No plan to scrap SME Bank, FPO chief says

Fiscal Policy Office (FPO) director-general Somchai Sujjapong yesterday affirmed that the Finance Ministry had no plans to dissolve the Small and Medium Enterprise Development Bank of Thailand, which is in the process of improving its performance.

Somchai will meet on Friday with the SME Bank committee tasked with improving bank performance to learn how it will go about this, he said.

He insisted that Thailand needed the SME Bank and the government would not definitely let its collapse.

On Monday, Finance Minister Kittiratt Na-Ranong disclosed that a study by the FPO had proposed that the SME Bank should be merged with the Government Savings Bank, as the former has several problems including a high proportion of bad loans and alleged lack of lending transparency practice. Kittiratt said that if the two banks had to merge, SME Bank had to cut down its non-performing loans first.

But on the same day, Areepong Bucha-oom, the Finance Ministry's permanent secretary, said that so far the ministry had no plan for such a merger. However, it had been worried about the performance not only of SME Bank but of the Islamic Bank of Thailand, because of the high levels of NPLs they have accumulated. The ministry had assigned the FPO to seek ways to solve these problems.

Somchai said the possibility of a merger had been raised in a study by the World Bank, which evaluated the performance of banks here that were set up for specific purposes, and the study was continued by the FPO.

As of December, SME Bank had assets of Bt97 billion, debts of Bt69 billion, outstanding loans of Bt96 billion, and NPLs of Bt31 billion. Its capital adequacy ratio is 1 per cent, far lower than the 8.5 per cent required by the Bank of Thailand. The SME Bank has deposits of around Bt10 billion.

Somchai said the Finance Ministry wanted to help SME Bank solve its NPL problem to enable it to get stronger.

He said he would visit the Islamic Bank next Monday to learn of its plan to deal with its NPLs. It has Bt24 billion worth of NPLs out of total outstanding loans of Bt109 billion. The bank has a capital adequacy ratio of 4.6 per cent.