Massive SME bank losses: Trail of broken rules

Bank loses 311 million baht after freewheeling lending practices of president break all the rules set by board. President fired & put under investigation.

In photo above Soros Sakornvisava, former president of SME Bank and now under investigation for banking irregularities, attaching a bank sticker to a truck in Mukdahan. The state-owned bank approved many new loans to logistics operators in the region.

Read previous Bangkok Post article about the case here.

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BANKING

SME Bank pulls the plug on Soros, may seek damages

15/08/2012 
Wichit Chantanusornsiri

The SME Bank board voted unanimously to terminate Soros Sakornvisava immediately for actions resulting in losses to the state bank worth at least 311 million baht, says chairman Naris Chaiyasoot.

Mr Naris said the bank would also pursue civil charges against Mr Soros seeking compensation.

The estimated losses do not include possible future losses from loans that may have to be reclassified as non-performing loans, Mr Naris added

The move is the latest development to hit the SME Bank, which this year has been faced with rising financial losses, allegations of accounting irregularities and conflicts between management and the bank board.

Mr Soros tendered his resignation to the board on July 25, citing health reasons. But directors declined to accept the resignation, saying Mr Soros was already under investigation concerning questionable lending practices during his tenure as well as his decision to procure a 300-million-baht new core banking system to field public deposits despite the fact that the bank by law cannot accept retail deposits.

The SME Bank board is currently investigating Mr Soros for nine issues. One of the issues, and the factor cited by the board at its meeting yesterday, was Mr Soros' handling of a state-sponsored loan programme initiated after the 2008 global economic crisis.

The government authorised the SME Bank to offer small businesses loans with interest of 5% per year over a five-year term to help ease liquidity constraints and encourage employers to maintain staff.

Funding for the programme came from 6 billion baht in deposits from the Social Security Fund, which accepted a deposit rate of just 1% from the SME Bank. The Social Security Fund later agreed to park another 1 billion baht in funds with the SME Bank for the jobs programme at an interest rate of 1.5%. 

But Mr Naris said Mr Soros ultimately approved 22 billion baht worth of loans under the programme, with 19 billion in loan documents signed and 13 to 14 billion baht in funds disbursed, well beyond the original lending limits set by the board for the programme.

Mr Naris said the additional loans would have to be funded from other sources, resulting in interest rate losses for the bank when compared with the fixed 5% rate set under the programme.

Pichai Chunhavajira, the executive chairman of the SME Bank, said Mr Soros used his authority as bank president to amend terms of the programme.

"While the board did give Mr Soros the authority to make certain changes, it was always under a clear condition that changes would not hurt the credit of the bank," Mr Pichai said.

"One change approved by Mr Soros was to increase the lending limit per borrower to 200 million baht, or four times the original lending limit. Mr Soros also scrapped a pre-approval credit system used by the bank, allowing total loans to well exceed the original 6-billion-baht credit limit for the entire programme set by the board.

Mr Soros also authorised an expansion in how funding could be used by borrowers. The bank originally stipulated loans would be for working capital or long-term financing, but later changed the terms to allow for factoring credit. Some SME Bank factoring customers used the jobs programme to refinance their existing debt, benefiting from the change in interest rates to the fixed 5% rate from their previous rate of 7.5%.

Underwriting guidelines were also relaxed, permitting borrowers who were still in the process of restructuring past debt to apply for funding.

Mr Pichai said the losses incurred by the SME Bank did not necessarily imply internal fraud. If fraud and personal gain were discovered, the bank would pursue additional action under the law, he said.

