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State bank restructuring will focus on loan approval standards & transparency, accounting practices & getting loans to small businesses that need them.

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Economics

State bank woes lead to revision

Ministry urges greater transparency, refocus
26 Feb 2013
Wichit Chantanusornsiri

The ongoing financial problems at the Small and Medium Enterprise Development Bank of Thailand (SME Bank) and the Islamic Bank of Thailand (IBank) have prompted a rethink by the Finance Ministry of its supervisory and surveillance procedures for state-run specialised banks.

Policymakers say greater transparency and a refocus on the original intent of state-run specialised banks will be the main priorities in the restructuring.

SME Bank and IBank rank among the weakest financial institutions in the country, with both plagued with billions of baht in distressed loans and capital-adequacy ratios well below minimum international standards.

Transparency, internal controls and lending standards have been an ongoing problem at a number of state-controlled financial institutions. For example, Secondary Mortgage Corporation (SMC), an institution set up to encourage the development of mortgage securitisation in the country, in the past has been found to have overvalued asset collateral or purchased mortgage assets taken by nominees with no capacity to service their debt.

SME Bank's current problems, meanwhile, date back several years and include questionable accounting practices that understated the levels of non-performing loans (NPLs) at the bank. Policymakers were alerted to the problems only following a special examination by the Bank of Thailand at the Finance Ministry's request.

Areepong Bhoocha-oom, the finance permanent secretary, said checks and balances must be strengthened within the credit approval process at state-run banks.

...credit approval procedures... have lacked transparency and been a primary factor in the high levels of NPLs at certain banks...

...IBank, set up in 2003 to provide financial services in compliance with shariah law, as of last November reported NPLs of 24.6 billion baht or 22.59% of total outstanding debt.

But using the more stringent criteria governing commercial banks under Bank of Thailand regulations, bad loans at IBank would be as much as 39 billion baht or 30% of outstanding debt.

SME Bank is in even worse straits, with the latest figures putting bad loans at the bank at 39 billion baht or 40% of total outstanding loans.

...the fundamental purpose of these banks is to provide financial services and credit to customers otherwise unserved by commercial banks.

SMEs, small-scale exporters, rural businesses and small-scale farmers are all market segments now served by state-run banks, some set up decades ago at a time when the country's private banking sector was still in its infancy.

...While top-credit small businesses can generally easily access commercial banking services, weaker businesses often have little options outside of state-run institutions willing to accept higher credit risk.

He said other countries offered similar policies, citing South Korea, which used state banks to support small businesses directly despite the higher credit risks and prospects of loan losses.

''While the risk of losses are higher, if you look at the bigger picture and the potential value created for the country, then it becomes a worthwhile risk,'' Mr Areepong said.

''But Thailand has not reached that point, as we still face questions regarding transparency [in lending operations].''

... At IBank, of the 24.6 billion baht in claimed bad debt, as much as 90% represent loans to just 100 large companies, a sign that the bank's rapid lending growth over the past several years has been driven by corporate lending rather than retail or small business expansion...

(Source: Bangkok Post, Economics, State bank woes lead to revision, Ministry urges greater transparency, refocus, 26 Feb 2013, Wichit Chantanusornsiri, link)  


Banking Industry Vocabulary

state - government รัฐ
state bank
state-run bank

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

Islamic Bank of Thailand (IBank) - (See Wikipedia)

Non-Performing Loans (NPL) - loans on which borrowers are failing to make payments on time to pay back the loan, in default (See Wikipedia)

bad loans - Same as "NPLs"
distressed loans - Same as "NPLs"

woes - great problems or troubles ความเสียใจ, ความทุกข์ร้อน
state bank woes

revision - a change, improvement or addition that someone makes to something like a plan or document การปรับปรุงใหม่, การแก้ไขใหม่
state bank woes lead to revision

transparency - being visible to the public, with nothing hidden or secret; an honest way of doing things that allows other people to know exactly what you are doing; , no opportunity for secrets , sneakiness, corruption, or cheating ความโปร่งใส

focus - to work or be concerned with one thing more than others
refocus - to focus again

urges - ask or request someone to do something
Ministry urges greater transparency, refocus

ongoing - currently happening; happening at the present moment; continuing ไม่หยุดยั้ง, ต่อเนื่อง
ongoing financial problems

surveillance - the careful watching of some person for wrongdoing  การเฝ้าตรวจตราอย่างเข้มงวด
surveillance procedures

specialised - to work in and do one "special" area or task very well and efficiently (instead of many different things inefficiently)
state-run specialised banks

ongoing financial problems have prompted a rethink of supervisory and surveillance procedures for state-run specialised banks

intent - your plan or purpose จุดประสงค์
the original intent - the first plan at the beginning (was later changed)
the original intent of state-run specialised banks

restructuring - organizing a company, an industry or organization in a different way in order to make it work better and be more efficient

priorities - the most important things that you must do first (before other less important things)
the main priorities in the restructuring

