This is no measly sum. Non-performing assets in state financial institutions eligible for transfer to the TAMC are estimated at Bt1.1 trillion. The estimated book value of private sector loans is Bt250 billion (2001). Even though transfer of debts from the Krungthai Bank to Sukhumvit AMC occurred when the loans were worth 80% less than their book value, in the present case they would be transferred to the TAMC at Net Book Value (NBV), that is, 100% of the assessed worth of the collateral.
Provisions on gain and loss sharing were clearly defined. Future losses of up to 20% NBV would be the responsibility of financial institutions that had transferred the NPLs. Additional losses on the next 20% NBV would be shared evenly between the private financial institution and the TAMC. Further losses would be borne by the TAMC. Future gains on the NBV would be shared in the following manner: gains amounting to 20% NBV would be shared evenly between the private bank and the TAMC, whilst gains thereafter would accrue entirely to the private financial institutions. Settlement of losses and gains would occur sometime between the 5th and 10th year after the establishment of the TAMC. Payment for losses could be made either by cash or stocks of the private financial institution. The TAMC would issue 10 year notes to banks as payment for their NPLs. The TAMC would pay annual interest, calculated from the weighted average of all deposits in the banking system. Interest rates would be adjusted on a monthly basis.
Social security for small businesses - losses and gains
Professor Dr Kriengsak Chareonwongsak Executive Director, Institute of Future Studies for Development (IFD)
kriengsak@kriengsak.com, http://www.ifd.or.th
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