INTERVIEW-No replacement for dollar yet: Chatri

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No replacement for US dollar yet: Chatri 
The Nation: 20 Oct 2009
INTERVIEW
No replacement for dollar yet: Chatri

By JIWAMOL KANOKSILP THE NATION

Veteran banker Chatri Sophonpanich does not see the financial crisis triggered by Lehman Brothers' collapse as something unusual.

"I've been here [in banking] for 50 years. There's been a problem all the time. It has never stopped happening, either big or small," the chairman of Bangkok Bank told The Nation in a rare, exclusive interview.

Chatri, 75, also believes that nothing qualifies enough to replace the US dollar as the world's reserve currency despite the recent fall of the greenback.

"What currency do you think will replace it? I don't think that any currency would easily replace the US dollar. Even gold can't, its supply is too low."

The Chinese yuan can't get close to the US dollar at this time. The yuan is quite limited in trading in Asia, while Beijing won't allow too much flexibility in its currency, he said.

And the euro zone is in too bad shape to allow its currency to dominate.

He said capitalism wasn't dying. It would still exist, but, perhaps, in a different form.

The Western banking industry has failed because management has "pushed it too far" and the bonus system has caused damage that almost led to collapse, he said.

"A bank is an entity that accumulates money from the public and then distributes it to industries or businesses. It's just a simple principle that makes banks grow. But so far management has abused banks," he said.

However, individual investors should not extend themselves on credit during this economic crisis, he warned.

"Don't buy any assets and keep them idle because the interest rate will eat them up. If you want to invest with your own money, that's fine. Don't borrow and do nothing."

Gold is one asset whose price would definitely rise, with US$2,000 in sight due to limited supply, he added.



Below are excerpts from the interview with the 75-year BBL chairman.



What is your prediction for Thailand's economic recovery?

I think Thailand is unlikely to experience a V-shaped recovery. It's going to grow slowly, not in a V-shape. It's more likely to be U-shaped. I don't see anything that would contribute to a V-shape. Boosting the industrial sector and "luxury" investments is not something that can be done immediately. It's easier said than done. The more money [the government] injects, the more difficult it is.

In your view, how has the government performed?

The government has constraints on the implementation of its policies, and I don't know how long this government will last. If [the government] does anything too significant, there might be damage. They face obstacles, like revising the Constitution. So, it's quite tough for them. It isn't that they are not capable, but the public doesn't give them a chance. [Prime Minister] Khun Abhisit [Vejjajiva] is a good guy, but he might not dare to do anything aggressive. If he does it wrongly, he might not survive. But if you don't take risks, you won't get success. But what concerns me most is the King's health.

Over the next five to 10 years, what will the banking industry be like?

Basically, the banking system won't change much. But whether banks can do anything more depends on the Bank of Thailand. We have lots of limitations. But banks overseas have mostly failed and gone back to basics. I still believe that merchant banking is doable. But how you do it matters. The US has not been successful in merchant banking as players have gone too far. The bonus system damages everything. But capitalism is not dying. It is a matter of what form it can exist in. You need capital every time you do something. It's a matter of where it comes from.

How do you see Asian banks' prospects?

The overall competition subsided [after Western banks failed]. The fee-cutting behaviour declined. Before [the crisis], they competed until they almost faced losses.

What is your view on the possibility of bank collapses?

It's the responsibility of management. They shouldn't be too rigid on some principles. For example, when my father [Chin Sophonpanich] was still alive, BBL's board approved allocating 5 per cent of revenues to management as compensation. Then, the bank's net profit was Bt1,900 per year, but now our income has risen to Bt200 billion a year … So management must not keep that board resolution but adjust to the present situation instead.

What else still concerns you about Bangkok Bank?

Basically, Bangkok Bank is not bad. There's nothing to be concerned about. We might be too slow in some areas. We might not be able to catch up with others in some areas, but that's okay as in the end we can do it. In terms of PR, we might be too slow, but not in practice. We plan to compete with ourselves. When we compete with others, we do it for comparison. Bangkok Bank doesn't need to be No 1 forever. If we fall to two or three, it can't be helped. But we need to have sustainable and steady growth. Too much growth is risky, though slightly risky but steady growth is okay. I don't agree that we need to speed up risky growth in order to be No 1.

Western banks calculate management incentive from net profits, Bangkok Bank is different. Our management incentive depends on performance, not net profits. We have limits: the incentive payment must not exceed a certain level. My father and Khun Boonchu [Rojanastien] mainly assess their performance, not growth. Khun Boonchu was very strict [on risk management].

Does the Sophonpanich family need to remain at Bangkok Bank?

Well, that's not certain. Now, the Sophonpanich share in Bangkok Bank is very small. I don't think it exceeds 5 per cent, or at least it's not more than 6 per cent. It's impossible to control large chunks of shareholding. We depend on capability, reputation and acceptance from the market. Otherwise, doing nothing, Tony [Chartsiri Sophonpanich] would be kicked out. Now, he was the most diligent one.

I didn't plan who would be the next leader. Anyone who has the capability can take it. For Tony, he can be president due mainly to his work and his personality. I helped him only in reputation, but the job is his due to his capability. This is similar to me. My father helped me in some areas. I haven't followed him in everything. I was with Khun Boonchu and learned from him more than my father. And my father allowed it.

Do you still scold Khun Chartsiri?

Well, he's 51 years old now. How can I scold him [laughs]? He hasn't allowed me to complain too much since he was around 20-something. The new generation is not like kids in the past, who obeyed the older generation. The new generation has its own ideas.

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