Thai's bad debts set to rise

Thai's bad debts set to rise

Associated Press, Bangkok

Official bad loan totals for Thailand's financial institutions are set to balloon when the central bank adopts international standards for tallying unrecoverable loans, the bank announced Friday.

Bank of Thailand Governor Pridiyathorn Devakula told reporters the bank plans to include uncollateralized loans that have already been written off in its reports of bad loan statistics in the nation's financial system.

The practice, required by international accounting standards, has not been followed in Thailand before. The governor did not say when the bank would adopt it.

Pridiyathorn said U.S.-based credit ratings agency Standard & Poor's recently appraised bad loans at Thailand's banks and other financial institutions at almost double the official Thai figures.

S&P said Thailand's bad loans totaled 843.31 billion baht (US$19.88 billion) at the end of June, compared with the Thai central bank's publicly declared figure of 465.91 billion baht, Pridiyathorn said.

"The S&P figures are right," Pridiyathorn said. "The actual non-performing loans are higher than we reported. We accept that. We will adjust our calculation method to the international standard."

Yet Pridiyathorn said the looming rise in reported bad loans won't likely cause problems for the financial sector because the nation's banks have set enough money aside to write off unrecoverable loans.

Non-performing loans - a legacy of the Asian financial crisis, which was triggered by a plunge in the Thai currency in 1997 - have dropped dramatically from a peak of 2.73 trillion baht, or 47 percent of total lending, in June 1999.

International ratings agencies, however, have expressed concern that the bad loans will act as a drag on the economy as banks trim lending to concentrate on writing off problem loans.

They've also criticized companies that have transferred their bad debts to asset management corporations, merely shifting the bad loan problem to another sector.