Thanong moots merger of banks

Speaking at a seminar, Thanong - who was also a close aide of former prime minister Thaksin Shinawatra - said that having six large banks was too many for the market, and they were in any case not that big when compared with those elsewhere.

Thai commercial banks will be forced to merge in order to be more competitive, he said, pointing out that foreign banks are generally large enough to absorb losses from financial crises, particularly the current sub-prime crisis.

He believes the country can, however, accommodate many specialised banks.

Thanong added that local financial institutions would not be competitive and would not expand as much as they should as long as the Bank of Thailand uses the same standard to govern all of them.

He said some institutions were quite weak and there were significant differences among commercial banks, specialised banks and non-bank institutions. If the Bank of Thailand continues to apply the same supervisory standard to all financial institutions, there would be negative effects. The key to supervision in the current era, he said, must be a separation of supervision of institutions in each category.

"Using the same standard for all the banks in these three groups will prevent some of them from boosting competitiveness. This will affect the overall financial system in the long term," Thanong said.

The former minister also spoke at the seminar about the role of chief financial officers, saying that CFOs must beware of cycles of change in global financial markets, as well as foreign-exchange policy that affects interest-rate trends.

Modern investors focus more on cash flow than price-to-earnings ratios or earnings per share, as cash flow reflects a company's future expansion. CFOs must, therefore, create returns for shareholders, he said.

Veerawat Kanchanadul, senior executive vice president of the Charoen Pokphand Group, told the seminar that the CFO must protect a company's assets more than boosting earnings, while Naris Cheykin - senior executive vice president of Central Pattana, said the CFO was the one who must keep financial discipline for sustainable growth.

Patiparn Sukorndhaman, senior executive vice president at Bangchak Petroleum, said a CFO was similar to a salesman - selling a company's credit to investors.