Solutions proposed for struggling Small and Medium Enterprise Development Bank

“We proposed that the NPLs [non-performing loans] be sold, as its NPLs are very high and hard to resolve. Once this big NPL portion is sold, the bank’s NPLs will decline, which will allow it to issue bonds and extend more loans,” Somchai Sujjapongse, director-general of the FPO, said last week.
Sukhumvit Asset Management Co has already appraised the prices of the SME Bank’s non-performing assets for sale. The NPLs account for 30 per cent of the bank’s Bt90-billion loan portfolio.
To solve the bank’s liquidity problem, the bank has to talk to its customers, which are all state agencies, to deposit funds for a longer time – from one month to one or two years. It will also have to issue long-term bonds. The Finance Ministry will have to step in to guarantee the bonds.
The Islamic Bank of Thailand (iBank) does not face a liquidity crunch but still has to address some internal problems. The bank should be able to continue operating.
iBank is now operating under the regulations of the Bank of Thailand but it wants to go back under the Finance Ministry for greater operating flexibility. The FPO has considered this request.
The office has also considered the state bank reform plan under which they have to adjust their roles to fit with their missions.
The Government Savings Bank has to focus more on lending to individual customers in urban areas, while the Bank for Agriculture and Agricultural Cooperatives will concentrate on individuals in rural areas.
A committee will be set up to regulate the banks’ direction. Some outdated laws governing them will be amended.
Once all these changes are finished and the committee is completely established, existing regulations will be improved.
The state banks should not be subject to all the rules of the central bank since they carry higher risks than commercial banks. However, they will still be strictly regulated.
The state bank reform plan will also determine that in the midterm, a specific law will be issued to oversee all the state banks.
The office has already discussed with the state banks’ executives on ways to regulate the state banks, and they agreed with the direction.
Strict regulations will be slapped on banks that can accept deposits from individual customers, while the ones with state agencies as main customers should not be subject to all but only some of the central bank’s regulations.
Once the draft regulations of the state bank reform are ready, they will be proposed to policy-makers for consideration next month, he added.