CHAPTER 1: WHERE DO WE GO FROM HERE?
“One of the roles of the financial regulator is to formalize processes and frameworks so as to guard against market disorder.” Dr. Tarisa Watanagase, Deputy Governor, Eminent Persons Group Meeting, April 2001
The first signs that financial institutions were resuming normal financial business occurred in 2000 as remaining finance companies began to submit applications to the Bank of Thailand asking for permission to expand their scopes of business into credit cards and loan servicing business. In the pre-crisis world, relevant departments within the Bank of Thailand would vet such requests and submit formal positions to senior management for final approval in a timely manner. But in the post-crisis period, where the majority of finance companies suffered irreparable losses from their disproportionate exposure to the real estate sector relative to commercial banks, authorities questioned the suitability of reviewing and approving requests on a case-by-case basis relative to looking at the scope of business in its entirety.
TABLE 1: FINANCIAL INSTITUTIONS UNDER SUPERVISION OF THE BANK OF THAILAND Pre-Financial Crisis January 31, 1997 Post-Financial Crisis December 2003 • Commercial Banks (31) Locally-incorporated (15) Foreign bank branched (16)
• International Banking Facilities (IBFs) attached to commercial banks (25) • Stand-alone IBFs (17) • Finance and Securities Companies (91)* • Credit Foncier (12) Total Number of Financial Institutions: 176
• Commercial Banks (31) Locally-incorporated (13) Foreign bank branched including hybrid banks (18) • International Banking Facilities (IBFs) attached to commercial banks (24) • Stand-alone IBFs (5) • Finance Companies (18) • Credit Foncier (5) Total Number of Financial Institutions: 83
Source: Bank of Thailand * As of December 31, 1996
The crux of the matter basically boiled down to a need to determine the appropriate role of small financial institutions in the Thai financial landscape, and to address pending issues raised by domestic and foreign financial institutions including the future scope of business, organizational structure and efficiency of financial institutions, and establish complementary supervisory regime capable of supporting, and not impeding, financial stability and soundness. To address these concerns, the Financial Institutions Policy Board (FIPB)1 initiated the ‘Recommended Structure for Financial