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ASEAN Banks Resigned to Sharing Cos



Subject: ASEAN Banks Resigned to Sharing Cost of Bad Loans

ASEAN Banks Resigned to Sharing Cost of Bad Loans

            Reuters
            23-OCT-98

            CHIANG MAI, Thailand, Oct 23 (Reuters) - Battered Southeast
Asian
            banks are resigned to sharing with defaulting borrowers the
cost of
            dealing with mountains of bad loans brought by the Asian
turmoil,
            according to bankers at a regional conference. 

            A consensus emerged at a regional bankers' conference in
this
            northern Thai city that they would have to act quickly to
contain
            damage arising from choking non-performing loans (NPLs),
            particularly in Indonesia, Thailand and Malaysia. 

            "ASEAN bankers are not in any kind of denial mood,"
Deogracias
            Vistan, president of Solidbank Corp of the Philippines, told
Reuters. 

            "Everyone recognises this and everyone seems to be at a
practical
            level of addressing how to get out of it. If not quickly
enough, at least
            surely enough." 

            Vistan spoke after chairing a workshop of ASEAN bankers to
work out
            their strategies of handling surging growth in NPLs. 

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

            Rating agency Standard & Poors has projected that bank NPLs
in
            Indonesia, Thailand and Malaysia may peak at 65 percent, 40
percent
            and 30-32 percent respectively by early next year against 50
percent,
            36 percent and 15 percent a few months ago. 

            "Indonesia is at the worst extreme of the spectrum, with
Singapore and
            Brunei at the other. But the (latter) two did not come here
with any
            sense of complacency," Vistan said. 

            Ng Kee Choe, chairman of the Association of Banks in
Singapore,
            said domestic NPLs of six Singapore banks stood at S$5.4
billion
            (US$3.3 billion), or 3.9 percent of domestic lending as of
mid-1998. 

            His figure did not cover Singapore banks' substantial loan
exposure in
            Malaysia and Indonesia, which accounted for more than 60
percent of
            S$29.2 billion loan exposure of the top four Singapore banks
in four
            ASEAN countries and South Korea. 

            Aljosja van Dorssen, vice president of consultants AT
Kearney, told the
            conference that rapidly rising NPLs had curbed Singapore
banks'
            profitability, put institutions in most other countries in
the red, and
            threatened their solvency. 

            Van Dorssen presented a paper outlining how ASEAN banks
could
            streamline and restructure to cope with vast changes taking
place in
            the industry. 

            Visten of Solidbank said the bankers looked at several
options to deal
            with NPLs, including subsidised interest servicing to ease
the burden
            on borrowers, conversion of debt into equity, and voluntary
turnover of
            assets. 

            Indonesia in January launched the Indonesian Bank
Restructuring
            Agency (IBRA), charged with the job of taking over or
freezing licences
            of unviable banks. 

            "Indonesia has created IBRA. It seems they have geared
themselves
            up for the task, but how effective they will be remains to
be seen," a
            Thai banker said. 

            Malaysia recently created two special agencies, Danaharta
and
            Danamodal, to help banks cope with its economic crisis.
Danahata is
            empowered to buy up banks' NPLs while Danamodal will
recapitalise
            needy banks. 

            Vistan said Malaysia and Indonesia proposed government
intervention
            to buy up NPL assets and their temporary transfer to the
authorities in
            exchange for state bonds. 

            "This reflects a recognition that it is better to work
things out out of
            court. Some kind of voluntary arbitration. In most cases
nobody will
            come out unscathed or unhurt," he said. 

            Thailand's Financial-sector Restructuring Agency was set up
early this
            year to liquidate and auction off assets of 56 finance
companies
            closed by the government. 

            Thai bankers said they hoped their government would manage
to push
            through ammended bankruptcy and foreclosure laws by
December.
            They said these were crucial for nudging debtors to reach
early
            amicable settlements with bank creditors. 

            Vistan said: "We are talking about more than debt
restructuring. It is
            balance-sheet reconfiguration that involves some painful
steps, like
            converting (debt) to equities. We discussed about subsidised
interest
            rates to make it affordable for borrowers." 

            He said not all banks want to take over bad assets: "They do
not want
            to be saddled with non-performing assets, but at least you
can sell a
            piece of land (collateralised by clients) even at a lower
price."