Two Thai banks under heavy pressure

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SME BankIslamic Bank of Thailand and SME Bank, a Thai financial institution specialising on small and medium company financing, are currently feeling the heat of non-performing loans and have been asking the government for capital injections.

The SME Bank has asked for 6 billion baht ($200 million) of capital increase, whereas the Islamic Bank of Thailand (IBank) has asked for as much as 14 billion baht ($466 million).

Non-performing loans at the SME Bank are at 40 per cent of all loans of after the bank was lending heavily to small and medium enterprises after the 2011 floods, but a high number of businesses has not been able to repay the rates regularly.

Bad loans at the IBank are in a range of 30 per cent, the state-owned bank admitted on February 12 and gave the reason with “grossly negligent lending by former executives.”

The Thai Ministry of Finance has said it will increase its scrutiny in overseeing loan issuance by IBank and the SME Bank, especially the granting of large loans. The ministry also plans to speed up the process of reducing non-performing loans carried by the two troubled state lenders.

IBank has experienced a run of alarmed customers to withdraw their account balances in the past few days at a combined sum amounting to 4 billion baht, but denies that is in the danger of a “crash”. It said that customers “have no need to panic.”

The bank is 100 per cent owned by the government and  would continue to provide financial services as usual, it said.

However, the finance ministry has committed itself so far to just release 1 billion baht as additional capital for the banks. Customer accounts are protected under existing law, the government said.

One high-ranking Thai state banker said the problems at SME Bank and IBank are reflecting weaknesses in the specific regulations and laws governing both banks, an overemphasis on asset growth and a lack of experience at the board and management levels.

Thai Finance Minister Kittiratt Na-Ranong said that there are no plans to scrap both banks, but at least SME Bank could be merged with the Government Savings Bank, also a state-owned financial institution.

 

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Reading Time: 2 minutes

Islamic Bank of Thailand and SME Bank, a Thai financial institution specialising on small and medium company financing, are currently feeling the heat of non-performing loans and have been asking the government for capital injections.

Reading Time: 2 minutes

SME BankIslamic Bank of Thailand and SME Bank, a Thai financial institution specialising on small and medium company financing, are currently feeling the heat of non-performing loans and have been asking the government for capital injections.

The SME Bank has asked for 6 billion baht ($200 million) of capital increase, whereas the Islamic Bank of Thailand (IBank) has asked for as much as 14 billion baht ($466 million).

Non-performing loans at the SME Bank are at 40 per cent of all loans of after the bank was lending heavily to small and medium enterprises after the 2011 floods, but a high number of businesses has not been able to repay the rates regularly.

Bad loans at the IBank are in a range of 30 per cent, the state-owned bank admitted on February 12 and gave the reason with “grossly negligent lending by former executives.”

The Thai Ministry of Finance has said it will increase its scrutiny in overseeing loan issuance by IBank and the SME Bank, especially the granting of large loans. The ministry also plans to speed up the process of reducing non-performing loans carried by the two troubled state lenders.

IBank has experienced a run of alarmed customers to withdraw their account balances in the past few days at a combined sum amounting to 4 billion baht, but denies that is in the danger of a “crash”. It said that customers “have no need to panic.”

The bank is 100 per cent owned by the government and  would continue to provide financial services as usual, it said.

However, the finance ministry has committed itself so far to just release 1 billion baht as additional capital for the banks. Customer accounts are protected under existing law, the government said.

One high-ranking Thai state banker said the problems at SME Bank and IBank are reflecting weaknesses in the specific regulations and laws governing both banks, an overemphasis on asset growth and a lack of experience at the board and management levels.

Thai Finance Minister Kittiratt Na-Ranong said that there are no plans to scrap both banks, but at least SME Bank could be merged with the Government Savings Bank, also a state-owned financial institution.

 

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