Policymakers say greater transparency and a refocus on the original intent of state-run specialised banks will be the main priorities in the restructuring.

institutions - large and important organizations, such as universities or banks สถาบัน
financial institutions - banks and other organizations like banks that lend money to people
state-controlled financial institutions

rank ... - are at the level of ...
SME Bank and IBank rank among the weakest financial institutions in the country

plagued - caused a lot of problems for someone or something for a long period of time ทำให้ยุ่งยาก ลำบากมานาน
plagued with billions of baht in distressed loans

capital - money invested by owners in the business (bank regulated must be above a certain level and is regulated by law)
adequacy - good enough to get the job done

capital-adequacy ratios - the amount of liquid assets (money, stock shares, bonds that can easily be changed into money) as a percentage of bank loans; when the ratio is high it means the bank can can deal with loan losses and will meet government and international standards  (See Wikipedia)

the money it has lent and therefore risks losing

international - in many different countries or between different countries ระหว่างประเทศ
standards - an acceptable level of quality or achievement มาตรฐาน a rule for behaving which should be obeyed บรรทัดฐาน, กฎเกณฑ์, กรอบ
international standards

minimum - the smallest number or amount possible
minimum international standards

well below - far below
well below minimum international standards
capital-adequacy ratios well below minimum international standards

rank among the weakest financial institutions in the country, with both plagued with billions of baht in distressed loans and capital-adequacy ratios well below minimum international standards.

internal - existing or happening inside a person, object, organisation, place or country ภายใน
internal controls  

lending - giving money to someone who agrees to pay it back in the future การให้ยืม
lending standards

ongoing - happening now, currently happening
ongoing problem

transparency, internal controls and lending standards have been an ongoing problem at a number of state-controlled financial institutions.

securitise (verb) - to change a financial asset such as a loan into an asset that can be bought and sold such as a bond (See Wikipedia)
securitisation (noun)

assets - things owned, especially property and money สินทรัพย์

mortgage - a legal agreement in which you borrow money from a bank in order to buy a house, build something, develop a piece of land, etc.การจำนอง

mortgage securitisation
mortgage assets

development
development of mortgage securitisation

encourage - to make someone more likely to do something, or to make something more likely to happen ปลุกใจ
an institution set up to encourage the development of mortgage securitisation

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

overvalued - when an asset that is given a value (in the accounting system) that is more than it is worth
has been found to have overvalued asset collateral

debt - an amount of money that you owe หนี้
service debt

capacity - the ability to do something, the amount that a factory or plant could produce if all the equipment was in use all the time ความสามารถในการทำงาน
no capacity to service their debt

nominees
nominees with no capacity to service their debt

mortgage assets

purchased mortgage assets taken by nominees with no capacity to service their debt

Secondary Mortgage Corporation (SMC), an institution set up to encourage the development of mortgage securitisation in the country, in the past has been found to have overvalued asset collateral or purchased mortgage assets taken by nominees with no capacity to service their debt.

current - of the present time ปัจจุบัน
current problems

date back
date back several years

SME Bank's current problems date back several years

accounting - the work of keeping and checking financial records for a company or organization 
practices - common ways of doing things; ways of doing commonly repeated tasks
accounting practices

questionable - involving doubts about whether something has been done properly ที่น่าสงสัย
questionable accounting practices

understated
non-performing loans (NPLs) at the bank.
understated the levels of non-performing loans (NPLs) at the bank.

questionable accounting practices that understated the levels of non-performing loans (NPLs) at the bank.

alerted 
alerted to the problems
Policymakers were alerted to the problems only following a special examination by the Bank of Thailand at the Finance Ministry's request.

credit - loans, borrowing of money เครดิต เงินกู้ทั้งหมด
approval - official permission การอนุมัต
credit approval

process - a series of actions taken to achieve a result แนวทางปฏิบัติ, กระบวน, วิธีการ
the credit approval process

checks and balances
checks and balances must be strengthened within the credit approval process at state-run banks.

primary - first and most important
factor - a fact or situation which influences the result of something ปัจจัย
primary factor - the most important things that affect a situation

...credit approval procedures... have lacked transparency and been a primary factor in the high levels of NPLs at certain banks...

