Chatu Mongol Sonakul, governor of the Bank of Thailand, said Friday that the fund injection is necessary to help Phatra fully meet its reserve requirements. He added that the plan will need final approval from Finance Minister Tarrin Nimmanahaeminda. Once the reserve requirements are met, he said, Thai Farmers Bank will be able to liquidate Phatra's assets, taking over the good ones and putting the bad ones into an asset-management company that will be set up.

Thai Farmers, the country's third-largest bank, said last week that it wanted to discontinue funding Phatra, which it took over through a tender offer in 1998 by request of the Bank of Thailand. The bank said it has already spent 7 billion baht to prop up the financecompany, causing Thai Farmers' own shareholders to be concerned about the bank's financial soundness should it continue to support Phatra.

Mr. Chatu Mongol's statement came ahead of the expected announcement Monday of a full plan for Phatra, which became Thailand's largest finance company in 1997, after the government shut down 56 of its peers. Thai Farmers officials have estimated that Phatra's non performing loans amount to about 80% of its total assets. Mr. Chatu Mongol said those bad assets, mostly loans to ailing property developers, probably won't be sold for at least three years.

Thai Farmers will then share half the proceeds generated from the sale of these assets with the Financial Institutions Development Fund, the central bank's rescue fund. However, he said Thai Farmers will have to shoulder any losses resulting from the management of Phatra assets. Thai Farmers shares rose 25 satang to 41.50 baht per share Friday. The bank has been anxious to tackle the issue together withthe Bank of thailand, as it also needs to raise funds to deal with its own bad loans. Thai Farmers' president, Banthoon Lamsam, has said his bank wouldn't be able to raise additional funds while its books are clouded by potential losses at Phatra.