Financial imbalances or a bubble may develop as a result, further complicating policy decisions. Thus, the BOT will continue to closely monitor credit developments and household’s debt servicing ability, especially for the lowerincome group. Another key challenge will be the management of volatile capital flows, and implications of exchange rate movements on the real economy. In meeting this challenge, the BOT has at its disposal various policy options, ready to be deployed under different circumstances. The recently announced Capital Account Liberalization Master Plan was aimed in part to encourage Thai companies to diversify their investments abroad, including towards neighbouring countries, and operating their businesses more efficiently using local currencies. The initiative would help foster more balanced capital flows, and promote financial market development that facilitates the regional integration under the ASEAN Economic Community (AEC) in 2015. We will continue to support businesses in strengthening their abilities to cope with exchange rate fluctuations. Financial institutions policy It is now universally recognized that economic growth and financial institution development must proceed hand in hand. The development of financial institutions in Thailand has indeed seen a significant and continuous progress, which has greatly helped support economic activities over the years. Still, many steps must be taken to further enhance the financial system and promote a more efficient intermediation. To deepen financial access, the BOT will cooperate with relevant agencies to allow commercial banks and non-banks to offer microfinance services, under the business model appropriate for risks and behaviour of the targeted group.

At the same time, it remains our priority to reinforce the stability of financial institutions by strengthening capital base and improving risk management, to cushion against potential shocks under adverse circumstances. This year, we will establish a licensing framework for foreign commercial bank subsidiaries, with a view to enhancing the competitiveness of the banking industry as envisaged in the Financial Sector Master Plan Phase 2. Meanwhile, a guideline will be laid out allowing domestic commercial banks to expand and integrate into the Qualified ASEAN Banks (QABs) network under the AEC. This integration offers an opportunity for Thai banks to step up their efforts to fortify their strategic strengths and prepare for a fiercer competitive environment. Stronger institutions could seize the opportunity to expand internationally and diversify their risks. A balance must be struck between the three objectives of increasing financial service efficiency and access, safeguarding financial system’s integrity, and strengthening consumer financial protection. Payment systems policy The priority this year will be to expand the coverage of the ICAS across the country, to speed up the provincial cheque collection from 3–5 business days to 1 business day. The initiative will help promote a more efficient payment system, enabling fast, safe, and secure economic transactions as well as promoting a substitution of electronic for cash payments.