Rapid Assessment for Resilient Recovery and ... - GFDRR

Damage and Losses
Commercial Banking Sector
Damage to physical assets of the banking sector appears to have been minimal. The
majority of the damage that has been incurred would, in any case, be insured. Although
no precise data about the replacement cost of assets that have been irreparably damaged
was available, nor of the costs of renovations and refurbishments, the banks, associations
and regulators interviewed agreed that the magnitude of damage will be minimal compared
to assets of the sector. This is in part because the vast majority of branch banks had sufficient
time to get their expensive equipment, or the expensive part of immovable equipment
(such as the electronics within ATMs), out of harm’s way before the floods struck. Thus,
even though 631 branches 44 (out of a total of 6,138 bank branches nationwide) had to be
closed for some period of time 45 , and 493 ATMs were out of commission at some stage,
the actual cost of damage is reportedly very small. 46
In terms of losses incurred by the banking sector due to the closure of branches, as with
the rest of the financial sector, the team was not able to collect enough data to estimate
this with any confidence on a sector-wide scale.
It is clear that, by far the biggest losses suffered by the banking sector are bank loans that
need to be restructured or temporarily given grace periods, and will, thus, generate less
income and reduce liquidity. Additionally, losses will come from those loans that will never
be repaid and will be outright losses.
For the private banking sector, third quarter forecasts by the Bank of Thailand indicated
that total loans for the private banking sector stood at THB 9.4 trillion, or THB 7.2 trillion if
loans to the financial sector are excluded. Once again, detailed data on losses from this
portfolio were not available because planned interviews and surveys were suspended due
to banks preoccupation in dealing with the impact of the floods.
The most important information obtained from the Thai Bankers’ Association and from one
of the largest banks in the country is that they estimated the increase in their non-performing
loan ratio (i.e. loans with payments over 3 months late, as a proportion of total loans
outstanding) due to the floods would be around 0.5 percent. 47 This reportedly held true
both for that particular bank, and for the sector as a whole. They also admitted that these
figures were a rough estimate, as many of their clients could still not reach their property to
assess the true extent of the damage.
44 As per discussion with a Senior Director at the Bank of Thailand.
45 The proportion of branches that had to close was much lower for the four banks that we met who had this data, i.e. of
the 2,183 branches that they jointly held, 107 (i.e. 4.9 percent) had closed at some stage. In the case of one of them,
only one of 80 branches had significant damage to report.
46 As per discussion with representatives of the Thai Bankers’ Association.
47 This is after offering grace periods of up to 6 months, and restructuring loans as needed, both allowed by the BOT for
flood-impacted borrowers (see table below).
60 THAI FLOOD 2011 RAPID ASSESSMENT FOR RESILIENT RECOVERY AND RECONSTRUCTION PLANNING