there have been no withdrawals except the Bt400 million to Bt500 million that Thailand Post Co took out for business expenses.

"The liquidity of IBank is not a problem and the rumour about large withdrawals was not true. We've been informed that deposits are still flowing into the bank," he said.

As of the end of last year, IBank had assets of Bt130.83 billion and liabilities of Bt126.50 billion. Outstanding loans were Bt109.49 billion, of which Bt24.73 billion or 22 per cent of the portfolio were NPLs.