Mention Thai finance companies and most investors head for the hills, their perception fixed by the memory of the closure of 56 of their number. But some finance companies are not only doing fine, they are planning to upgrade to full bank status.

National Finance recently announced that it has become the first of the finance houses to apply for a restricted banking license in Thailand. Pakit lamopas, executive vice president in charge of the bank project at National Finance, explains the motive for the move: ‘As a finance company, we already compete with banks on many fronts, but we suffer from handicaps because we do not have access to some businesses, like import/export companies. Our cost of capital is also higher because we have to offer more interest on deposits as people’s perception is that the larger banks are more secure. Going for a license, we don’t lose.”

The application process involves sending a preliminary letter to the Bank of Thailand (BoT) explaining how the finance company plans to meet the requirements to gain the license — merging with five other finance companies, maintaining a capital adequacy ratio (CAR) of 15% for two years (after which time the ratio may fall to the typical bank requirement of 8.5%) and having a capital base of Bt lO billion ($251 million).

National Finance’s preliminary application was accepted in June 1999. In mid- September it submitted a detailed plan to the BoT which, if accepted, goes to the minister of finance for final approval.