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Thai Central Bank Gets Tougher - 2004-10-04

Bank of Thailand, the country's central bank, has asked state-owned Krung Thai Bank to revoke its reappointment of Viroj Nualkhair as president for a second term.

Krung Thai, the country's second largest lender, accumulated more than $1 billion of bad loans in the second quarter this year under Mr. Viroj's leadership. The Krung Thai board cleared Mr. Viroj of wrongdoing, but the central bank says he should be held accountable.

Andrew Stotz, head of research at Macquarie Securities, says Krung Thai will probably comply with the central bank's request and appoint someone else. He says the central bank has toughened its regulatory stance since the Thai baht collapsed in 1997 and triggered an Asian financial crisis. "The central bank issued a memo which tightened their power to reject a director of a bank," he says. "The Bank of Thailand governor's made it clear that he will use the powers."

Prices for bus fares, food and electricity in Sri Lanka have gone up as the price for diesel fuel shot up almost 20 percent last week. The government says private bus operators will be allowed to increase fares by up to 16 percent to offset fuel prices.

Sri Lanka's central bank says prices may return to normal if oil prices decline to $40 a barrel.

Shareholders of Chinese steelmaker Baosteel have approved its plan to sell up to five billion new shares - the largest stock sale ever in China.

Baosteel says it will use the proceeds to buy assets from its parent company and bring all segments of the world's sixth-largest steelmaking group under one publicly traded umbrella.

China Construction Bank, the country's top lender, says it will not sell its shares in overseas exchanges this year because it is not ready for listing and market conditions are not favorable.

China is looking to strengthen its banking system by selling shares in its four biggest lenders, which are burdened with non-performing loans worth about $228 billion. China is preparing to open its banking sector to overseas competition over the next few years, as part of the agreement it made after joining the World Trade Organization.