(Source: Bangkok Post, BANKING, SME Bank pulls the plug on Soros, may seek damages, 15/08/2012, Wichit Chantanusornsiri, link) 


Banking Vocabulary
 
SME Bank - a government bank in Thailand that specializes in making loans to SMEs (See Website)

massive - very big
massive losses - very big losses

freewheeling - not limited by rules

trail - a series of things leading in a certain direction
trail of broken rules

seek damages - sue in a court of law (trying to get money from someone who "damaged" you through bringing a legal case against them) 
damages  - the money you get someone who "damaged" you, if you win the court case against them

logistics - transporting and moving goods from one location to another (tracking goods and storing in warehouses)
logistics operators - companies running or operating a logistics business

pull the plug on - stop and end some activity that is out of control (like pulling the electricity cord out of the electrical socket)

SME Bank pulls the plug on Soros, may seek damages

board - the board of directors, the group of people that makes the highest level decisions and policy for an organization
SME Bank board

unanimously - everyone agrees (with decision or agreement)
voted unanimously - everyone voted for it

terminate (verb) - 1. to fire an employee and end their employment and job with an organization; 2. to end or stop something ทำให้สิ้นสุด
immediately - happening right after something else with no delay; right away ทันที
terminate immediately - end employment right now (without delay)

terminate immediately for actions resulting in losses

state - government รัฐ
state bank

The SME Bank board voted unanimously to terminate Soros Sakornvisava immediately for actions resulting in losses to the state bank worth at least 311 million baht, says chairman Naris Chaiyasoot.

civil - of a case filed a court that deals with non-criminal matters, especially complaints made by people against other people or organisations คดีที่ยื่นฟ้องต่อศาลแพ่ง
charges - a criminal case brought against a person (laws they are accused of breaking and will tried for)
civil charges

pursue - to work at something or carry it out ทำให้ลุล่วง to try to achieve something ดำเนินตาม, พยายามเพื่อให้ได้มาซึ่ง
pursue civil charges

compensation - money paid to a person for damage they suffered; money that someone receives because something bad has happened to them การจ่า่ยเงินชดเชย
seeking compensation - will try to get money from the person who harmed him (by using a legal case in the courts) 

pursue civil charges seeking compensation.

Mr Naris said the bank would also pursue civil charges against Mr Soros seeking compensation.

estimated - the amount that people think or calculate it to be (not exact, only around the right amount)
estimated losses

Non-Performing Loan (NPL) - a loan that the borrower has failed to make payments on time (in default) (See Wikipedia)

reclassified - change the official; description, type, category of something
loans reclassified as non-performing loans

The estimated losses do not include possible future losses from loans that may have to be reclassified as non-performing loans, Mr Naris added

development - a new event in a news story that is happening now (not finished yet) (when something important happens in an ongoing news story)  
latest development - the newest important event in an ongoing news story
the latest development to hit the SME Bank

accounting - the work of keeping and checking financial records for a company or organization (See Wikipedia)
irregularities - a situation in which the rules, laws or usual ways of doing something have not been followed ความไม่สงบ (and therefore may indicate wrongdoing or corruption)

accounting irregularities - when amounts are not recorded correctly in the accounting system (which may indicate fraud, corruption or negligence)

allegations - accusations; statements that someone had done something wrong or illegal even though this has not been proved ข้อกล่าวหา
allegations of accounting irregularities

conflicts - disagreements and fighting ความขัดแย้ง
conflicts between management and the bank board

The move is the latest development to hit the SME Bank, which this year has been faced with rising financial losses, allegations of accounting irregularities and conflicts between management and the bank board.

resignation - the act of leaving a job permanently ลาออกจากตำแหน่ง
tendered his resignation - gave official notice that he was leaving his job

citing - mentioning as a reason ให้ อ้างอิงเหตุผล
citing health reasons - saying he was doing it because of bad health

investigation - try to find out what happened during an event, discover the truth; the process of trying to find out all the details or facts about something การสอบสวน การตรวจสอบหาข้อเท็จจริง
under investigation

lending - giving money to someone who agrees to pay it back in the future การให้ยืม
practices - ways of doing commonly repeated tasks
lending practices

questionable - involving doubts about whether something has been done properly ที่น่าสงสัย
questionable lending practices

tenure - the period of time during which someone has an important job ช่วงระยะเวลาที่ดำรงตำแหน่ง
questionable lending practices during his tenure

core - the central most important or most basic part of something ส่วนสำคัญ
core banking system - the most important and central computer system used to run the bank (keep track of money in deposits and loans)

deposits - bank deposits, money that people and companies keep in a bank 

field - to deal with something (example: the politician fielded difficult questions from journalists)
field public deposits  

procure - buy
procure a 300-million-baht new core banking system to field public deposits

retail - 1. directly with the public; 2. to sell directly to the public for their own use ขายปลีก
retail deposits

the bank by law cannot accept retail deposits.

