Banks In Asia

Asia is the largest and most populous continent or region, depending on the definition. It covers 8.6% of the Earth`s total surface area, or 29.4% of its land area, and it contains more than 60% of the world`s human populationAsia has three main financial centres: in Hong Kong, Singapore and Tokyo. Call centres and business process outsourcing (BPOs) are becoming major employers in India and the Philippines, due to the availability of a large pool of highly skilled English speaking workforce. The rise of the business process outsourcing industry has seen the rise of India and China as other financial centres.

Established in 1939 as the Bank of Asia for Industry and Commerce by former prime minister Pridi Bhanomyong, the bank supported the expanding trading activities of the Euachukiarti family – one of its founders.

Over the year the commercial bank’s business grew along with the economy. Along the way, huge quarrels broke out among its major shareholders – the Euachukiartis and the Phatraprasits – who fought hard to win majority control during a near-decade-long feud.

The winner of the battle became irrelevant when, like other banks, Bank of Asia found itself on the verge of collapsing under the weight of colossal non-performing loans (NPLs) due to the 1997 meltdown. As its limited ownership could not help, the bank had to embrace a new shareholder. That was when Dutch bank ABN AMRO stepped in, snapping up a stake of over 75 per cent in the local bank in 1998.

After the crisis, it was no longer strange to see local banks under foreign control. Other banks also underwent big changes by initiating capital write-downs to cope with their huge NPL burden.

This marked a significant milestone in the competitive evolution of banking capital. Many banks stumbled, including Siam City Bank, which was controlled by the Mahadamrongkul family, the Siriwadhanabhakdi family’s First Bangkok City Bank, the Tejapaibul family’s Bangkok Metropolitan Bank and Nakornthon Bank of the Wanglee clan.

All experienced periods of weakness before the 1997 crisis and were nationalised after the crisis subsided.

In short, ABN Amro’s emergence, through a capital investment of Bt7.3 billion, marked a narrow escape for Bank of Asia.

The huge increases in NPLs at all banks was the result of most companies suffering from the stringent monetary and fiscal measures imposed by the Chuan administration. Few firms were viable enough to borrow and banks could not expand at the rate they enjoyed before the crisis. As interest income fell short of covering the rising costs from NPLs, more capital-raising exercises were held in the subsequent years.

Bank of Asia was no exception. Despite the Bt7.3-billion injection from ABN Amro, it had to seek Bt23 billion more between 1999 and 2002.

As of March 2003, ABN Amro held 80.7 per cent of the bank. But because the investment took a longer-than-expected period to recoup, coupled with the bank’s decision to refocus on its branch operations in Bangkok, ABN Amro decided to pull out.