Nukul Prachuabmoh and Dr Phaichitr Uathavikul have been named by an advisory team of Finance Minister Tarrin Nimmanahaeminda as potential candidates to head a committee investigating mismanagement and policy flaws at the Bank of Thailand (BOT) which ultimately led to the collapse of the financial system.

Sources said Tarrin has asked former prime minister Anand Panyarachun to try to persuade former central bank governor Nukul and Phaichitr, a well-known academic and former Science and Technology minister, to accept an invitation to become members of the inquiry committee which may comprise six or seven members.

The high-powered committee will be assigned to focus its investigation on the central bank's lax supervision of the Bangkok Bank of Commerce (BBC), the grave mismanagement of the foreign exchange reserves and the outrageous spending spree where Bt430 billion was used to support the 58 suspended finance companies, they said.

The results of the investigation, as Tarrin indicated on Monday, are expected to lead to a wholesale restructuring of the central bank, which must display its accountability to the Thai public and its effectiveness as a credible institution responsible for guarding financial stability and the economy as a whole.

The central bank lost all credibility when, under the governorship of Vijit Supinit, it attempted to cover up the BBC scandal and went so far as to prop up the rogue bank with public money. Most analysts said the collapse of the BBC in 1996 triggered the downfall of the once-venerable central bank, destroying overnight its reputation and integrity built up over the previous 30 years.

Personally, Tarrin would also like to lay to rest the ''ghost'' of the BBC, which has haunted his reputation since he left his stint as Finance minister in July 1995.

There were attempts by Tarrin's political enemies to blame him for the collapse of the BBC but Tarrin staunchly fought back, in and out of court, with evidence that he had been misled and misinformed by Vijit.

Also, under Thai banking law, the power to supervise commercial banks rests directly with the BOT governorship -- not the Finance minister. So far, nobody at the central bank has been held accountable for the BBC scandal, which cost the public Bt80 billion. Vijit and Jaroong Nookwan, who is still the deputy governor, are expected to be at the centre of the investigation if the BBC scandal is to be dug up.

The central bank's go-for-broke strategy, with its fierce defence of the baht, will also be a subject of investigation by the inquiry committee, which will review the entire decision-making process that led to the central bank's artificial build-up of reserves to prop up the baht and its US$23.4-billion obligations in forward contracts as of August this year.

This did not include the $7 billion the central bank spent to defend the baht before this period, which resulted in the depletion of its foreign exchange reserves and created a loss of confidence in Thailand's ability to honour its foreign obligations.

Sources said it will be extremely difficult for the inquiry committee to determine the flaws in the central bank's disastrous defence of the baht in the first half of 1997. At issue is whether it is a policy flaw to defend the baht at all costs or whether it is an error of the collective, if not individual, decision, they said.

The highest decision-making body, with regard to the baht defence, involved then governor Rerngchai Marakanond, then deputy governor and manager of the Exchange Equalisation Fund Chaiyawat Wibulwasdi, then assistant governors Tanya Sirivethin and Siri Garnjaroendee, then director of the banking department Bandid Nijathavorn, and Phaibul Kittisrikangval, the bank's key currency dealer.

Sources said that when Tarrin was an opposition MP, he asked Chaiyawat, now the bank's governor, whether he was involved in in the defence of the baht in any way, to which Chaiyawat denied any knowledge. It was disclosed however, that even though Rerngchai, as governor, acted as commander in chief during the time of the baht defence, he passed on this responsibility largely to Chaiyawat since he was not an expert in foreign exchange.

After April, Chaiyawat took control over the baht policy, while Rerngchai focused his energy on saving the beleaguered financial sector. It was not until July 2 that the central bank caved in by floating the baht, a de-facto devaluation that triggered financial turmoil throughout the region.

However, Chaiyawat has fiercely defended his reputation by denying that he had any involvement in formulating and implementing the flawed baht defence policy. This implied that all the decision-making rested with Rerngchai, who as governor had the final authority over the foreign exchange policy.

Sources said from the beginning that the management of the baht, which had been pegged to a basket of currencies dominated by the US dollar, was determined by collective decisions made by the top central bank officials. Rerngchai had listened to the opinions of his top lieutenants, who were divided into two camps, without making any tough decisions. One camp supported a more flexible baht policy and the other stuck to the currency peg system.

Chaiyawat was reported to have supported the currency peg orthodoxy. He has hinted that if an investigation is to take place, it should focus on fraud rather than on policies because no central bank official intended to harm the country.

In the baht policy, individual judgement prevailed over collective opinion, sources said. The power structure at the central bank is such that the governor reigns supreme and has the final say over all policies, without any checks and balances from subordinates or an independent Court of Directors.

The third area to be investigated will be the use of Bt430 billion of the Financial Institutions Development Fund's money to bail out the 58 troubled finance companies. Tarrin had attacked both the Chavalit government and the central bank over bailing out the troubled companies without limits and without determining to what degree they were affected by poor asset quality or liquidity problems.

Finance One Plc took more than Bt30 billion from the fund, compared to Bt20 billion by General Finance & Securities Plc and more than Bt10 billion by CMIC Finance & Securities Plc. Tarrin previously indicated that the fund had lent its money to these troubled finance companies even though it realised it would never recover it.

When the fund revealed the gigantic amount of money it had spent to bail out the troubled firms in August, panic spread quickly because the public realised that the system was broke.

Central bank officials had tried to defend their seemingly unlimited support of the troubled finance companies with the argument that the companies would have collapsed the next day bringing down the whole system with them, if the money had not been injected.

They said they had tried to consult former prime minister Chavalit Yongchaiyudh and former Finance minister Amnuay Viravan, but the two did not make a decision thus forcing the central bank officials to keep on throwing good money after bad without solving the problem.

Sources said restructuring the central bank will be an enormous and challenging task if the institution hopes to regain its reputation and credibility.

There has been talk about increasing the power of the Court of Directors , which is now involved with petty administrative matters, as a counterbalance to the governor and about limiting the power of the central bank to that of guarding price stability while transferring supervisory authority over financial institutions to an independent regulatory body similar to the Securities and Exchange Commission.