services - บริการต่างๆ
financial services - services that people get at banks such as loans or bank accounts that earn interest

provide - to give someone something that they want or need
provide financial services

shariah law -  the moral code and religious law of Islam (See Wikipedia)

compliance - following a rule or law
provide financial services in compliance with shariah law

outstanding - still exists, currently exists, not yet complete (not finished, not paid yet)
outstanding debt - money that people borrowed and have not paid back yet
reported NPLs of 22.59% of total outstanding debt

...IBank, set up in 2003 to provide financial services in compliance with shariah law, as of last November reported NPLs of 24.6 billion baht or 22.59% of total outstanding debt.

commercial banks - a bank with many branches in many different places serving businesses and familes with bank accounts loans and ways to save money (the ordinary bank that most people use)

regulations - official rules that control the way that things are done ระเบียบปฏิบัติ ระเบียบ ข้อบังคับ  กฎระเบียบ
Bank of Thailand regulations

criteria - standards, the key points of comparison and factors that you use to make a decision บรรทัดฐาน
stringent criteria - very exact rules and standards (always followed, not flexible)

stringent criteria governing commercial banks under Bank of Thailand regulations, bad loans

But using the more stringent criteria governing commercial banks under Bank of Thailand regulations, bad loans at IBank would be as much as 39 billion baht or 30% of outstanding debt.

bad straits - in bad condition, in a bad situation
worse straits
in even worse straits

figures - statistics, numbers describing the economy
latest figures

SME Bank is in even worse straits, with the latest figures putting bad loans at the bank at 39 billion baht or 40% of total outstanding loans.

fundamental - very important and essential พื้นฐาน รากฐานที่สำคัญ
fundamental purpose - the most important reason (why something exists)
the fundamental purpose of these banks

...the fundamental purpose of these banks is to provide financial services and credit to customers otherwise unserved by commercial banks.

scale - size (relative size)
small-scale

small-scale exporters
small-scale farmers

rural - in the countryside (farms, forests), not the city  ในชนบท, บ้านนอก
rural businesses

market segment - a customer group similar (income, age, habits) with special needs met by specialized niche products (See Wikipedia)
market segments served by state-run banks

decades - periods of ten years เป็นสิบๆปี
set up decades ago

sector - a part of a country's economic or business activity ภาค (เศรษฐกิจ)(See Wikipedia)
private banking sector - banks that are companies (owned by individuals; not the government)

infancy - very young (like a baby), not old 
still in its infancy
the country's private banking sector was still in its infancy

SMEs, small-scale exporters, rural businesses and small-scale farmers are all market segments now served by state-run banks, some set up decades ago at a time when the country's private banking sector was still in its infancy.

access - the ability to get something สิทธิหรือโอกาสในการใช้
options - choices ทางเลือก

risk - danger, how likely or possible it is for a bad event that causes harm and damage ความเสี่ยง
credit risk - how likely someone is to pay back loans

higher credit risk - less likely to pay back loans
willing to accept higher credit risk

...While top-credit small businesses can generally easily access commercial banking services, weaker businesses often have [few] options outside of state-run institutions willing to accept higher credit risk

support - help, by giving money, for example สนับสนุน
support small businesses

South Korea used state banks to support small businesses

loan - an amount of money that a person, business, or country borrows, especially from a bank เงินกู้
loan losses

prospects - the possibility that things will happen, especially something good ความเป็นไปได้
prospects of loan losses

citing - giving or mentioning as an example or reason ให้ อ้างอิงเหตุผล

He said other countries offered similar policies, citing South Korea, which used state banks to support small businesses directly despite the higher credit risks and prospects of loan losses.

potential - possible ความเป็นไปได้
potential value

worthwhile - something that is useful; suitable reward for the money or time spent   ("worth" the time and effort) คุ้มค่ากับความพยายาม
a worthwhile risk

big picture - the big view or description of a situation (without details)
if you look at the bigger picture

''While the risk of losses are higher, if you look at the bigger picture and the potential value created for the country, then it becomes a worthwhile risk,'' Mr Areepong said.

''But Thailand has not reached that point, as we still face questions regarding transparency [in lending operations].''

claim - to say something is true (without proving it yet)
claimed bad debt

represent - are เป็น
as 90% represent loans to just 100 large companies

rapid - happening quickly อย่างรวดเร็ว
rapid growth
the bank's rapid lending growth

corporate
corporate lending

retail - to sell directly to the public for their own use ขายปลีก
expansion - when something increases in size, number or importance การขยายออก

retail expansion
small business expansion

growth - Same as "expansion"
driven by - caused by

growth driven by - growth caused by
lending growth driven by corporate lending rather than retail or small business expansion...

... At IBank, of the 24.6 billion baht in claimed bad debt, as much as 90% represent loans to just 100 large companies, a sign that the bank's rapid lending growth over the past several years has been driven by corporate lending rather than retail or small business expansion...