The existing regulatory framework was simply inadequate to detect and prevent the brewing problems. At one level, inadequate follow-up framework made it difficult to track where the funds were going. But the heart of the problem lay in the loose supervision and examination system in place. Regulatory waivers were common. And the culture evolved to one that encouraged or condoned excessive risk-taking behavior. Compounding the problem were Thailand’s underdeveloped capital markets. The absence of what Alan Greenspan termed a “spare tire” of finance made bank lending the dominant source of corporate financing. Consequently, viable businesses were trapped in the breaking down of the banking sector’s intermediary role with no way out, and the crisis spiraled into a devastating credit crunch. The most significant implication drawn from this lesson is thus a strong financial sector is essential for a country to sail through financial storms. It is perhaps not a coincidence that Singapore and Hong Kong fared better than many other Asian countries during the 1997 crisis, for their financial systems were, and still are, relatively deeper than the rest. A strong financial sector serves as an absorber for external shocks while a weak and inefficient financial sector aggravates the depth of the problem and prolongs the recovery process. Beyond the “hardware” of the physical and financial infrastructure, the “software” of the ethical issues governing the running of the system is also critical. Tales of businesses being endowed with extraordinary treatments from bankers through their cross-holding relationship are probably still fresh in everyone’s mind.

Namely, the final report on the Needs Analysis Programme for the National Bank of the Republic of Macedonia contained 138 recommendations addressing the gaps in terms of the EU benchmarks established in 11 areas of central banking. It is my pleasure to point out that some of them have already been implemented, and some of them have been incorporated in the Strategic Plan of the NBRM, that is in the National Bank’s Plan of Activities for this year. However, the overall implementation of the recommendations will require additional technical assistance in terms of experience and knowledge of the ECB and the national central banks of the EU. Therefore, the inclusion of the NBRM in this regional project, which aims to facilitate the preparations for the implementation of the recommendations we received in the report on the Needs Analysis Programme for the NBRM, by establishing a Plan for their implementation, is very important. It will be the basis for the preparation and the implementation of a subsequent project, as well as the basis for further planning and promotion of the bilateral cooperation with the central banks with which the NBRM already has a traditional cooperation, but also for the establishing of a cooperation with other European central banks. The implementation of these and similar projects by the ECB and the EU in recent years, unequivocally confirms their continued determination, commitment and dedication to assist the central banks of the Western Balkan countries on their way to joining the ESCB, and later the Euro system.