Banks told to reinstate credit lines

Banks told to reinstate credit lines

CHIANGMAI, Thailand (Reuters): More than 100 Southeast Asian bankers called on banks in ASEAN on Saturday to reinstate or establish new credit lines to promote trade in the region.

Ending a three-day conference, they also urged governments to launch export financing schemes to help the export sector and said the ASEAN Bankers Association (ABA) would look into establishing an ASEAN bankers' acceptance market.

Banthoon Lamsam, chairman of the ABA, told a news conference that he was heartened by early signs that the bottom of the Asian financial crisis could be near for some countries.

"Good signs have emerged that measures for tackling problems are clearer and the bottom of the crisis may be approaching for some countries to boost chances of their recovery in the near future," he said, adding that many nations regarded Thailand as enjoying a good chance of early recovery.

The Thai baht has stabilized at under 38 to the dollar in the past two weeks compared with its post-devaluation low of 56 in January.

Thai interest rates have dropped sharply in the past two months, raising hopes that battered banks would be more willing to provide fresh loans to the corporate sector.

Banks in Indonesia, Thailand and Malaysia are reeling under massive non-performing loans (NPLs) brought about largely by plunging values of their currencies.

Banks in Indonesia carry NPLs amounting to 30 to 75 percent of total lending. The figure stands at about 40 percent in Thailand and 15 percent in Malaysia.

The Association of South East Asian Nations groups Thailand with Indonesia, Malaysia, Singapore, the Philippines, Vietnam, Brunei, Myanmar and Laos.

Market analysts said the NPLs would likely peak in early 1999 despite rallies of regional currencies against the dollar in the past few weeks in line with an appreciating yen.

Ignatius Supomo, general manager of Indonesia's Bank Dagang Negara, said that due to the current turmoil, ASEAN governments should follow Australia, Japan and the United States in guaranteeing letters of credit issued by their commercial banks.

Ng Kee Choe, chairman of the Association of Banks in Singapore, told reporters the meeting discussed the merits and demerits of Malaysia's recently imposed currency controls.

"The delegates conclude that while there are merits of imposing currency controls if the situation demands...it is very important that it be made clear that they are temporary and should be removed when conditions permit," he said.

Malaysia pegged the ringgit currency at 3.80 per U.S. dollar and ended the convertibility of the ringgit overseas as part of the sweeping currency controls imposed on Sept. 1.

The ABA statement said delegates suggested a form of temporary capital controls might be needed but ASEAN governments should make it clear right from the beginning that whatever restrictions they placed on capital mobility would be temporary.

It said ASEAN members appreciated assistance from the International Monetary Fund, but the agency's policy prescriptions sometimes lacked flexibility.

ABA secretary-general Tay Kah Chye told the briefing: "Delegates felt that IMF could be more flexible and respond faster to changing conditions, to adjust fiscal positions as environment changes."

Chye said, however, that IMF reform programs for Thailand and Indonesia had begun showing positive results.