SME Bank caught lying | Bangkok Post: learning

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Bad loans are 25% of loans not 15% as reported bank examiners discover. 8 billion of bank's 25 billion in loans suspect.

Photo above of an auditor at work examining the account books of a company checking for irregularities that may indicate that the organization has lied about its financial transactions (cooked the books).

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Financial Advice

Finance official: SME Bank 'misstated' bad loans in portfolio

24/02/2012
Wichit Chantanusornsiri

The Small and Medium Enterprise Development Bank of Thailand (SME Bank) has manipulated its accounts to understate the level of bad loans in its credit portfolio, says a Finance Ministry official

The source said an examination by the Bank of Thailand found that non-performing loans at the state-run bank are as high as 25% of total outstanding loans compared with 15% reported by SME Bank.

Central bank examiners first discovered the irregularities during an audit last March and singled out two issues for further review.

Examiners commented that restructuring plans approved by SME Bank on behalf of its problem customers "failed to reflect the actual repayment capacity" of the customers.

Singled out were the accounts of about 100 borrowers with outstanding debts of 3.5 billion baht.

Delinquent loans that were restructured then became delinquent again. Some loans were restructured more than 10 times on behalf of the customers.

Examiners said by constantly restructuring debt for certain clients despite evidence of an inability or unwillingness to service the loans, SME Bank suffered additional losses by failing to take more proactive efforts to seize collateral assets or take legal action against the dud borrowers.

The bank's strategy however did help reduce non-performing loan levels on the surface even though the restructured debt continued to remain "bad."

The central bank review also noted that in some cases, SME Bank reclassified restructured debt as performing despite the fact that the borrower had yet to sign the restructured loan agreements.

Indeed, examiners questioned whether the borrowers were even aware that SME Bank had restructured loan accounts and payment terms on their behalf, presumably in a bid to push the bank's overall bad loan figures down.

SME Bank said non-performing loans currently stand at around 15 billion baht out of a total outstanding credit portfolio of 100 billion

But authorities say that of 25 billion baht worth of debt in the bank's bad loan portfolio, as much as 8 billion in loans are suspected of accounting "window dressing."

Naris Chaiyasoot, SME Bank's chairman, said he is aware of the examination report and has directed management to submit an action report to the Bank of Thailand for review.

Deputy Finance Minister Wirun Techapaiboon said he has also directed SME Bank to retain an outside auditor to review accounts.

As a state-owned financial institution, SME Bank is currently audited by the Auditor-General's Office.

Mr Wirun said SME Bank has also been ordered to comply strictly with other Bank of Thailand recommendations such as an overhaul of the bank's credit risk analysis functions.

(Source: Bangkok Post, Financial Advice, Finance official: SME Bank 'misstated' bad loans in portfolio, 24/02/2012, Wichit Chantanusornsiri, link) 

Bank Examiner Vocabulary

Small and Medium Enterprise Development Bank of Thailand (SME Bank) - a government bank in Thailand that specializes in making loans to SMEs (See website)

bank examiner - a kind of auditor that makes sure that banks are operating legally and ethically (See Wikipedia)
central bank examiner - a bank examiner from Thailand's central bank the Bank of Thailand (BOT)

audit - official examination of accounting records to check if they are correct and there are no irregularities (See Wikipedia)
auditor - a person who officially examines the accounting records of an organization to ensure accuracy
audited - to have your accounting records examined for accuracy

account books - the written records of the financial affairs of a business or the same recorded in a computer database (See Wikipedia)
financial transaction - a piece of business that is done between people, especially an act of buying or selling (See Wikipedia)
irregularities - things that are not normal and therefore suspicious (might indicate problem or wrong-doing) ความไม่สงบ

loan - an amount of money that a person, business, or country borrows, especially from a bank เงินกู้
non-performing loans  - a loan that a borrower has not made a payment on for a long time, so bank has lost money on loan (See Wikipedia)
bad loan - Same as "non-performing loan"

portfolio - a set of investments owned by a person or organization; securities (stocks, bonds) owned and derivatives owned by a firm or individual หลักทรัพย์
loan portfolio - all the loans that a bank has made to borrowers
credit portfolio - Same as "loan portfolio"
credit - loans; the total amount of loans in an economy เครดิต เงินกู้ทั้งหมด money that you owe someone (a bill that grows until you pay it off at the end of the month, for example)

Finance official: SME Bank 'misstated' bad loans in portfolio

accounts - the accounting records of a company, the records of money paid, received or owed over a period of time by a company
understate - say lower than actually is กล่าวถึง(จำนวน)ที่น้อยกว่าความเป็นจริง
manipulated - change in a dishonest and untruthful way (for personal gain)
manipulated its accounts
manipulated its accounts to understate the level of bad loans
manipulated its accounts to understate the level of bad loans in its credit portfolio

The Small and Medium Enterprise Development Bank of Thailand (SME Bank) has manipulated its accounts to understate the level of bad loans in its credit portfolio, says a Finance Ministry official

source - someone who gives information แหล่งข่าว
outstanding - still exists; not yet complete (not finished, not paid yet)
outstanding loans - loans that still exist (the money borrowed has not been paid back to the bank yet)
outstanding debts - Same as "outstanding loans"

The source said an examination by the Bank of Thailand found that non-performing loans at the state-run bank are as high as 25% of total outstanding loans compared with 15% reported by SME Bank.