Mr Soros tendered his resignation to the board on July 25, citing health reasons. But directors declined to accept the resignation, saying Mr Soros was already under investigation concerning questionable lending practices during his tenure as well as his decision to procure a 300-million-baht new core banking system to field public deposits despite the fact that the bank by law cannot accept retail deposits.

issues - subjects that need to be considered ประเด็น
meeting - when a group of people come together to discuss issues and make decisions การประชุม

factor - a fact or situation which influences the result of something ปัจจัย
cited - mentioned (to support a point you are making or arguing) กล่าวถึง
factor cited - a fact mentioned as a reason (for a decision or action)

the factor cited by the board at its meeting yesterday

loan - an amount of money that a person, business, or country borrows, especially from a bank เงินกู้
loan programme

state-sponsored loan programme
handling of a state-sponsored loan programme

global - throughout the world ทั่วโลก
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์  วิกฤต
2008 global economic crisis

initiated - created; started ริเริ่มโดย
initiated after the 2008 global economic crisis.

The SME Bank board is currently investigating Mr Soros for nine issues. One of the issues, and the factor cited by the board at its meeting yesterday, was Mr Soros' handling of a state-sponsored loan programme initiated after the 2008 global economic crisis.

authorised - activity given official permission to happen or do something ได้สั่งการให้
the government authorised the SME Bank to offer small businesses loans

interest - payments made for the use of another's money for a period of time
term - a period of time ช่วงเวลา
loans with interest of 5% per year over a five-year term

liquidity - a situation in which an organisation, company, business, etc. has the money it needs to pay its bills สภาพคล่อง
constraints - things that limit possible action and solutions to problems
liquidity constraints

ease - to make or become less severe, difficult, unpleasant, painful, etc ทำให้ง่าย บรรเทา
help ease liquidity constraints

employers - companies that hire workers

maintain - to keep รักษา
staff - workers, employees พนักงาน
maintain staff - keep staff (not fire employees when business is bad)

encourage - make people interested in and excited about doing an activity; gain enthusiasm, motivation and energy ปลุกใจ
encourage employers to maintain staff

The government authorised the SME Bank to offer small businesses loans with interest of 5% per year over a five-year term to help ease liquidity constraints and encourage employers to maintain staff.

deposit rate - the interest rate that people get paid for keeping their money at the bank (example: 1% of deposit per year)
deposit rate of just 1%

funds - money in bank accounts; an amount of money kept for a special purpose เงินทุน
park funds - put money someplace; keep money at someplace
agreed to park another 1 billion baht in funds with the SME Bank

Funding for the programme came from 6 billion baht in deposits from the Social Security Fund, which accepted a deposit rate of just 1% from the SME Bank. The Social Security Fund later agreed to park another 1 billion baht in funds with the SME Bank for the jobs programme at an interest rate of 1.5%. 

ultimately - finally, in the end (after a long complicated series of events)  ท้ายที่สุด, ตอนสุดท้าย, ในที่สุด
disbursed - pay out money for a special purpose from a fund

But Mr Naris said Mr Soros ultimately approved 22 billion baht worth of loans under the programme, with 19 billion in loan documents signed and 13 to 14 billion baht in funds disbursed, well beyond the original lending limits set by the board for the programme.

funded - given money บริจาค money provided for operation of a business or organisation ให้ความช่วยเหลือทางการเงิน ให้เงินลงทุน
funded from other sources

fixed 5% rate 

Mr Naris said the additional loans would have to be funded from other sources, resulting in interest rate losses for the bank when compared with the fixed 5% rate set under the programme.

