Moreover, while the average capital adequacy ratio is comparable to other countries in the region, it has to be viewed against the backdrop of the poor loan portfolio quality and weaknesses in the areas of provisioning, loan classification, and collateral valuation. For example, the ability to choose the discount rate implicit in net present value of restructured loan calculations give banks the option to shift provisioning to the future. Moreover, the true capital adequacy may be overstated by the current practice of allowing banks to deduct the value of physical collateral prior to required reserve calculation. There are two major problems with this method. Firstly, it is difficult to assess the fair value of these collateral, some of which depreciate rapidly once left idle. Although the Bank of Thailand requires banks to take a 10 percent haircut off the appraised value, it is unlikely that the amount would commensurate potential losses_especially in light of the fact that these collateral are likely to be significantly overvalued. Secondly, the current reserve method ignores the time value of money. Foreclosing an asset normally takes about 3-4 years, during which a bank will not be able to realize sale proceeds. As such, the current method allows some banks to delay the realization of losses and the necessity to increase capital.