Thai Loan Norms To Be Tightened By 2000

The Bank of Thailand said yesterday that it had set a target to further tighten classification of loans extended by Thai commercial banks to raise their quality to international standards by 2000.

Central bank governor Chaiyawat Wibulswasdi told reporters after meeting bankers, "Our policy is to raise our standards to strengthen our positions and credibility, taking into consideration the viability and timing for our financial institutions to adjust to such measures."

The governor said the central bank aimed to raise the standards of its commercial bank supervision to match practices in more developed countries in two years.

"Our moves to strengthen banks and boost market confidence must be implemented consistently," he said. He said, however, that his meeting with private bankers did not produce a definite time frame on more stringent banking supervision.(Reuters)

Assistant central bank governor Tanya Sirivekhin said the authorities would further tighten, from the second half of this year, definitions of substandard and non-performing loans of Thai banks.

She referred to a central bank plan to shorten, to three from six months, the maximum period that bank clients can miss interest payment on loans borrowed from commercial banks before creditor banks are required to set provisions for them.

The central bank just started enforcing tougher loan classification from January 1 this year.

Under its recently adopted standard, banks could not book, as revenue receivable, any delayed earnings from loans not serviced by interest payment for more than six months. Its previously permitted non-service period was 12 months.

The stricter measure has forced all Thai banks to sharply raise capital as they need to raise substantial funds for meeting higher provisions for deteriorating loans and assets.

Several medium and small Thai banks that failed to recapitalise have been taken over in recent months by the authorities or agreed to sell majority shares to foreign partners.Ball in FIs court