News Brief No. 97/20

News Brief: Camdessus Endorses Thailand’s Strategy for Restructuring the Financial Sector

October 14, 1997

Following Thailand’s announcement of a package of measures to restructure the financial sector, Michel Camdessus, Managing Director of the International Monetary Fund (IMF), said:

"The Thai government has made a significant announcement today about its detailed strategy to restructure Thailand's troubled financial sector. The announcement contains the key elements of the restructuring process for the 58 suspended finance companies as well as measures to strengthen the remaining institutions.

"In particular, the institutional framework for the restructuring or liquidation of the suspended finance companies has been clarified, and two new institutions are being created to implement and oversee this process. I particularly welcome the announcement that the strongest possible criteria will be adopted and that only the very strongest finance companies will be allowed to reopen.

"Both for the suspended finance companies, as well as for the rest of the financial sector, a major relaxation of foreign equity participation has been announced. This welcome liberalization--with the provision for majority participation--will also be crucial for recapitalizing existing financial institutions, for whom also new loan classification and provisioning rules are to be adopted.

"Today's announcement makes clear the full commitment of the Thai government to the economic program supported by a stand-by arrangement with the IMF. It should go a long way toward resolving remaining market uncertainties about the implementation of financial sector restructuring and other elements of the economic program.

"The IMF, together with the World Bank and other agencies, will continue to work closely with the Thai authorities to help implement the financial restructuring strategy, as well as other elements of Thailand’s economic program."