THE Bank of Thailand has emerged as the sole underwriter for Finance One Plc's Bt8.282 billion rights issue, designed to pull the troubled finance company back from the brink of bankruptcy and defuse the bomb hanging over the whole finance sector.

However, the critical question is: how much money will the central bank have to pump into the dozens of other ailing finance companies sitting on a mountain of bad debts accumulated from their years of overconfidence, imprudence, mismanagement and ­ in some cases ­ fraud.

Already the central bank has committed Bt178 billion to bail out the Bangkok Bank of Commerce ­ a scandal which turns out to have been the largest fraud in world banking history.

The Financial Institution Development Fund, a rescue arm of the BOT, has borrowed from the central bank about Bt120 billion in high-powered money to lubricate the cash flow of troubled finance companies.

The fund has also gone so far as to aval all the promissory notes issued by finance companies, effectively creating a two-tier deposit system.

People who purchased a promissory note from a poorly-managed finance company are guaranteed by the government a return of 12 to 13 per cent a year.

A bank deposit, which is also government-guaranteed, yields only nine per cent.

The BOT regulators are still operating under the outdated belief that banks or finance companies are too big to fail. But they do not have enough money to bail out the entire financial system.

Standard & Poor's estimates that the authorities may need to spend, at least, the equivalent of six per cent of the gross domestic product to bail out property-related loans.

If the regulators allowed the rogue BBC to go under they would need to put up Bt80 billion as guarantee for the bank's depositors. After auctioning off all the bank's assets, regulators may end up losing only Bt30 billion to Bt40 billion. Instead, the government is now committed to rehabilitate BBC at a cost of Bt178 billion, which it could take 10 years to recover.

The regulators are about to commit the same mistake yet again with Fin-One. They asked Thai Danu Bank and Fin-One to fake a wedding. After about three months of due diligence, Thai Danu realised that Fin-One was a poor bride indeed.

Pakorn Thavisin and Khan Prachuabmoh, the two senior directors at Thai Danu, put up a fierce fight against a merger with Fin-One, although Pornsanong Tuchinda, the president, appeared to be a Fin-One sympathiser.

Despite Thai Danu's walkout, Fin-One is more than happy to turn to the regulators, hands held out, and to receive the same BBC-style treatment.

Already Fin-One has borrowed Bt30 billion from the fund to meet the rush of withdrawals over the past few months which have reduced its total deposits from Bt50 billion to Bt20 billion.

How could Fin-One ever repay this amount? Since Fin-One will not be able to honour this repayment, the regulators choose to throw good money after bad. They are afraid that the collapse of the Bt102-billion organisation would send the Thai financial system into a turbulent whirl.

Fin-One is making a one-for-two rights issue for its 828.2 million shares, but the fund is likely to take up almost 100 per cent of the issue, at a 25-per cent discounted Bt7.50 apiece.

Pin Chakkaphak, Fin-One's president, and his cohorts, who control about 50 per cent of the company, are unlikely to have the fresh capital at their disposal to subscribe to this gigantic recapitalisation.

Pin, who has recently built a Bt600-million home, is reported to be experiencing financial difficulties. All of his projects are facing a liquidity dry-out.

Asked by a friend what had gone wrong, Pin simply answered: ''I don't know what is going on."

Since nobody, except the authorities, wants a lame duck, Pin and his group's combined stake in Fin-One is likely to be diluted to well under 20 per cent. With this minority stake the chance of them having any future management control would be effectively shut out.

The regulators' probe shows that Fin-One's net worth is currently more than Bt4 billion, down from Bt14 billion at the end of 1996. This gives the company a book value of around Bt13.28 a share. But this figure does not take into account its deteriorating financial position in a weakened economy.

For this reason, the authorities have opted to order Fin-One to raise fresh capital rather than reduce capital first to write off the bad debts.

The authorities are of the view that this harsh demand to increase capital is severe enough, because it will punish the major shareholders and the management.

Tripling Fin-One's capital to Bt12.42 billion will put the company in a position to set aside Bt14.8 billion in provisions to cope with its doubtful debts.

Of the provisions, Bt5 billion comes from the existing provisions, and Bt7.8 billion from capital gains the company earlier got from its stock offering. Another Bt2 billion will come from the latest round of recapitalisation planned for Fin-One by the regulators.

Small-time shareholders in Fin-One are advised to cut their losses because they are not likely to get a return by participating in the one-for-two capital increase, which will massively dilute the company's earnings per share.