KRUNG Thai Bank is a privatised bank, but it looks as if it is still being run as a state-controlled bank.

''If they still try to perpetuate its status as a state-owned bank, how can they tackle its problems?'' says a banking veteran.

The first thing that KTB, which has merged with First Bangkok City Bank, needs to do is to cut its overheads. As of December, the bank maintained a workforce of 18,386. Its executives have said the bank will need to cut back its staff by at least six thousand. But they'll be lucky if they can achieve redundancies of between 500 and 1,000 jobs.

Since 1993, when the mutual separation programme was first launched, KTB has been able to lay off 1,336 staff, spending a total of Bt867 million for the purpose. But the pace of the programme has been speeded up since 1996.

''But I say 40 per cent of the workforce has to go. The overhead cost is locked into the bank's operating cost. The reason that Thai banks cannot be sold out is because when the foreign banks look into them they are appalled at the overhead costs,'' said the banking veteran.

Any attempt to privatise Krung Thai will certainly run into a snag in the absence of strong political will. With the 13,000-strong labour union holding on to its fortress, it will be quite a battle. In the end, the matter will have to be dealt with by political leadership, even higher than Finance Minister Tarrin Nimmanahaeminda's status.

The privatisation process is slow. No matter how good the programme is, if it is not implemented on time, the result will be equally bad. At present, all the intervened banks control about 40 per cent of the market share, but they are like sitting ducks.

To successfully privatise KTB, the veteran banker said: ''All the staff should be asked to leave and take compensation pay by 15-20 months of their salaries. Then, they -- not all of them -- can be re-hired on new terms and conditions. They will get a four-month probation. Anybody who fails to perform will have to go.''

Only this way will productivity at KTB improve overnight. The easy-going atmosphere will immediately disappear. Most of the staff will be geared to do the marketing work to increase earnings for the bank. Only the performers will be allowed to keep their jobs, while the under-performers will be asked to leave.

Some Thai commercial banks have already moved to get rid of the fat and tried to slash overhead costs, although the pace is not moving fast enough with the scale of the problems.

Last year the overhead expenses of the total 13 banks reduced from Bt41.96 billion in 1997 to Bt36.26 billion, a 13.59 per cent reduction. Notably, the eight private banks' overhead cost reduction fell in a larger proportion of 16.89 per cent, while the five state-owned banks' overhead costs increased 14.43 per cent.

The higher cost of the overheads in the state-run banks was due mainly to the higher costs of Bangkok Metropolitan Bank and BankThai, while other government banks, including KTB, Siam City Bank and Radanasin Bank, recorded negative growth of overhead costs.

All the banks who follow this tough road of redundancy and establish a new work culture will all be saved, otherwise the government will have to continue to pump public money into them without any hopes of seeing them being able to stand on their own feet. Once the process begins, the bank stocks will rise, helping the banks to recapitalise more easily.