Meet the new breed of Asian banker - the ones who survived the crisis and are now able to put their hard-learned lessons into practice. They are leading the way into a new era of openness and transparency in Asia.
Take Jada Wattanasiritham, president of Thailand's Siam Commercial Bank (SCB), whose bank took the painful steps necessary to go through the government's recapitalization programme. It required making a clean breast of how bad the balance sheet was at a time when most banks were not fully owning up to their problems. Eventually SCB was able to execute what many see as the most successful recapitalization in the region. But coming out the other side does not mean the bank resembles the kind of institution it was at the outset.
Management is older and wiser. Regulators are more vigilant, investors sceptical and the Thai economy moving only slowly. Welcome to the new world of Asian banking.
"We are adjusting to the new reality of a more slow-moving economy. We have to climb back much more but we are slowly moving in the right direction," says Wattanasiritham.
SCB survived because it quickly realized that it needed to forego its original plan to announce a straight equity issue and accept the restrictive but less risky programme the government was offering.
Besides satisfying the demands of government SCB had to work on its shareholders. Its existing shareholders had to take a large dilution of their holdings and the shareholders it hoped to entice would need to be convinced of its story. SCB got a lot of support from existing shareholders, including the crown property bureau. Not only was it willing to be diluted from a 25% to a 12.5% stake in the company but it committed to Bt7.5 billion ($196 million) up front.
In winning over new shareholders SCB was diligent. "We had to be very thorough with the information we presented to investors," says Wattanasiritham.
SCB was the only bank brave enough to disclose all its problem loans (at the end of last year they were at 42% of its total loan portfolio and have declined to 38% this June). SCB was upfront with its mistakes and made big promises that it has followed through. Wattanasiritham says: "We were too slow in taking the recommended steps to recapitalize ourselves." The most dramatic change the bank made was at the end of June when four members of the bank's board of directors resigned and were replaced with three non-Thai investors and a government member. The Bt65 billion preferred shares issue in April was a success and it became the largest ever Thai equity transaction.
In Indonesia, where 65 banks have been closed down since November 1997, seven have been taken over by the government, and four have been forcibly merged, Lippo Bank is a survivor and was included in the government's recapitalization plan. It has since injected Rp8.7 trillion ($1.3 billion) into its balance sheet and cut its problem loans by more than half.
"We were going into uncharted territory, both the banks and the restructuring agency," says Harry Sasongko, managing director of Lippo Bank. With its recapitalization newly complete, Lippo Bank has already turned to structural reforms. By July, a month after its second rights issue, it signed a three year contract with ING Barings to improve operational standards. It has restructured its board of supervisory commissioners to include four new outside members. Its recapitalization established it as a survivor, its attitude towards corporate governance sets it up for the future.Alex Mathias