ECONOMIC RECOVERY NOT YET CERTAIN, SEMINAR TOLD

       The economy is not completely out of the woods yet, because the US is still fighting a financial crisis, with more than 400 banks in trouble, central-bank chairman MR Chatu Mongol Sonakul warned yesterday.
       The US banks' customers have not repaird their debts, which would possibly force the US Federal Deposit Insurance Corp (FDIC) to spend US$400 billion (Bt13.5 trillion) to bail them out, said ChatuMongkol, who has also servehd as governor of the central bank.
       If the US financial system worsens, and the contagion spreads to the global economy, the Thai economy would inevitably suffer, he told a seminar hosted by the Bank of Thailand.
       The global economy and financial market conditions, although improved, still face several risk factors. Large financial institutions or financial conglomerates could go bankrupt anytime.
       "Confidence has improved while the Thai economic figures have picked up. The problem is that risk remains," he said.
       After the start of the Great Depression in October 1929, US commercial banks collapsed again in 1932, dragging European banks into bankruptcy.
       At least 84 US banks have fallen so far this year. Home prices have sagged and unemployment has jumped, so loan defaults have increased. That was considered the largest number of bank failures per year since the early 1990s, compared with 25 last year and three in 2007.
       The bank crashes have sapped billions from the FDIC, which guarantees account holders' money when banks go under. The FDIC stood at $10.4 billion in the second quarter, its lowest point since 1992.
       Veerathai Santiprabhob, executive vice president of the Stock Exchange of Thailand, said the US financial problems remained because about 400 banks have been having a hard time, whicl small and medium-sized banks could also be hurting.
       The US financial system could not completely function, but only overshoots, which could bring about a sharp turning point.
       "I think it is not a perfect V-shaped economic recovert. For me, it's an imperfect V-shape or a checkmark," he said.
       Titanun Mallikamas, director of the central bank's Economic Research Department, said he personally believed the Kingdom should prepare for unknown shocks, such as a China crisis, because it could impose rapid and immense risks to the domestic economy.
       The economists recommended authorities to make banking reform and social improvement national priorities in order to bring about lasting economic sustainability.
       Veerathai said the banking system' efficiency needed enhancing to help fortify macroeconomic systanability. It could be done through a platform change instead of being developed on top of the existing business.
       "We need an agenda to bring about changes in order to address upcoming challenges," he said.
       The BOT should promote more competition in the banking system while other countries around the world have tightened their regulations.
       The central bank should encourage a more open atmosphere in the industry and find a way to attract new players to jump into the market, otherwise foreign investors were unlikely to participate due to the strict regulations and the global financial crisis.
       "We have to find our how to encourage financial institutions to develop themselves all the time and introduce new products to be beneficial to the long-term economy," he said.
       The banking system's profitability has remained high during the current global crisis, which begged the question of whether the competition was intense enough, he said.
       Somchai Jitsuchon, research director for macroeconomic development and income distribution at the Thailand Development Research Institute, agreed the competition in the banking system was not enough in terms of players, functions and channels.
       Veerathai questioned whether the Kingdom should continue to be a bank-based economy when only a few banks played a key role in the industry.
       Banks have emphasised the wholesale business even though large corporations should depend on the capital market, he said.
       The BOT should expand the financial infrastructure, such as by setting up a bond market for retail investors, and initiate new innovative products, which could help the economy develop.
       The financial market lacked a long-term savings channel, which was essential for an ageging society, which desires security and a steady return, he said.
       Titanun said banks should find the proper way to use savings to finance long-term private and public investment efficiently.