Rerngchai accuses several of his former aides of distorting financial crisis involvement
FORMER Bank of Thailand governor Rerngchai Marakanond lashed out at several former aides who he said were trying to distort the events surrounding the central bank's disastrous defence of the baht and its massive financial losses in a desperate attempt to protect the integrity of the financial system.
As public anger over the central bank's inept handling of the foreign exchange swap and the huge losses incurred from the bailout of the financial system reached a feverish pitch, Rerngchai emerged from his quiet retiring life to defend his role in the turbulent first half of 1997 when Thailand was pushed to the brink of bankruptcy.
''I feel regret that some of us in the central bank have been trying to distort the matters. But the reality will have to emerge,'' he told Matichon in its Feb 2 edition.
Rerngchai defended himself because it appears he could be singled out to take the blame for the tragic episode which eventually forced Thailand to seek a US$17.2 billion bailout from the International Monetary Fund. Deeply frustrated, he said all policies put forward under his leadership received clearance from former finance minister Amnuay Viravan and were subject to a collective decision-making process by his central bank colleagues.
The Cabinet is to deliberate Tuesday the Bt1 trillion in liquidity support to the financial system from the Financial Institution Development Fund and, later this month, the $23.4 billion worth of foreign exchange swap contracts built up by the central bank to defend the baht. These events led to a complete loss of confidence in the Thai financial system and the de facto devaluation of the Thai currency.
The Chuan administration is obliged to inform the public about the need for public funds to finance the damage incurred by the FIDF and explain to all Thais whether the problem occurred because of individuals or a group of individuals or because the system was flawed.
A committee tasked to study and propose measures to improve the efficiency and management of Thailand's financial system, chaired by former central bank governor Nukul Prachuabmoh, is to conclude its report this month. The report will state whether it was a mistake by the individuals involved in the foreign exchange policy-making body or a mistake in the system, or both.
When he resigned on July 28, 1997, Rerngchai indicated the FIDF had spent a total of Bt400 billion to keep the financial system afloat. ''At that time whenever I was away, there were deputy governors on hand to handle the job on my behalf. This included not only approval of money from the FIDF but also the foreign exchange swap contracts to defend the baht. We all helped each other,'' he said.
Rerngchai was frustrated because some of his former aides were trying to distance themselves from the events. Although he did not name names, it was understood that one of his targets was Chaiyawat Wibulswasdi, the present central bank governor who has denied any involvement in the baht's defence.
''Let's take it this way. Now he said he had no idea, did not know anything nor did he consent with the policy. If anybody did not consent with the main policy, he must express it in a record, a record of dissent. In the past, during the tenure of deputy governor Chalong Peungrakul, he did not agree with a proposal to build a new building for the central bank. He wrote a note of dissent.
''If there was a note of dissent, I should not have (plunged into the baht defence). There was evidence since the end of 1996 that I would like to change the country's foreign exchange system. But my subordinates did not want to change it.''
Rerngchai's inner circle of aides included Chaiyawat, then deputy governor; Thanya Sirivedhin, assistant governor; Siri Garnjaroendee, assistant governor; Dr Bandid Nijathavorn, then banking department director; and Phaibul Kittisrikangwal, then the central bank's chief currency trader. Earlier, The Nation reported Thanya and Siri were the two officials who called for a change in the currency peg system, while Chaiyawat, Bandid and Phaibul voted for a full-scale defence.
While governor, Rerngchai faced the currency attack and the crumbling financial system. He took charge of both, yet he turned the foreign exchange management over to Chaiyawat some time in April to concentrate on reviving the financial system, according to sources. Sources said it was Chaiyawat who had Rerngchai's ear, due to his macro-economic prowess and his insistence on defending the baht.
Yet, in an interview with Dok Bia magazine in December 1996, Chaiyawat gave a completely different account. He said when he was deputy governor he was not part of the decision-making body that formed the baht defence policy, even though he was manager of the Exchange Equalisation Fund.
''The baht defence was undertaken by the Banking Department, which was not my line of responsibility. I did not know about the extent to which the central bank had intervened in the foreign exchange market or how it was being done. It was not until January (1997), when we were really in deep trouble, that we had consultations, since I was manager of the EEF. Sometimes a question was asked about why we needed to intervene every day, why the the baht was trading slightly off its trading band, and foreign support should be sought. That's all that I helped.
''In May, I did not know anything until Wednesday (14th) when the situation was already very grave (due to the heaviest baht attack). I gave out suggestions that we should try to keep it through, otherwise nobody could have foreseen what would happen the following day. I did not really know the level of previous interventions because I was not given the assignment. But after the heavy baht attack, I tried to help my colleagues, who had no one to hang on so they came to me. Sometimes I took a look at the (computer) screen before coming back to my desk. I would not know the details because it was not part of my job.
''If I should bear the guilt, then it was the guilt of helping out friends. At that time, I tried to do my best. If you ask me the figure of the swap contracts, I would not know because it was a secret.''
BY VATCHARA CHAROONSANTIKUL and THANONG KHANTHONG