A healthy dose of self criticism

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The Asian Development Bank's May governors meeting included sessions where bankers spoke candidly about the problems faced by the region's financial sector.
In what became something of an exercise in self-flagellation, Asia's leading bankers gathered in the northern Thai city of Chiang Mai last month to thrash out what had gone wrong in the past three years.
As the 1,000-odd bankers and delegates debated, gossiped, wheeled and dealed in the air-conditioned comfort of the Westin Riverside Plaza Hotel in Thailand's second city, a similar number of local "indigenous people", as one seminar would have it, protested peacefully outside, baffling delegates with banners written in Thai.
Inside, the charismatic president of Thai Farmers Bank, Banthoon Lamsam, stole the show during a series of satellite seminars to the main governors meetings. Four bankers from across the region had been invited to share their thoughts on "Challenges for Banks and Financial Institutions in Asia". Fuji Bank president Yoshiro Yamamoto and Industrial Finance Corporation of Thailand director Aswin Kongsiri raised the usual issues - new technology, tackling non-performing loans and the threat of global competition.

Banthoon, looking every inch the Wall Street banker, with his slicked-back hair-do and Harvard attitude, took to the lectern. Dispensing with the speech written for him by Thai Farmers Research Centre, he entranced the audience with an apparently oV-the-cuV, description of the personal trials and tribulations of being at the top of a Thai bank as the good times caved in. "We are still swimming in a sea of bad debt," he admitted. "This will continue to be a drag on the existing Thai banks."
Recapitalization would also continue to be a management concern, Banthoon said, adding: "The outlook on the debt restructuring and still increasing NPLs will have implications on the amount of provisions that are required even though things are improving in terms of the eVort on debt restructuring with a much more clearly deWned framework."
The threat of competition from the big-name international banks coming into Thailand, such as ABN Amro Bank, Standard Chartered and HSBC, which have all taken over smaller Thai banks, was a major concern, said Banthoon. "These are new competitors and they are strong, both from the technology point of view and their Wnancial strength, and they have come in without the burden of bad debt. That in itself is an advantage, but it is no longer useful for me to complain, because it's done and I have to face up to the reality."
Banthoon continued: "Thai banks like Thai Farmers Bank will have to wake up fast. We have been hit with the crisis totally unprotected from a technical standpoint and a cultural standpoint. A lot of people are just not accustomed to changing so fast. That is the management challenge - to get the organization to change fast enough not to get wiped out. We have to face up to the reality that a substantial percentage of employees in Thailand are hopeless going forward. There is a new kind of work environment and organizations will not be able to accommodate the old kinds of practices and the lack of technical know-how.
"Rationalization is something that Thai banks will have to get working on fast, and it costs money. There is a balance to be struck between something that makes good business sense and something that is socially acceptable. That is something that a lot of Thai banks Wnd very diYcult to face up to, but the market forces and the reality of the competition will bring it about sooner or later."
In a nation known for its non-confrontational approach, Banthoon continued his straight-talking on the key topics for the industry. Much of the day-to-day technology in Thai banks was "obsolete", he said, insisting: "We cannot come out with new products unless technology is state-of-the-art." On credit control, he said: "It was something that was never an important part of thinking when the economy was growing 10% a year." That will now have to change, he said. "The organization of Thai banks is also something that has to be totally overhauled," he said. "A clear legacy is the branch networks that used to be something like a little Wefdom across the nation, and that is something that can no longer be competitive," he added.
Banthoon recognized, though, the diYculty of implementing change: "Thai banks used to be very cosy kinds of organizations - very paternalistic. People felt close to each other and results and performance were pushed aside. We are not going to compete with the foreign banks that way, because performance-based culture is very much in place in foreign banks."
Banthoon continued: "Something that keeps me up every night is that the top people in my organization will jump ship across town to Citibank or HongkongBank. My job deWnition at Thai Farmers Bank is that I am the bad guy. It's the price we pay for a manager who tries to change something." Summing up his message, Banthoon emphasized: "The technical expertise we can still buy - the consultants are available. What one cannot buy is a new culture. That has to be managed with perseverance and sensitivity."
Euromoney managed a brief chat with Banthoon, the former chairman of the Thai Bankers' Association, before he was descended on by local reporters after his speech. Did he really have sleepless nights over his staV? "What I really lose sleep over at night is not the crisis, it's the unlevel playing Weld," he admitted, before being engulfed.
Banthoon's speech was impassioned, but its content was not universally accepted. One Bangkok-based foreign banker pinpointed Banthoon's top-down approach as one of the key problems with Thai banking. Risk management and credit policy should be a separate dedicated function within the bank, not a board-level policy play, he argued.
In his speech, Citibank Thailand country manager Henry Ho ran through the main challenges for banks, including non-performing loans, transparency, regulation, technology and risk management. On technology, he said: "This is something that scares the hell out of a lot of people in the banking industry. It is a very powerful tool to use. It is not something which will prevent people from making mistakes in the future, but it will help them do their jobs better." He continued: "Thai banks tended to under-invest in new technology in previous years and it was very easy to make a decision not to invest because they were making so much money." But he added: "We do not underestimate the Thai banks and we wish them well. Real competition always makes for a much stronger industry."
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