THANONG Bidaya, the finance minister, just did what he had been expected to do ­ drop the guillotine on the necks of the beleaguered finance companies.

By freezing the business of 16 finance companies for 30 days ­ during which they'll have only 14 days to produce an acceptable rescue plan ­ Thanong has moved decisively to offer a specific timeframe within which he intends to complete his surgical task.

Equally important is his determination to limit the scope of the damage in the finance sector and prevent it from spreading throughout the financial system.

This came less than a week after his appointment to head the controversial Finance Ministry ­ a post nobody apparently was willing to take at this time of deepening financial and foreign exchange crises.

Armed with one of the royal decrees approved by the Cabinet earlier this week, Thanong has overcome the political barrier to tackle the finance sector with his blade. There was almost no hesitation because the financial crisis is threatening to tear the Thai economy apart.

Finance companies have been required to report the level of their non-performing loans as of the first half of this year, for the first time. If they cannot close their books, the panic factor will further undermine confidence in the finance sector, giving another good reason for foreign speculators to launch another round of attacks against the baht.

Under Thanong's directives, if these finance companies fail to bring along new local or foreign partners to bail them out in 14 days, they'll be history.

Their licences will be revoked. Their equity will be completely written down. Their remaining assets and liabilities will be transferred to the core finance companies, which stand to receive bank licences in return for their acquisitions.

To stem public panic, Thanong and the banking regulators have stated that all deposits and interest payments will be guaranteed. Creditors of the beleaguered finance companies will also be protected.

However, it will take time, probably a year, before the promissory note holders or creditors have a chance of recovering their money since the core companies that will become banks will assume all assets and liabilities of the bankrupt firms.

There will be a legal process of transferring the P/Ns and interests of a bankrupt company to a core company.

There was little surprise in the names of the troubled finance companies suspended by Thanong. They are Finance House Co; Finance One Plc; Thana One Finance & Securities Plc; CMIC Finance & Securities Plc; General Finance & Securities Plc; Prime Finance & Securities Plc; Country Finance Co; Metropolitan Finance Co; Thana Thai Finance and Securities Plc; Thai Fuji Finance & Securities Plc; GCN Finance Co; International Trust and Finance Plc; Dynamic Eastern Finance & Securities (1991) Plc; United Finance Plc; CL Sahaviriya Finance Co; and Sap Thamrong Finance Co.

These companies have been crucified because they are financially too weak to recapitalise and write off their bad debts. They have witnessed their shareholders' equity falling below one-third of the total bad debts that need to be written off. Moreover, they have sought liquidity support from the Financial Institutions Development Fund amounting to more than 40 per cent of their deposits.

Some of the 10 ailing finance companies blacklisted by the regulators on March 3 do not appear on this list because they have succeeded in working out recapitalisation plans.

Finance One has borrowed about Bt40 billion from the Financial Institutions Development Fund; CMIC has borrowed more than Bt20 billion; and GF, more than Bt10 billion. Through this life-support system, these finance companies are no longer operational, business-wise.

The FIDF is reported to have spent more than Bt200 billion to keep the finance sector afloat after liquidity became scarce due to the loss of confidence and the financial crisis. It, too, will become a target of political censure if it fails to explain to the public why it keeps on injecting money into the ''zombie" firms in the absence of a clear-cut strategy to tackle the finance sector.

Sensing that the cost of bailing out all the beleaguered finance companies would be impossible to shoulder, the authorities have reversed their policy by letting the weak go bust and be taken over by the stronger ones.

Bantherng Tantivit, chairman of the Association of Finance Companies, has played a key role in helping the banking regulators work out the radical package. A fall of one finance company without a credible official package to deal with the crisis will wreak havoc on the entire system.

The combined assets of these 16 finance companies total about Bt400 billion, amounting to one-quarter of the Bt1.6 trillion in assets of the finance sector. The size of the beleaguered companies causes grave concerns over the risks of a potential systematic breakdown.

Thanong and the banking regulators have placed a large bet on their package effectively restoring calm and order to the financial system. The financial markets yesterday welcomed Thanong's bold measures, as evidenced by the Stock Exchange of Thailand closing at 528.18, up 1.57 per cent.

Tarrin Nimmanahaeminda, a former finance minister and now a Democrat MP from Bangkok, said: ''I believe these measures will work at a level. They're decisive and hope to tackle the root of the problem once and for all. However, they may not be enough."

The core finance companies who will receive all the liquidity support from the banking regulators during this make-or-break transition, include Nava Finance & Securities Plc, Phatra Thanakit Plc, Dhana Siam Finance & Securities Plc, National Finance & Securities Plc and Krung Thai Thanakij Finance & Securities Plc.

Some of the remaining 26 finance companies will transform themselves into super finance companies if they succeed in weathering this financial crisis.