issues - an important subject that people are discussing and debating about  ประเด็น
issues for further review - issues to look at more sclosely to see if there is a problem

single out - to select one or a few things from a big group of things

Central bank examiners first discovered the irregularities during an audit last March and singled out two issues for further review.

debt - an amount of money that you owe หนี้
restructure debt - to change the conditions of the loan to make it easier to pay back
restructured debt
reclassified restructured debt as performing
restructuring plans

on behalf of - doing for another person, someone else

capacity - the ability to do something ความสามารถใน การทำงาน การผลิต ...
repayment capacity - the ability of a borrower to pay back money borrowed

actual - real; existing in fact จริง
the actual repayment capacity

reflect - to show สะท้อน แสดงถึง
failed to reflect - did not show
failed to reflect the actual repayment capacity - did not show if they could really pay back the loan

delinquent - late in doing something; not on time; did not meet deadline or due date
delinquent loans - loans not paid back in time

Examiners commented that restructuring plans approved by SME Bank on behalf of its problem customers "failed to reflect the actual repayment capacity" of the customers. Singled out were the accounts of about 100 borrowers with outstanding debts of 3.5 billion baht. Delinquent loans that were restructured then became delinquent again. Some loans were restructured more than 10 times on behalf of the customers.

constantly - continuously; all the time อย่างต่อเนื่อง
constantly restructuring debt

clients - (formal) customer ลูกค้า
evidence - facts, statements or objects that help to prove in a court whether or not someone has committed a crime หลักฐาน หลักฐานประกอบการไต่สวนคดี หรือพิจารณาคดี

proactive - acting in advance to solve problems before they occur มาตราการป้องกันล่วงหน้า (See glossary)
efforts - the work done towards achieving some goal; people trying to accomplish something, achieve a goal ความพยายาม
seize - to take control of by force or official power ยึกครอง จับกุม ยึด
collateral - property or some other valuable asset that you promise to give to a lender if you cannot pay back money that you borrowed ทรัพย์สินผูกพันตนเพื่อเอาไว้หักชำระหนี้หากไม่ชำระหนี้นั้น (See glossary)
assets - things owned, especially property and money; for example: stocks, bonds, real estate, loans to others, or money สินทรัพย์
take more proactive efforts to seize collateral assets

dud - failed, didn't work (example; the dud firecracker failed to explode)
dud borrowers - failed borrowers (who never paid back their loans as promised)

take legal action - go to the courts and try to get some action (get your money back)
take legal action against the dud borrowers.

Examiners said by constantly restructuring debt for certain clients despite evidence of an inability or unwillingness to service the loans, SME Bank suffered additional losses by failing to take more proactive efforts to seize collateral assets or take legal action against the dud borrowers.

strategy - a plan to achieve a goal over a longer period of time (longer than a "tactic")
on the surface - what can be seen by outsiders (but may not be the truth)

The bank's strategy however did help reduce non-performing loan levels on the surface even though the restructured debt continued to remain "bad." The central bank review also noted that in some cases, SME Bank reclassified restructured debt as performing despite the fact that the borrower had yet to sign the restructured loan agreements.

aware - knowing that something exists, or having knowledge or experience of a particular thing ทราบ

terms - details and conditions in an agreement, contract, or arrangement ข้อกำหนด
payment terms

bid - an attempt to do something ความพยายาม
in a bid to

figures - statistics, numbers describing the economy
bad loan figures

Indeed, examiners questioned whether the borrowers were even aware that SME Bank had restructured loan accounts and payment terms on their behalf, presumably in a bid to push the bank's overall bad loan figures down. SME Bank said non-performing loans currently stand at around 15 billion baht out of a total outstanding credit portfolio of 100 billion. 

authorities - government officials; the police or people in official organisations who have the legal power to make people obey laws or rules เจ้าหน้าที่ (ตำรวจ หรือผู้มีอำนาจ)
suspected - thought to be something เป็นที่สงสัย people believe that they might have done something wrong, but not yet proven
accounting - the work of keeping and checking financial records for a company or organization
accounting "window dressing" - changing the accounts of a company in an untruthful way (to make things look better than they really are)

But authorities say that of 25 billion baht worth of debt in the bank's bad loan portfolio, as much as 8 billion in loans are suspected of accounting "window dressing."

submit - to formally give something to someone so that can make a decision about it ยื่น (เอกสาร) เพื่อการพิจารณา

Naris Chaiyasoot, SME Bank's chairman, said he is aware of the examination report and has directed management to submit an action report to the Bank of Thailand for review.

retain - hire
retain an outside auditor - hire an auditor from outside the company to check the company's accounts

Deputy Finance Minister Wirun Techapaiboon said he has also directed SME Bank to retain an outside auditor to review accounts.

institution - an important tradition or system upon which society is based สถาบัน
financial institution - a bank or a organization that deals with money like a bank

As a state-owned financial institution, SME Bank is currently audited by the Auditor-General's Office.

comply - to obey a rule or law or do what someone asks you to do ปฏิบัติตามกฎหมาย
comply - to obey a rule or law, or to do what someone asks you to do;  follow and obey rules and regulations ปฏิบัติตามกฎหมาย
strictly - completely อย่างเข้มงวด
overhaul - repair completely and rebuild; to improve something so that every part of it works properly ปรับปรุงใหม่
risk - the possibility that something dangerous or unpleasant might happen ความเสี่ยง
finance - to provide money for something จัดหาเงินทุนให้

Mr Wirun said SME Bank has also been ordered to comply strictly with other Bank of Thailand recommendations such as an overhaul of the bank's credit risk analysis functions.

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