Squeaky clean bank boards
courtesy of Thailand's new Financial Institutions Development Act
By Jon Fernquest
Laws passed by the coup-appointed National
Legislative Assembly (NLA) last year are causing a lot of changes in
the way that business is conducted in Thailand.
Many would argue changes for the better, despite the fact that they were passed by a coup-appointed legislature. Much of the legislation was also railroaded through in a rush that left little time for the laws to be reviewed by members of the NLA (Read an article about this).
One theory is that much of the legislation passed was legislation left over from previous sessions of parliament that didn't make its way into law because it infringed on powerful vested interests in some way.
(Photo on right of bank guard telling PAD protesters to go away)
New banking laws seek to reduce conflicts of interest
New banking laws are currently having a radical impact on Thailand's banking sector. Laws for financial institutions are now tougher than those of private companies.
The new Financial Institutions Development Act regulates bank loans to people who have a close relationship with the bank that may bias lending decisions (related-party lending):
Section 48 of the new law, concerning related-party lending, limits bank lending to directors and senior executives holding management power within a financial institution.The rules, aimed at minimising potential conflicts of interest and lending abuse, also restrict lending to the spouses and underage children of directors and managers.
As well, the law limits any bank director from holding more than two directorship seats at other companies.
Conflicts of interest
A conflict of interest could exist if a person worked for both a bank and a customer of the bank at the same time. For example, being an senior executive or a member of the board of directors at both the bank and its customer.
Under the new laws people with a potential conflict of interest are forced to make a choice, work for the bank or the company that does business with the bank.
Most will probably choose to resign from the bank rather than the bank's customer, usually a large private company.
Banks may also prefer that directors with possible conflicts of interest resign just to play it safe.
Violations of many clauses under the new act could result in both criminal and civil penalties. Bankers are worried about breaking the new laws so they have asked the Bank of Thailand for more detailed guidance on what changes should be made to business practices.
An Example
"Siam City Bank, for instance, has Prasert Bunsumpun, the president and chief executive officer of PTT Plc, as an independent director on its board. It remains uncertain whether the related-party rule applies, given that Mr Prasert has no management authority with the bank.
But if the law does apply, it could mean that SCIB may not only face restrictions in offering a housing or credit-card loan to Mr Prasert, but also loans between the bank itself and PTT Plc."
(Source: Bangkok Post, business, SOMRUEDI BANCHONGDUANG, 10-09-08, temp-link)
Vocabulary:
squeaky clean - very
clean (so clean that it squeaks when you run yuour hand over it)
สะอาดมาก
changes for the better - improvements ปรับปรุง
railroad, railroad through - force something to
happen, push through forcefully (without much care or consideration)
กระตุ้นให้ผ่านการพิจารณา
left over - remaining ที่เหลืออยู่
infringe on Y
- interfere with Y, enter into an area that is someone elses's business
(or at least that is the way they perceive it, for example you may
infringe on the mafia's territory which it does not legally own)
ล่วงละเมิด
have a vested interest in Y - depending on how
situation y turns out, your money, power, or reputation might be
affected
infringed on powerful vested interests - interfere
in a situation that powerful people consider their's
have a radical
impact - cause big changes มีผลกระทบทั่วหน้า
Financial Institutions Development Act - the name of
the new law that forces changes in the way that banks in Thailand do
business กฎหมายพัฒนาสถาบันการเงิน
related-party lending - lending to people you have a
relationship with, either through business or through family
การให้เงินกู้กับผู้ที่มีความสัมพันธ์กัน
ไม่ว่าจะเป็นญาติหรือผู้ร่วมธุรกิจ
board of
directors, executive board - a body of elected or appointed
persons who together oversee the activities of a company or an
organization (See Wikipedia)
คณะกรรมการ
directors - the members or people serving on the
board of directors of a company ผู้อำนวยการ
hold a directorship seat - be a director for a
company ขึ้นเป็นผู้อำนวยการบริหาร
holding more than two directorship seats มีตำแหน่งเป็นผู้อำนวยการบริหารถึงสองแห่ง
senior executives
- high level management in a corporation such as presidents and
vice-presidents ผู้บริหารระดับสูง
a conflict of interest - when personal conflicts
with helping others, "a situation in which someone in a position of
trust, such as a lawyer, a politician, or an executive or director of a
corporation, has competing professional or personal interests. Such
competing interests can make it difficult to fulfill his or her duties
impartially." (See Wikipedia)
ผลประโยชน์ทับซ้อน
spouses
- husbands or wives คู่สมรส
underage children - children who are not legally
adults yet บุตรที่ยังไม่บรรลุนิติภาวะ
resign - choose to leave your job
ลาออก
play it safe - act carefully, to avoid
dangerous situations
criminal penalties - pay a fine to the
government or serve time in jail if found guilty
จ่ายค่าสินไหมทดแทนในคดีอาญา
civil penalties - pay money to someone for
the harm you caused (damages) or be ordered to stop doing something by
the court (injunction) จ่ายค่าสินไหมทดแทนในคดีแพ่ง