Non-bank players have also been aggressively competing for market share in the personal loan and credit card market, although with focus on people in the lower range of income groups. Considerable amount of investment has been made to revolutionize network channel, operational process, and risk management system in order to reduce the operational cost and service delivery time, and to manage risks more effectively. Functionalities of traditional delivery channel such as ATM have been greatly expanded, while new e-banking tools such as internet banking, mobile banking, and electronic money service have been introduced. Use of ATM, debit and credit cards continues to grow steadily, whilst internet banking transactions and use of electronic money services increase markedly both in terms of the number of users and the value of usage. Modernization of operational process and risk management system includes automating application process, credit approval process, and increasing use of credit scoring models and credit information system. Ladies and Gentlemen, We view increased competition and innovation in the retail banking business as beneficial to consumers and the financial system as a whole. Banks’ loan portfolios have become more diversified, while a greater number of people have been given access to financial services. Many of you will recall that one of the primary objectives of the Bank of Thailand’s first Financial Sector Master Plan was to broaden access to financial services for the underserved segments of our society, including people in the lower income group, in the rural areas, and small and medium-sized companies.

This is particularly true for sovereign credits where there is BIS Review 50/2000  2  widespread support for finding an alternative to the current OECD/non-OECD distinction. In other words, OECD membership would no longer be relied on for setting regulatory capital for sovereign or bank claims. Notwithstanding this support, many commentators have offered modifications to the Committee’s proposed standardized framework, which several observers have suggested does not go far enough toward risk differentiation. The Committee has taken this concern to heart, and is actively evaluating whether it would be feasible to incorporate additional risk weights into the standardized approach, and, if so, how this should be done. As we work toward greater risk differentiation among claims that are rated, we will continue to give extensive thought to the treatment of unrated claims, given that the penetration of external ratings remains low in most countries. It is difficult to avoid creating incentives to remain unrated while at the same time retaining continuity with the existing Accord’s treatment for these credits. Further work would be needed to develop a standard for unrated claims that would be more risk-reflective but, unfortunately, few commentators offered significant suggestions in this regard. Procyclicality The Committee has considered what some observers have noted is the potential for introducing greater cyclicality in a more risk-sensitive capital framework. That is, the capital requirements for loans to troubled borrowers will tend to increase at just the point when such trouble is becoming apparent.