But growing co-operation with counterparts in other countries is also vital for supervisors, because a global financial system cannot be effectively supervised without a suitable degree of co-operation providing for mutual trust and information exchange. International co-operation, in sum, is a cornerstone of global financial stability and of the extension of best international practices in this field. Within Europe, the new capital directive reinforces this approach by establishing colleges of supervisors for transnational financial groups, but also through the role of lead supervisor on a consolidated basis. Moreover, the extension of the so-called Lamfalussy approach from the securities industry to banking and insurance is a clear commitment to a co-operative and evolutionary approach, constructed on the strength and knowledge of national supervisors. This supervisory co-operationintensive model increases the responsibility of national supervisors, since it is only sustainable insofar as it provides appropriate responses, eliminates obstacles and encourages the necessary financial integration. Although only about 40 of the 8,000 European deposit institutions engage in significant transnational activity, the European banking market is integrating at considerable speed. Even though the pace of integration may seem limited, with few cross-border operations annually, international competition in each of our domestic financial systems is increasingly patent and intense. Further, some market segments have undergone unprecedented growth. The euro interbank market and the asset-backed bond market are now fully integrated and fully accessible to more than these pan-European institutions.

Nevertheless, in the case of Thailand after the crisis, the banking system has not yet been fully functioned and this, to a certain extent, undermined the effectiveness of the monetary policy. The macro-model gives a range of core inflations with probability distribution being described into a fanchart. This fanchart takes into account the related uncertainties and gives some flexibility in a range of forecasts. Based on the most likely outcome, the MPC will announce the expected rate of inflation for this year and next year. According to the most recent assessment, the core inflation will be 0.5-1 percent in 2002 and 0.5-1.5 percent in 2003, providing growth of between 3-4 percent in 2002 and 2003. Finally to enhance transparency of the process, Inflation Report is published on the quarterly basis providing forecasts of inflation and economic growth for the next eight quarters along with the quarterly press release. For the final part of my talk, I would like to dwell on the issues of Central Bank Independence. The first issue is whether a Central Bank can have too much independence in the sense that it can be harmful. To this, I incline to say yes, but only in a rare circumstance. Bad decisions relating to monetary or financial institutions operations can be damaging with wide impact. To prevent this from happening, a mechanism should be installed such as a Monetary Policy Committee or a Financial Institutions Policy Committee comprising of qualified external directors so that important policy measures are made through group decisions.