BoT downplays Map Ta Phut as risk-factor for creditor banks

BANGKOK, Dec 5 (TNA) – Bank of Thailand (BoT) Assistant Governor Sorasit Soontornkes on Friday shrugged off mounting concern that the suspension of 65 investment projects in the Map Ta Phut Industrial Estate could put creditor banks at risk, saying the financial position of the banks remains strong.

He said that commercial banks had loaned about Bt200 billion to investment projects in Map Ta Phut. Of this, Bt95 billion had been already drawn down.

An initial survey found that the loans were disbursed normally and that no projects had experienced difficulties in cash flow.

As a result, he said, the banks needed not set a loan-loss provisioning because it is unlikely the Bt95 billion loan amount would become non-performing as a whole.

“Even if the amount becomes non-performing as a whole, it will not affect the financial position of the banks because the capital-to-risk asset ratio is as high as 15-16 per cent now and the reserve provision as required by the central bank is so substantial,” he said.

As of the end of November 2009, the outstanding loans extended by the banks to the suspended projects totalled Bt78.06 billion or 1.15 per cent of the total loans.

In case the loans turn bad as a whole, it would reduce the bank’s capital adequacy set under the Bank for International Settlement (BIS) rule by only 0.1 per cent to around 15.8 per cent. So, it should not affect the banks’ financial status.

In the short run, Mr Sorasit projected, the suspension of the 65 investment projects, if not persistent, would not impact creditor banks, but should the suspension drag on, it needs to be assessed again how adversely the bank would be affected. (TNA)