Directors must devote their time to the bank, cannot be a director of more than three other profit-seeking companies, as well as disallowing of borrowing where cross ownership is more than one percent of the paid up capital of the borrower. Of the 92 people involved, 53 have now complied, and arrangements have been made for most of the others to comply, with the possible exception of the representatives of the Ministry of Finance who may find that their representatives are not the sort of people who can devote that much time to the bank because they are not part of the ownership or operation of the bank, but are just government representatives. We are looking into this and will discuss with the Ministry when the time is right. The problem in fact is not as innocuous as it looks as state bank remunerations are affected by considerations other than just how should directors be rewarded so that shareholders’ value can be maximised. But all this is being done through sanctions and coercion, and in the New Commercial Bank Act the authority will be explicit. My last words on commercial banks, the intervened banks might not yet be completely taken care of, but at least the cost of rescue can now be well estimated. The proper financing of the debt burden is probably one of the first jobs of the new government.
I shall keep my comments mainly therefore to what the new government should do, be it really a new government or just the old one in a new bottle, and I shall refer only to the present or historical developments only in so far as it is necessary to understand future recommendations. As this is an after lunch speech, I shall also keep it short and not try to be comprehensive, but only comment on things that interest me or I think might be useful to the audience. Let’s start with a simple concept, the Credit Bureau. One of the reasons the NPL could become so high, and banks with high NPLs could remain supported by the public, is because in the present law the concept is that financial transactions are secret and banks are secret places, looked after and owned and supervised by responsible people. It would be nice if it were true, but the banking industry is leveraged by a ratio of 12:1 and the temptation is rather great for the owner to take advantage of other people’s money, people who have no right to know what is going on with their money even once a year because they are not shareholders but just depositors. The temptation of the supervisors to evade their responsibilities by not taking the correct action is also great, as rich people are powerful, and bad political systems over a long time do not help to make you brave. This philosophy must be changed.