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."