In recentmonths the spread between what commercial banks charge customers for moneylent and what is returned to them on deposits has widened to an average of 5.3percent. That's indeed scandalous, and it hardly encourages saving. In the banking industry worldwide, lending and deposit interest ratespreads reflect the cost of doing business and reasonable profitexpectations, with lending risk assessment a paramount factor on the costside. Thus, predictably and understandably, Thai bankers have made the argumentthat they are not to blame for current high spreads, that those spreadsreflect present business conditions. Up to a point, they are right in thatassertion.
New lending is high-risk and there are few tempting opportunities for it.
To put it bluntly, Thai banks have opted for raising new money forthemselves in international capital markets and charging their remaininggood local customers large interest rate spreads, instead of tackling their NPL problems - whichoften involve ''strategic debtors,''meaning debtors able but unwilling to pay. Meanwhile, the new Thaibankruptcy law, which was long fought over in parliament and finally passedin March, has largely gone unused.