The cabinet yesterday approved a reform plan for savings and credit cooperatives proposed by the Finance Ministry to make the system more transparent and efficient.
Kobsak Phutrakul, assistant minister to the Prime Minister's Office, said the reform plan will be based on directives of the Basel Committee on Banking Supervision (Basel I).
Basel I is the round of deliberations by central bankers from around the world.
In 1988, the Basel Committee on Banking Supervision in Basel, Switzerland published a set of minimum capital requirements for banks. This is also known as the 1988 Basel Accord, and was enforced by law in the Group of Ten countries in 1992.
Basel I -- that is, the 1988 Basel Accord -- is primarily focused on credit risk and appropriate risk-weighting of assets.
The new regime will call for savings and credit cooperatives that have assets of more than 5 billion baht to rely on similar regulations applied to commercial banks and state banks.
Cooperatives with assets of more than 5 billion baht are required to have no fewer than three directors, while managers will need to be experts in financial management and accounting.
Such cooperatives are also required to have internal auditors approved by the Securities and Exchange Commission.
The credit lines given to the cooperatives' directors will be capped at 10% of the cooperatives' total share value.
According to Mr Kobsak, each cooperative is required to have a credit approval unit separate from the analysis division to make credit approval more transparent.
The cooperatives should not pay dividends exceeding 80% of their net profit. Associate members of the cooperatives will be restricted only to the member's parents, spouse and children.
Accounting practices are required to conform with Thai Accounting Standards and Financial Reporting Standards, all accounts of which will need to be disclosed to members.
The cooperatives' directors will stay in power for three years, with only two terms allowed.
According to Mr Kobsak, the new regulation will limit the cooperatives' investment to a maximum of 10% of total share value.
According to the Finance Ministry's reports, the savings and credit cooperatives now have total assets of as much as 2.61 trillion baht.
There are 1,448 savings cooperatives and 588 credit cooperatives. The savings cooperatives manage 2.06 trillion baht worth of total assets.
Of the total, 113 savings cooperatives have assets of more than 5 billion baht.
Only one credit cooperative has assets worth more than 5 billion baht.
Credit cooperative assets overall amount to 55 billion baht.