Thai Banks Kii Nee Ao

[Bruce551]

Bangkok Post 24 Jan 09

EDITORIAL: Banks must do their bit

Published: 24/01/2009 at 12:00 AM

Newspaper section: News

Finance Minister Korn Chatikavanij has demonstrated a difference in viewpoint compared to certain commercial bankers, including Kasikornbank CEO Banthoon Lamsam, over the financial institutions' spread or the gap between lending and deposit rates. Mr Korn remarked that the gap was too wide, resulting in unduly high profits earned by commercial banks, while Mr Banthoon noted that the rates were set by the principles of a free market system.

This difference raises three essential questions: Whether the commercial banks' interest rate spread is too high and their profit unseemly? Whether the government should allow the free-market mechanism to set interest rates? And whether commercial banks should contribute a little bit more to help the country survive the economic crisis?

Mr Korn, who was an investment banker before he turned to politics, made the remark apparently because he was upset by the response from commercial banks to the central bank's recent move to cut its policy lending rate.

The Bank of Thailand's Monetary Policy Committee recently cut the central bank's benchmark rate by 0.75 percentage points. However, in response to this, commercial banks reduced their lending rates by only 0.25 percentage points while lowering their deposit rate by as much as 0.75 percentage points. CROOKS!!!!!!

As a result, commercial banks' savings deposit rates now range from 0.5% to 2.5% while their minimum lending rate is around 7% and the minimum lending rate for general borrowers averages 7.7%.

Following the move by commercial banks, the central bank admitted that the benefits of its policy rate reduction had not fully passed through to the real sector.

Mr Banthoon, a highly respected banker, defended the commercial banks' decision. He said local financial institutions operated in a free market and the decision of each bank to adjust its interest rates was thus based on the free-market principle. (Sounds like Bush)

He also suggested that Mr Korn intervene by bringing down lending rates charged by government-owned banks. Mr Korn countered that under the present circumstances, all parties must contribute to society and "do what they can".

We agree with the Finance Minister. We must admit Thailand cannot escape the adverse impact of the global crisis and the economy could be on the brink of collapse if no proper and effective measures are taken.

As revealed by the government, the country's exports last month suffered a drastic drop of 14.5% and many economists expect zero growth as the best estimate for this year. Consumption is likely to suffer a contraction, while there is no sign of new investment. The only factor driving the economy is the stimulant created by government spending. Under such circumstances, this is not the time to stick to the free-market principle. It is time for all parties to "contribute and do what they can" - as Mr Korn says.

It is fortunate that local financial institutions have not suffered too badly from the global financial meltdown as they had learned a valuable lesson from the tom yum goong crisis a decade ago. We also remember that in the last crisis, the government spent vast amounts of taxpayers' money to bail out the financial sector. Now, the financial sector is the strongest party in a weakening economy. A little more help from the bankers - by reducing the burden on borrowers - would help stimulate the economy. After all, would the financial sector survive if all the other sectors collapsed?

*** Also Khun Korn wants to "Dust Off" Land Tax regulations. How many filthy rich Thais own thousands of Rai and pay very little Property Tax.

:!:

[Ngairo]

The ones with the money always win..... :!: