A CHILL will have gone through the spines of Thailand watchers in the past week with the first break in what is capable of turning into a huge scandal involving the country's biggest bank, Krung Thai. They may recall that it took many months for the simmering Bangkok Bank of Commerce scandal to finally boil over in 1996, with widespread political fallout and economic repercussions which set the stage for Thailand's crisis a year later. The Krung Thai affair has the potential to be no less damaging over the long term. Leaked extracts of an audit of the bank by PricewaterhouseCoopers apparently questioned lending practices. Krung Thai is state-run and mostly state-owned and the quality of its loan portfolio has lagged those of commercially run peers such as Bangkok Bank and Thai Farmers Bank. But the PricewaterhouseCoopers leaks seem to hint at more willful crony lending under the watch of Sirin Nimmanahaeminda, who left the bank earlier this year. That name sounds familiar and he is indeed the brother of finance minister Tarrin. While only the most naive of newcomers to Thailand have any faith in the integrity of the country's politicians, Mr Tarrin has stood out as a beacon of hope for foreign investors. Having inherited an economic catastrophe in November 1997, he has performed a Herculean task in pushing through unpopular reforms. If he is forced from office under a cloud of scandal, Premier Chuan Leekpai's fragile coalition would fall apart. Thailand's economic recovery, which is at a critical juncture, could possibly end up being set back by many months if not years in the ensuing chaos, despite the IMF's latest upbeat outlook. The return to power of discredited figures such as former premiers Chavalit Yongchaiyudh or Banharn Silpa-archa while the economy is still in such a vulnerable state would be hard to stomach. Add to that the crushing blow to foreign investor confidence from the affair and the possibility that the country's biggest bank is a complete basket case and it is no wonder Thai watchers are breaking out in a sweat. It is bad enough to contemplate that greedy politicians who have raped their own country and played a big part in causing the Asian crisis are capable of trumping up charges to remove a government which is trying to clean up their mess. That the charges could be true does not even bear thinking about.