amend - change a law, revise; to make changes to a document, law, agreement, etc. especially in order to improve it การแก้ไขกฎหมาย
terms - conditions; requirements ข้อกำหนด
amend terms of the programme

authority - power อำนาจ อำนาจในการสั่งการ
his authority as bank president

used his authority as bank president to amend terms of the programme

Pichai Chunhavajira, the executive chairman of the SME Bank, said Mr Soros used his authority as bank president to amend terms of the programme.

clear - easy to understand
condition - something that must be true or must be done before another thing can happen เงื่อนไข
clear condition

credit - 1. credit rating, how financially healthy a person or organization is, and whether it is able to borrow more safely; 2. loans, the borrowing of money เครดิต เงินกู้ทั้งหมด
hurt the credit of the bank

While the board did give Mr Soros the authority to make certain changes, it was always under a clear condition that changes would not hurt the credit of the bank," Mr Pichai said.

limit - a highest or lowest amount
lending limit per borrower

approval - giving permission for some action; official permission การอนุมัต
pre-approval - get approval before you do something
pre-approval credit system - a computer system used to check a credit rating (to decide whether a borrower is able to borrow more and still pay it all back)

scrapped - ended, discarded; decided not to continue with something, such as a plan or event ยุติแผนที่วางไว้
scrapped a pre-approval credit system

exceed - to go beyond an official limit; to be greater than a number or amount เกินปริมาณ เกินกว่าที่กำหนด
exceed the original 6-billion-baht credit limit

One change approved by Mr Soros was to increase the lending limit per borrower to 200 million baht, or four times the original lending limit. Mr Soros also scrapped a pre-approval credit system used by the bank, allowing total loans to well exceed the original 6-billion-baht credit limit for the entire programme set by the board.

expansion - when something increases in size, number or importance การขยายออก
funding - money to a program so it can operate การให้เงินสนับสนุน
authorised an expansion in how funding could be used by borrowers

capital - money invested in a business (See glossary)
working capital - money and stocks of goods used for the day-to-day operation of a business, to pay employees and produce and sell more goods; the opposite of this is money used for long-term investments in new equipment or machinery (See Wikipedia)

stipulated - say clearly that something must be done (in a contract)  
originally stipulated loans would be for working capital or long-term financing

factoring - when a business gets quick money it needs to do business by selling the rights to money it will collect in the future (accounts receivable) at a discount (See Wikipedia)
factoring credit - factoring loans

later changed the terms to allow for factoring credit

debt - an amount of money that you owe หนี้
refinance their existing debt - get a new loan with new terms (interest rate, payback period) for the money you borrowed in the past and still owe

Mr Soros also authorised an expansion in how funding could be used by borrowers. The bank originally stipulated loans would be for working capital or long-term financing, but later changed the terms to allow for factoring credit. Some SME Bank factoring customers used the jobs programme to refinance their existing debt, benefiting from the change in interest rates to the fixed 5% rate from their previous rate of 7.5%.

underwrite - to agree to pay for an activity and accept financial responsibility for any losses it may make (See Wikipedia)

guidelines - rules to help guide action; useful rules or advice to help you perform some task or engage in some activity แนวทาง นโยบาย
relax guidelines - when rules do not have to be followed strictly; loose enforcement of rules

underwriting guidelines were also relaxed

process - a series of actions that you take in order to achieve a result แนวทางปฏิบัติ, กระบวน, วิธีการ
borrowers still in the process of restructuring past debt
apply - to make use of something นำมาใช้
apply for funding.

Underwriting guidelines were also relaxed, permitting borrowers who were still in the process of restructuring past debt to apply for funding.

losses incurred - money that was lost

fraud - the crime of gaining money by tricking or lying to people การโกง การตุ้มตุ๋น (See Wikipedia) การฉ้อโกง การหลอกลวง เล่ห์เพทุบาย การปลอมแปลง
internal - existing or happening inside a person, object, organisation, place or country ภายใน
internal fraud - fraud inside the bank (breaking operating rules for personal gain)

Mr Pichai said the losses incurred by the SME Bank did not necessarily imply internal fraud. If fraud and personal gain were discovered, the bank would pursue additional action under the law, he said.