Prasarn Trairatvorakul: Challenges to central banks in the era of the new
globalisation
Opening remarks by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the
Bank of Thailand International Symposium 2010 on "Challenges to central banks in the era of
the new globalisation", Bangkok, 15 October 2010.
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Professors, Fellow Central Bankers, Distinguished Participants, Ladies and Gentlemen,
It is a great pleasure for me to welcome you to the Bank of Thailand International
Symposium 2010 on "Challenges to Central Banks in the Era of the New Globalisation".
This event is the fourth in a series of International Symposiums organized by the Bank of
Thailand, which have been a forum for prominent academics, policy makers and market
practitioners to meet and discuss current issues related to central banking and monetary
policy, especially from an international perspective.
As the world begins to recover from the global financial crisis, a new stage of globalisation
has emerged and brought along a transformation of the economic and financial landscape.
The meeting today will again be an opportunity for us to share views and address key
challenges facing central banks during this time of change. I will highlight three of them.
First, the global financial crisis has brought to the fore the importance of financial stability
as a necessary condition for economic stability. The need to fulfill this objective will forever
change the way central banks conduct their policy. The most important question is how the
central bank can embrace this objective without impairing price stability and without creating
unrealistic expectations about what it can and cannot do given limited tools at its disposal.
Second, with the global financial crisis revealing many regulatory gaps, especially in
advanced economies, many new proposals have, understandably, been made to reform
international financial regulations. However, it is important to note that attempts to fix the
last crisis may not prove effective in preventing the next one, as crises always come in
different shapes and forms. In addition, some proposed new standards, such as Basel III,
appear to mainly address the problems of banking systems in developed countries whose
business models and risk-taking behaviour may well be very different from those of emerging
markets. Therefore, the key challenge for policymakers in these countries, going forward, is
how to adapt the global standards to best suit local needs, bearing in mind the enormous
economic costs of over-regulation.
Third, differential growth outlook between advanced and emerging markets in the aftermath
of the global financial crisis is inducing large and persistent capital flows to emerging
markets with implications for the exchange rate, inflation, and the risk to financial stability. In
light of this, policymakers in emerging markets would find it more difficult to use traditional
instruments to achieve domestic objectives. They must be more wary of the buildup of
financial imbalances and may even have to rethink the exchange rate management strategy.
On a larger scale, uncertainties pertaining to the post-crisis international monetary and
reserve currency system - the one in which dominant currencies are likely to grow weaker
and newly emerging currencies grow stronger - will also pose important challenges to
monetary, exchange rate, and reserve management policies.
Ladies and Gentlemen,
To tackle some of these challenges, we are very fortunate to have with us today many
distinguished speakers from both academia and central banks. In the morning sessions, we
will hear from the academic point of view the implications of the changing financial and
regulatory landscape. During lunch time, our keynote speaker will share his insights on the
future of the international monetary system and what implications entail for policymakers.
Later in the afternoon, we hope to bridge academic thinking with practical policy
considerations.
Let me conclude by saying that it is impossible to have answers to all the big questions in a
one-day conference like this. But I am sure we can contribute to the better understanding of
many difficult issues and come up with useful policy recommendations. Most of all, I hope
that this forum will be followed by continuing discussions and cooperation among all
participants, which would be a true measure of success of the conference.
I wish you all a fruitful meeting and memorable stay in Bangkok. Thank you.