Dhammakaya: What does a bank failure look like?

26 years to repay depositors at Klong Chan Credit Union, brought down by embezzled religious donations to Dhammakaya Temple.

RELIGION, CRIME & BANK FAILURE

Dhammakaya: What does a bank failure look like?

26 years to repay depositors at Klong Chan Credit Union, brought down by embezzled religious donations to Dhammakaya Temple.
7/03/2017
Wichit Chantanusornsiri

Klongchan Credit Union was bankrupted by a former chairman who was also treasurer to Dhammakaya Temple and who embezzled huge sums that he handed over to the temple as "donations".

CREDIT UNION MEMBERS NOT PROTECTED LIKE BANK DEPOSITORS

Klongchan Credit Union is a financial institution but it is not a bank and that is the problem.

The Credit Union will need some 26 years to fully repay its embezzled members.

Unlike Thai banks whose depositors are protected by deposit insurance and strict auditing by bank examiners, credit union members are just another group of creditors waiting in line to get their money back from the failed (bankrupt, insolvent) credit union.

After the credit union's failure, Thailand's central bank considered putting in place stricter oversight for credit unions and recently these plans have been resurrected (read today's article here).

26 YEARS NEEDED TO REGAIN WHAT WAS LOST TO EMBEZZLEMENT

The timeframe for repayment of 26 years is based on the rehabilitation plan for the credit union.

The rehab plan involves borrowing money to set up an investment fund eventually repay the money to the credit union members. 

This is according to Phichest Wiriyaphaha, director-general of the Thai government's Cooperative Promotion Department.

Hopefully, there will not be another crooked chairman embezzling funds in the credit union's future.

BAILOUT TURNED DOWN BY STATE BANKS

Earlier, Klongchan planned to borrow from the Bank for Agriculture and Agricultural Cooperatives (BAAC) and Government Savings Bank (GSB) but both state-owned banks turned it down.

The banks claimed that if they loaned the insolvent credit union money, they would need to set aside 100% loan-loss provisions because of the insolvency.

WILL BORROW FROM OTHER COOPERATIVES THAT ARE ALSO CREDITORS

Although it may seem a little strange and convoluted, Klongchan Credit Union will borrow money from other cooperatives that are already its creditors.

These creditors of the insolvent credit union that are willing to lend it money are standing in line to get their money back from the credit union like everyone else but apparently are more confident about the credit union's future than the state banks are.

If successful, it is projected that the fund should yield a profit of about 450 million baht a year.

It had yet to conclude how much other cooperatives would agree to lend.

Hopefully, the lending cooperatives will put in place some solid auditing mechanisms to prevent another tragedy.

EMBEZZLEMENT LED TO CREDIT UNION INSOLVENCY & FAILURE

Embezzlement caused damage totalling 15 billion baht for the once-richest cooperative.

In March last year, a court order was issued for its rehabilitation.

So far, 1.2 billion baht had been repaid to its creditors.

Klongchan Credit Union had about 1 billion baht left in its accounts and some assets.

CREDIT UNION FAILURE LINKED TO EMBEZZLED DONATIONS TO DHAMMAKAYA  

The embezzlement case is linked to fugitive Phra Dhammajayo, former abbot of Wat Phra Dhammakaya.

The 72-year-old monk allegedly received multi-million-baht so-called "donations" from the former management of the cooperative.

CONFLICT OF INTEREST: CREDIT UNION CHAIRMAN WAS DHAMMAKAYA TREASURER

The ex-chairman of the credit union who is already in jail was also a former treasurer of the temple, a clear potential conflict of interest and disaster waiting to happen. 

Security forces have been laying siege to the temple in Pathum Thani province for nearly a month in order to arrest the fugitive Phra Dhammajayo.

http://www.bangkokpost.com/news/general/1210400/26-year-repayment-for-klongchan-creditors

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