Opening Remarks Veerathai Santiprabhob, Governor of the Bank of Thailand Bangkok Sustainable Banking Forum 2019 13 August 2019, Bangkok, Thailand Distinguished guests, Ladies and gentlemen, Good morning and welcome to the Bangkok Sustainable Banking Forum 2019. This forum was first started last year to promote sustainability practices in the Thai financial sector and to highlight the potential role of the financial sector in addressing common challenges facing the Thai society, such as income inequality, environmental degradation, excessive household debt, and the persistent problem of corruption. Certainly, addressing the challenges around environmental, social, and governance (ESG) aspects are critical for the sustainability of the Thai economy and to some may seem far beyond financial institutions’ core mandates. Nevertheless, as main intermediaries of financial resources, the financial sector can influence how these resources are allocated and, hence, can influence how the economy and society progress over the longrun. Many people may view that the concept of sustainability for the financial sector generally encompasses financial institutions partaking in charity or corporate social responsibility projects. I am afraid that the concept is often misunderstood. The core concept of sustainability needs to be considered first in the context of the long-run sustainability of the financial business itself. When financial institutions focus mainly on short-term gains, neglecting the potential long-term effects or negative spillover of their activities, this can in fact increase  1/7  financial institutions’ risks; risks that can impair their credibility, public trust, and financial positions in the long-run. Allow me to highlight three well-known incidents in particular.

Experience suggests that asset price cycles continue to be very substantial In the last two decades market forces have indeed tended to cause misalignments between equilibrium and actual asset prices. Stock markets in particular have experienced this phenomenon. But in foreign exchange markets as well, prices have also a tendency to diverge substantially from their “equilibrium level”, although those divergences have been contained through fruitful G7 co-operation during the last 15 years. In addition, some markets have seen an increase in volatility and frequent volatility peaks. Although cyclical moves should be clearly distinguished from volatility, the latter may in some circumstances exceed what can be considered optimal, making the price determination mechanism less efficient and thus contributing to misalignments. Moreover, as demonstrated by a number of financial crises during the last two decades, contagion among countries and across financial markets has been frequent. As a result, investors have faced asset price fluctuations that might be more synchronised than before. Lastly, the connections between credit, asset price and business cycles have tended to amplify cyclical swings. Credit, in particular, is playing an important role in asset price fluctuations. Observed in particular during the “speculative bubbles” of the 1980s and early 1990s, this trend has persisted. Another example is provided by boom-bust cycles in asset prices which have often been associated with sharp economic contractions. Several factors are in play when financial asset prices experience amplified moves I shall give a few examples.