COMMENTARY
For SME and Islamic banks, what went awry?
- Published: 28 Feb 2013 at 00.00
- Newspaper section: News
Plainly speaking, it's been a complete management failure, both inside and out. How else can one frame the fact that two state-controlled banks, the SME Bank and the Islamic Bank of Thailand, are now wrestling with bad loans in excess of 80 billion baht, or over one-quarter of their total outstanding loans? When we consider the fact that their peers in the private sector count their own non-performing loans in the low single digits, and that Thai bank profitability overall is at record highs, the performance of these two institutions looks even worse.
One can buy and build quite a bit for 80 billion baht, whether it be schools for children, hospitals for the infirm or new roads and railways for commuters. Who should be held accountable? I think it's a collective failure, whether it be the executives and directors of the two banks, the political leadership which appointed both or the Finance Ministry officials tasked with supervising the institutions. All should answer to the public, and explain why we do not have new schools, hospitals or roads today.
Ministry officials and bank executives argue that the actual losses are likely to be less. No doubt. But even assuming that 50% of the dud loans can be reclaimed _ 24.6 billion baht at the Islamic Bank, and 39 billion at the SME Bank _ we are still talking about taxpayer losses amounting to tens of billions of baht.
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