Asian bankers call for accelerated restructuring

Asian bankers call for accelerated restructuring

SINGAPORE (AFP): Bank and financial restructuring efforts
deemed crucial to the overall Asian recovery have barely begun
and the region's governments are partly to blame, top bankers
said Tuesday.

A sense of urgency on restructuring appears to have
disappeared since economies hardest hit by the crisis began
recovering this year, executives attending the World Economic
Forum's East Asia conference said.

"Efforts to date amount to little more than creative
accounting techniques designed to mask insolvency," said Philippe
Delhaise, president of Thomson Bankwatch Asia, the world's
largest bank rating agency.

"Most banks in South Korea, Thailand, Indonesia and Malaysia
are now at the mercy of their governments for their very
survival," he said.

"Under government control, banks can more easily fake
solvency. They conceal bad loans."

John Olds, chief executive of Southeast Asia's top bank, the
Development Bank of Singapore, lamented the "disappointing" pace
of change in bank restructuring efforts.

"Basic tenets like creditors' rights and the enforcement of
contractual obligations seem so antithetical to vested interests
that even where statutes exist, delay and inaction are the rule
rather than the exception," he said.

Chartsiri Sophonpanich, president of Bangkok Bank, said
restructuring efforts in Thailand were heading in the right
direction, albeit not as speedily as some would like.

Thai central bank governor Chatu Mongol Sonakul hoped Thai
banks would be internationally competitive in two to three years.

Thailand, along with South Korea and Indonesia, had followed
mandates set by the International Monetary Fund to sort out the
mess its banking system got mired in as the crisis struck in mid-
1997.

"We must confront challenges that will be a heavy burden on
our hopes of economic recovery and growth if they go unresolved,"
said Chartsiri, citing the difficulty of managing non-performing
loans among Thai banks and the absence of transparency.

The costs of cleaning up banking systems continue to mount as
financial institutions drag their feet on reforms, the bankers
warn.

South Korea has spent 64 trillion won (US$53.15 billion) or 15
percent of its gross domestic product on restructuring, and
estimates from credit rating agencies show Indonesia's bill may
exceed $100 billion on such efforts.

"This extracts a tremendous toll on businesses large and small
and is especially cruel to those below the poverty line, breeding
waves of political discontent and sometimes political
instability," said Olds.

While policies and processes in bank restructuring could be
guided by international precedents, it was up to Asian
governments to provide the incentives to foster a sense of
urgency, he said.

Key to bank and financial reform is corporate restructuring,
which, for example, has no clear policy direction in Thailand and
Indonesia, bankers say.

Chartsiri said Thailand was pursuing bank restructuring led
largely by the private sector but admitted broader corporate
restructuring was being hampered by a lack of capital.

Muddling Indonesia's restructuring efforts are the heavy
presence of government in bank assets and political upheaval,
said Robby Djohan, chief executive of Indonesia's Bank Mandiri.

"When we talk about the restructuring of the financial sector
in Asia, then what is very important is the objective ... that
the corporate sector has to be restructured," he said.

"The corporate sector can only be restructured if it is
supported by a very strong capital market, strong banking
system."