Loan rules eased for banks, related parties
The Bank of Thailand has relaxed its regulations to allow credit committees or executive boards to approve loans between commercial banks and related parties, with approval no longer being required from the relevant institution's board of directors.
The BOT defined related parties as credit institutions more than 75 per cent held by banks. The relaxed regulations also cover loans for any companies more than 10 per cent controlled by the Finance Ministry or other state agencies. BOT deputy governor Tarisa Watanagase said the change was intended to facilitate banks' business and prevent unnecessary losses. According to the relaxed rules, however, the board of directors must unanimously approve any loans approved by executive committees. Tarisa said this would help to reduce credit risk. Assistant BOT governor Krirk Vanikkul said banks requested the regulations be relaxed because the previous rules were slowing down the credit-approval process and causing banks to lose business. "The related parties may be good or bad, but in general they are not bad. Credit to related parties is not a bad thing, but it would be bad if banks abuse their power," said Krirk. Credit to related parties has been closely controlled by the BOT, with the central bank seeking to prevent crony lending. It encouraged transparency in credit approval by requiring banks' board of directors to be involved. Krirk said loans to related parties had declined since the BOT's regulation was introduced. As of August, such loans were worth Bt194.96 billion and comprised 3.35 per cent of total loans.
Anoma Srisukkasem The Nation
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