The huge loss of the state-owned Islamic Bank of Thailand (IBank) has raised questions as to how a bank that runs on principles of integrity could turn into a financial institution riddled with suspected graft in just over a decade.
I remember being amazed at the bank's ideology -- that it would stick to the idea of sharing, rather than profit-taking -- and the care it had for the poor when it was opened about 15 years ago. Now it's just an illusion.
How did most of the 50 billion baht of loans issued by the IBank became bad debt? It remains unclear who is to be held accountable for such irresponsible management. I just wonder if the responsibility will be limited to bank staffers, or if should it include some Finance Ministry officials who oversaw the bank's operations at the time?
Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.
For those who have no idea how big the 50-billion-baht amount that was lost by bad management is, I suggest they consider that such a sum could cover the pensions for all the elderly for a year, or it could be used to construct one electric train line in Bangkok. It could also pay for well-paved roads stretching several thousand of kilometres in rural areas to boost the quality of life and development of people in those remote areas, or a free bus service for the urban poor, plus other welfare like subsidies for water and electricity charges for one or two years.
It's more than enough for all three of the navy's submarines!
Yet, it seems the bank's loss has received little attention from the public so far. We must not let the issue disappear without any action.
The then management of IBank once admitted that more than half of the bad debts (30 billion baht) were lent to a group of fraudulent people in 2011-2012. They said the bank brought charges against some people with a dozen court cases, but we have not heard about any progress. More importantly, I don't believe it was the work of just a few junior bank officers, and that there were no big fish involved in such major fraud.
The government came up with a rehabilitation plan. It planned to inject fresh funds worth 18 billion baht into the troubled bank, while looking for a new partner.
According to the rehabilitation plan, IBank will raise 18 billion baht to swing its capital adequacy ratio back to the central bank's minimum requirement of 8.5% of risk-weighted assets from a negative position of 20% now. The Finance Ministry plans to earmark two billion baht from the government's annual budget to fund IBank's recapitalisation plan, with the remainder to be borrowed from the specialised financial institutions fund.
Under the rehabilitation plan, the State Enterprises Policy Commission said it will permit IBank's new partner to hold up to a 74.5% stake. Yet no one has expressed an interest.
At the same time, the bank has sorted its customers into two groups. It was found that most of the bad debt, about 45 billion baht, was taken out by non-Muslim customers. This part of the bad debt will be taken care of by Islamic Asset Management, set up by the Finance Ministry. IBank is to handle the remaining five billion baht of unpaid debt that involves Muslim customers.
At a certain level, losses at a state-run bank may be acceptable provided operations are undertaken with integrity. We cannot compare its operations with those of commercial banks. As a matter of principle, state-owned banks are obliged to deal with some people with less credit, that is small- and medium-sized enterprise operators.
But it is another matter if the losses were incurred from fraud and corruption which looks to be the case with IBank. Those who are involved in the bad debt must be held responsible.